<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WAVETEK CORPORATION
AND
WAVETEK U.S. INC.
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C> <C>
DELAWARE 3825 33-0457664
(WAVETEK
CORPORATION)
(State or other jurisdiction (Primary Standard Industrial 95-2263080
of Classification code number) (WAVETEK U.S.
incorporation or organization) INC.)
(I.R.S. Employer
Identification
Numbers)
</TABLE>
11995 EL CAMINO REAL, SUITE 301
SAN DIEGO, CA 92130
(619) 793-2300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
VICKIE L. CAPPS
WAVETEK CORPORATION
11995 EL CAMINO REAL, SUITE 301
SAN DIEGO, CA 92130
(619) 793-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH A COPY TO:
ALISON S. RESSLER, ESQ.
SULLIVAN & CROMWELL
444 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
(213) 955-8000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities to be registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box. /X/
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
<S> <C> <C>
10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation $85,000,000 $29,311
Subsidiary Guarantee of Wavetek U.S. Inc. (1) -- --
</TABLE>
(1) No consideration will be received for the Subsidiary Guarantee.
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8,
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The Prospectus relating to the New Notes being registered hereby to be used
in connection with the Exchange Offer (the "Exchange Offer Prospectus") is set
forth following this page. The Prospectus to be used in connection with certain
Market-Making Transactions in the New Notes (the "Market-Making Prospectus")
will consist of alternate pages set forth following the Exchange Offer
Prospectus and the balance of the pages included in the Exchange Offer
Prospectus. The Exchange Offer Prospectus and the Market-Making Prospectus are
identical except that they contain different front, inside front and back cover
pages and different descriptions of the Plan of Distribution (contained under
the caption "the Exchange Offer" and "Plan of Distribution" in the Exchange
Offer Prospectus and under the caption "Plan of Distribution" in the
Market-Making Prospectus). Alternate Pages for the Market-Making Prospectus are
separately designated.
<PAGE>
PROSPECTUS
, 1997
$85,000,000
[LOGO]
WAVETEK CORPORATION
OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS OUTSTANDING 10 1/8%
SENIOR SUBORDINATED NOTES DUE 2007, WHICH WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933.THE EXCHANGE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
Wavetek Corporation ("Wavetek" or the "Company") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus (as the same
may be amended or supplemented from time to time, the "Prospectus") and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $85,000,000 aggregate principal amount of its 10 1/8%
Subordinated Notes due 2007 (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 constitutes
a part, for a like principal amount of its outstanding 10 1/8% Senior
Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes,
the "Notes"), of which $85,000,000 aggregate principal amount is outstanding.
Pursuant to the Exchange Offer, Wavetek Corporation is also exchanging the
guarantee by the Subsidiary Guarantors (as defined) of the Old Notes (the "Old
Subsidiary Guarantee") for a like guarantee of the New Notes (the "New
Subsidiary Guarantee" and, together with the Old Subsidiary Guarantee, the
"Subsidiary Guarantees") by the Subsidiary Guarantors. The Company will not
receive any cash proceeds from the issuance of the New Notes offered hereby.
The terms of the New Notes are identical in all material respects to the
respective terms of the Old Notes, except that the New Notes have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Old Notes and will not be entitled to
registration rights. The New Notes will be issued under the indenture governing
the Old Notes. For a complete description of the terms of the New Notes, see
"Description of Notes."
The Old Notes were originally issued and sold on June 11, 1997 in a
transaction not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of, and Rule 144A and Regulation S under, the
Securities Act (the "Offering"). Accordingly, the Old Notes may not be offered
or sold within the United States or to United States Persons (as such terms are
defined under the Securities Act) except pursuant to an exception from, or in a
transaction not subject to, the registration requirements of the Securities Act.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain interpretive letters
addressed to third parties in other transactions. Based on these interpretations
by the staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act (an "Affiliate") or who intends to participate in the Exchange Offer for the
purpose of distributing New Notes, or any broker-dealer who purchased Old Notes
from the Company to resell pursuant to Rule 144A under the Securities Act ("Rule
144A") or any other available exemption under the Securities Act, (i) will not
be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (ii) will not be entitled to tender such Old Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or other
transfer of such Old Notes unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer (a
"Participating Broker-Dealer") holds Old Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old Notes
for New Notes, then such Participating Broker-Dealer must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resales 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.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Company
believes that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Notes received upon exchange of such Old
Notes (other than Old Notes which represent an unsold allotment from the
original sale of the Old Notes) with the prospectus prepared for an exchange
offer so long as it contains a description of the plan of distribution with
respect to the resale of such New Notes. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities.
The New Notes will be a new issue of securities for which there currently is
no market. The Old Notes, however, have traded on the National Association of
Securities Dealers, Inc.'s PORTAL market. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Old Notes could be adversely affected. Following consummation of the Exchange
Offer, the holders of Old Notes will continue to be subject to all of the
existing restrictions upon transfer thereof and will not be entitled to any
further registration rights under the Registration Rights Agreement. See "Risk
Factors -- Consequences of Exchange and Failure to Exchange Old Notes."
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered or accepted for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended
(the "Expiration Date"). Upon the terms and subject to the conditions of the
Exchange Offer, the Company will exchange, and will issue to the Exchange Agent,
New Notes for Old Notes validly tendered and not withdrawn (pursuant to the
withdrawal rights described under "-- Withdrawal Rights") promptly after the
Expiration Date. Tenders of Old Notes may be withdrawn at any time on or prior
to the Expiration Date.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY HOLDERS OF OLD NOTES BEFORE TENDERING THEIR OLD
NOTES FOR THE NEW NOTES OFFERED HEREBY.
-------------------
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.
<PAGE>
AVAILABLE INFORMATION
The Company and Wavetek U.S. Inc. have filed with the Commission a
Registration Statement on Form S-4 (the "Registration Statement," which term
shall include all amendments, exhibits, annexes and schedules thereto) pursuant
to the Securities Act, and the rules and regulations promulgated thereunder
covering the New Notes being offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration Statement
are necessarily summaries of those documents, and, with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved.
Following consummation of the Exchange Offer, the Company will be subject to
the periodic reporting and other informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). Periodic reports, proxy statements
and other information filed by the Company with the Commission may be inspected
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10043. Copies of such material can be obtained from the Company upon request.
The Commission maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the Commission's
Electronic Data Gathering, Analysis, and Retrieval system. This Web site can be
accessed at http://www.sec.gov.
The Company has agreed in the indenture, dated as of June 11, 1997 (the
"Indenture"), by and between the Company and The Bank of New York, as trustee
(the "Trustee"), under which the Old Notes were issued, and under which the New
Notes are to be issued, to furnish to the Holders of Notes and file with the
Commission all quarterly and annual financial information that would be required
to be contained in filings with the Commission on Forms 10-Q and 10-K and 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. See "Description of
Notes--Certain Covenants--Reports."
Separate financial statements for the Subsidiary Guarantors are not included
in this Prospectus and the Subsidiary Guarantors are not expected to file
separate reports under the Exchange Act because (i) the Subsidiary Guarantors
have jointly and severally guaranteed the Notes and (ii) separate financial
statements and other disclosures concerning the Subsidiary Guarantors are not
deemed to be material to investors.
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE INFORMATION CONTAINED IN
THIS PROSPECTUS SINCE THE DATE HEREOF.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
------------------------
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Vickie L. Capps, who may be contacted at 11995 El Camino Real, Suite 301, San
Diego, California 92130, telephone (619) 793-2300. In order to ensure timely
delivery of the documents, any request should be made by five business days
prior to the Expiration Date.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY AND THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
DATA OF THE COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE
SET FORTH HEREIN, REFERENCES HEREIN TO "PRO FORMA" FINANCIAL DATA OF THE COMPANY
ARE TO FINANCIAL DATA OF THE COMPANY WHICH GIVE EFFECT TO CERTAIN
RECAPITALIZATION TRANSACTIONS DESCRIBED HEREIN THAT WERE EFFECTED BY THE COMPANY
ON JUNE 11, 1997 (THE "RECAPITALIZATION TRANSACTIONS"), INCLUDING THE ISSUANCE
OF THE OLD NOTES AND THE INCURRENCE OF INDEBTEDNESS UNDER THE NEW CREDIT
AGREEMENT. THE COMPANY'S FISCAL YEAR ENDS ON SEPTEMBER 30. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "WAVETEK" HEREIN SHALL BE TO
WAVETEK CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Wavetek is a leading global designer, manufacturer and distributor of a
broad range of electronic test instruments, with a primary focus on
application-specific instruments for testing voice, video and data
communications equipment and networks ("Communications Test"). The Company also
designs, manufactures and distributes precision instruments to calibrate and
test electronic equipment ("Calibration Instruments") and provides repair,
upgrade and calibration services for its products on a worldwide basis
("Service"). The Company was acquired in 1991 by an investment group led by Dr.
Terence J. Gooding ("Gooding") and consummated the Recapitalization Transactions
in June 1997 with certain new equity investors. The Company has increased sales
from $58.1 million in fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA
(as defined) from $3.8 million in fiscal 1992 to $20.9 million in fiscal 1996 by
increasing its penetration of existing markets and by entering additional
markets through new product introductions and acquisitions. For the latest
twelve months ended June 30, 1997 ("LTM"), Wavetek had sales and EBITDA of
$154.5 million and $22.3 million, respectively.
Wavetek believes it has achieved its success by: (i) focusing on the $2.5
billion Communications Test market segment of the test instrument industry,
which is expected to grow by approximately 10% per annum through 2001; (ii)
identifying changing industry trends and customer needs and successfully
introducing responsive new products on a timely basis; (iii) serving the
increasing demand for application-specific, portable field service and
maintenance equipment, which accounted for over 70% of the Company's LTM sales;
and (iv) leveraging its operations and development capabilities outside the
United States, where the Company generated 61% of its LTM sales. Wavetek
believes that its product development capabilities, product quality, breadth of
product line and geographic diversity should enable it to continue to expand its
share of existing markets and successfully enter new markets.
The Company's Communications Test products, which accounted for 75% of the
Company's LTM sales, serve the cable television ("CATV"), wireless
communications ("Wireless"), telecommunications ("Telecom"), local area network
("LAN") and general purpose hand-held electronic test tools ("Test Tools")
market segments of the test instrument industry. The primary end users for the
Company's Communications Test products are service, installation and maintenance
personnel of CATV operators, wireless communications companies,
telecommunications companies and data communications equipment installers. The
Company's CATV products are used by CATV operators to diagnose and monitor CATV
systems, test cable for signal quality and leakage and ensure the proper
installation of new services such as cable modems. The Company's Wireless
products are used by wireless operators, equipment manufacturers and retailers
to test mobile phones during production, repair or at the point-of-sale and by
wireless operators and equipment manufacturers to test base stations. The
Company's Telecom products are used by telecommunications companies to install
and maintain fiber optic cable. The Company's LAN products are used by LAN
installation and service professionals to test LAN cables and connectors
("physical layer"). The Company's Test Tools products, primarily hand-held
digital multimeters ("DMMs"), are used to test a wide variety of electronic and
electrical equipment. The Company has strong competitive positions in its target
markets and believes it is the worldwide market leader in the manufacture of
CATV
3
<PAGE>
test equipment, the second largest supplier of hand-held DMMs and one of the
five largest manufacturers of Wireless and physical layer LAN test equipment.
The Company's Calibration Instruments products, which accounted for 17% of
the Company's LTM sales, are used in metrology, engineering and manufacturing
environments worldwide to calibrate electronic equipment and certify compliance
with international standards. The Company believes it is the second largest
global manufacturer of products used for: (i) calibrating and verifying the
accuracy of voltage measuring equipment ("Calibration Sources"); and (ii)
transferring the accuracy of voltage measurements from national standards
laboratories to industry calibration laboratories ("Transfer Standards"). The
Company's Calibration Instruments products also include high precision DMMs
("Precision DMMs"). The Company successfully competes in this market based on
its technical expertise, relationships with national laboratories and product
reputation.
The Company's Service business, which accounted for 8% of the Company's LTM
sales, provides repair, upgrade and calibration services for the Company's
products through eight Wavetek service centers worldwide and an international
network of independent representatives.
Wavetek has global design, manufacturing, marketing and distribution
capabilities through facilities located in the United States, the United
Kingdom, France and Germany. The Company is committed to providing high quality
manufacturing and has received or is in the process of receiving ISO 9000
certification (an international quality standard) for each of its manufacturing
facilities. In addition, Wavetek supports its broad international base of over
5,000 customers with regional sales offices in San Diego, Indianapolis, Norwich,
Paris, Munich, Vienna, Singapore, Hong Kong, Beijing and Shanghai. The Company's
products are sold through direct sales teams in the United States, the United
Kingdom, France and Germany and a global network of over 250 distributors and
independent representatives.
BUSINESS STRATEGY
Wavetek believes that it has achieved its strong position in the
Communications Test and Calibration Instruments market segments by identifying
changing industry trends and customer needs, and by successfully introducing
high-quality, cost-effective, application-specific products to meet such needs
on a timely basis. The Company's business strategy is to further enhance its
strong position in these markets and to continue to increase sales and EBITDA
through the following key initiatives:
- FOCUS ON THE LARGE, RAPIDLY GROWING COMMUNICATIONS TEST SEGMENT. The
Company generated 75% of its LTM sales from Communications Test products
and intends to continue to focus on this segment of the test instrument
industry. Prime Data, a market research firm, expects sales in the
Communications Test market to grow at approximately 10% per annum from
approximately $2.5 billion in 1996 to approximately $4.0 billion in 2001.
The Company believes that the drivers of this growth include: (i) rapidly
changing communications technology; (ii) growing demand for personal
communications services (including mobile phones, interactive CATV and
internet access); and (iii) increasing worldwide investment to build or
upgrade data and communications infrastructure. Wavetek intends to
capitalize on this large, rapidly growing market segment through its broad
Communications Test product portfolio, extensive international presence
and strong market positions in CATV, Wireless and LAN.
- DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR TARGET MARKETS ON A TIMELY
BASIS. Wavetek's product development strategy is to: (i) focus on
application-specific products that are responsive to customer needs; (ii)
minimize development time in order to address rapidly changing technology;
and (iii) leverage design efforts by generating multiple product line
extensions from existing product platforms. Wavetek has a history of
successful new product introductions, including eight new products in
fiscal 1996, and the Company expects to introduce approximately ten new
products in fiscal 1997.
4
<PAGE>
- MEET DEMAND FOR ENHANCED PORTABLE TEST INSTRUMENTS. The Company generated
over 70% of its LTM sales from portable field service and maintenance
equipment and intends to continue to focus on these types of products. The
increasing complexity of communications technology is creating demand for
field test equipment that incorporates enhanced measurement performance.
Furthermore, service, installation and maintenance personnel are demanding
smaller, more portable products that enable them to service systems and
equipment in the field rather than at a service facility. As a result of
its product design, manufacturing and distribution strengths in portable
test instruments, the Company believes it will continue to benefit from
these demand trends.
- LEVERAGE INTERNATIONAL OPERATIONS AND DISTRIBUTION. The Company believes
that international capital investment in communications infrastructure has
provided and will continue to provide growth in the worldwide
Communications Test market. Wavetek believes it is well-positioned to
capitalize on this growth with its substantial international operations
that include: (i) three foreign manufacturing facilities; (ii) established
international sales and distribution channels; and (iii) approximately 450
employees located outside of the United States. The Company generated 61%
of its LTM sales from customers outside the United States and believes its
international operations should enable it to gain market share in existing
international markets and successfully enter new markets, particularly in
the Asia-Pacific, Eastern Europe and South America regions. Additionally,
the Company believes that its strategic alliance formed in 1996 with
Yokogawa Electric Corporation ("Yokogawa"), a leading Japanese process
control and test and measurement company, coupled with the development of
new products tailored for the Japanese market, will increase the Company's
sales in Japan.
- ENHANCE PROFITABILITY THROUGH CONTINUED IMPROVEMENT IN THE WIRELESS AND
TELECOM BUSINESSES. Wavetek has taken measures to improve the operations
of its Wireless and Telecom businesses, acquired in October 1994,
including: (i) introducing new products with higher gross margins; (ii)
rationalizing old, low margin businesses and products; (iii) reducing
headcount; (iv) hiring new management; and (v) reducing marketing and
selling expenses as a percentage of sales. As a result of these ongoing
efforts, the Company has significantly improved the operating results of
these acquired businesses. As new products with higher margins continue to
replace older products, and as the Company makes additional cost
improvements in its European manufacturing operations, the Company expects
results from these businesses to continue to improve.
FINANCIAL CHARACTERISTICS
The Company's business has the following financial characteristics:
- DIVERSE AND GLOBAL CUSTOMER BASE. The Company has a broad international
base of over 5,000 customers operating in a wide range of industries. In
fiscal 1996, no customer represented more than 5% of the Company's sales,
and the Company's top ten customers represented approximately 17% of
sales. Customers outside the United States accounted for 61% of the
Company's LTM sales. The Company believes that its diverse and global
customer base should allow it to mitigate the impact of potential economic
downturns in certain businesses or geographic areas.
- STRONG SALES AND EBITDA GROWTH. The Company has increased sales from $58.1
million in fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA from
$3.8 million in fiscal 1992 to $20.9 million in fiscal 1996. During this
period, the Company's EBITDA as a percentage of sales increased from 6.5%
in fiscal 1992 to 13.9% in fiscal 1996. The Company believes that this
performance can be attributed to: (i) developing application-specific
products to address market needs; (ii) acquiring and significantly
improving the operations of its Wireless and Telecom businesses; (iii)
consolidating manufacturing facilities; and (iv) increasing operating
efficiencies.
- LIMITED CAPITAL EXPENDITURES. The Company's business is not capital
intensive and its management emphasizes a disciplined approach to capital
expenditures and working capital management. The
5
<PAGE>
Company's primary capital expenditures in the past five years have been
for upgrading manufacturing capabilities, purchasing tooling for new
products and implementing a new management information systems
infrastructure. Annual capital expenditures have averaged less than 2.5%
of sales over the last five fiscal years and have recently increased
primarily as a result of investment in new management information systems.
CORPORATE INFORMATION
The Company was founded in San Diego in 1962 and completed its initial
public offering in 1972. In June 1991, Wavetek was acquired by an investment
group led by Gooding and reorganized under a new management team, with Gooding
as Chairman and Chief Executive Officer. The Company has been privately held
since that time.
Since Gooding acquired the Company, it has completed two strategic
acquisitions: (i) the Instrumentation Products Division of Beckman Industrial
("Beckman") in October 1992; and (ii) the Wireless and Telecom businesses of
Schlumberger S.A. ("Schlumberger") in October 1994. Since 1992, the Company has
divested two small non-strategic businesses and has discontinued certain
non-core products. As part of its strategy for growth in the future, Wavetek
intends to continue to evaluate the acquisition of complementary businesses that
could expand its presence in new or existing product areas or geographic markets
or create cost savings opportunities.
The Company is a Delaware corporation. The Company's executive offices are
located at 11995 El Camino Real, Suite 301, San Diego, California 92130 and its
telephone number is (619) 793-2300.
THE RECAPITALIZATION TRANSACTIONS
The Old Notes were originally issued in connection with the following
Recapitalization Transactions: (i) DLJ Merchant Banking Partners II, L.P. and
its affiliates ("DLJMB") and Green Equity Investors II, L.P. and its affiliates
("GEI" and, together with DLJMB, the "New Equity Investors") purchased shares of
Common Stock from the Company, representing 49.7% of the Common Stock
outstanding following the Recapitalization Transactions, for an aggregate of
$43.5 million (the "New Equity Investment"); (ii) the Company issued the Old
Notes; and (iii) the Company incurred indebtedness of $25.0 million under a five
year and six month term loan facility and entered into a five year and six month
revolving credit facility providing for borrowings up to $20.0 million (the "New
Credit Agreement"). See "Description of Other Indebtedness -- New Credit
Agreement." These proceeds were used to repurchase Common Stock from existing
stockholders for an aggregate of $152.5 million and to make cash payments upon
surrender of stock options by employees in an aggregate amount of $7.1 million.
Gooding, Yokogawa and the other existing stockholders retained 50.3% of the
shares of Common Stock outstanding following the Recapitalization Transactions.
See "The Recapitalization Transactions" and "Ownership of Capital Stock."
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer.................. Up to $85,000,000 aggregate principal amount of New
Notes are being offered in exchange for a like
principal amount of Old Notes. The Company is making
the Exchange Offer in order to satisfy its
obligations under a registration rights agreement
(the "Registration Rights Agreement") entered into
between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ" or the "Initial
Purchaser" in connection with the sale of the Old
Notes. For a description of the procedures for
tendering Old Notes, see "The Exchange Offer --
Procedures For Tendering Old Notes."
Expiration Date..................... 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended by the Company
(in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer
is extended). See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."
Conditions to the Exchange Offer.... The Exchange Offer is subject to certain conditions,
which may be waived by the Company in its sole
discretion. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being
tendered or accepted for exchange. See "The Exchange
Offer -- Conditions to the Exchange Offer." The
Company reserves the right in its sole discretion,
subject to applicable law, at any time and from time
to time, (i) to delay the acceptance of the Old Notes
for exchange, (ii) to terminate the Exchange Offer if
certain specified conditions have occurred or exist,
(iii) to extend the Expiration Date of the Exchange
Offer and retain all Old Notes tendered pursuant to
the Exchange Offer, subject, however, to the right of
holders of Old Notes to withdraw their tendered Old
Notes, or (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any respect.
See "The Exchange Offer -- Expiration Date;
Extensions; Amendments."
Withdrawal Rights................... Tenders of Old Notes may be withdrawn at any time on
or prior to the Expiration Date by delivering a
written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set forth
below under "The Exchange Offer -- Withdrawal
Rights."
Procedures for Tendering Old Tendering holders of Old Notes must complete and sign
Notes............................. a Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent,
either with the Old Notes to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Notes. Certain brokers,
dealers, commercial banks, trust companies and other
nominees may also effect tenders by book-entry
transfer. Holders of Old
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish to
tender Old Notes pursuant to the Exchange Offer. See
"The Exchange Offer -- Procedures for Tendering Old
Notes."
Letters of Transmittal and certificates representing
Old Notes should not be sent to the Company. Such
documents should only be sent to the Exchange Agent.
Questions regarding how to tender and requests for
information should be directed to the Exchange Agent.
See "The Exchange Offer -- Exchange Agent."
Exchange Agent...................... The exchange agent with respect to the Exchange Offer
is The Bank of New York (the "Exchange Agent"). The
addresses, and telephone and facsimile numbers of the
Exchange Agent are set forth in "The Exchange Offer
-- Exchange Agent" and in the Letter of Transmittal.
Federal Income Tax Consequences..... An exchange of Old Notes for New Notes should not be
taxable to holders. See "The Exchange Offer --
Federal Income Tax Consequences."
TERMS OF THE NOTES
The Exchange Offer applies to $85,000,000 aggregate principal amount of the Old Notes.
The terms of the New Notes are identical in all material respects to the respective terms
of the Old Notes, except that the New Notes have been registered under the Securities Act
and therefore will not be subject to certain restrictions on transfer applicable to the Old
Notes and will not be entitled to registration rights. The New Notes will be issued under
the indenture governing the Old Notes. For a complete description of the terms of the New
Notes, see "Description of Notes."
Securities Offered.................. $85,000,000 aggregate principal amount of 10 1/8%
Senior Subordinated Notes due 2007.
Use of Proceeds..................... The Company will not receive any cash proceeds from
the issuance of the New Notes offered hereby. See
"Use of Proceeds."
Maturity............................ June 15, 2007.
Interest and Payment Dates.......... The Notes bear interest at the rate of 10 1/8% per
annum, payable semi-annually on June 15 and December
15 of each year, commencing on December 15, 1997.
Optional Redemption................. On or after June 15, 2002, the Notes will be
redeemable at the option of the Company, in whole or
in part, at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
Notwithstanding the foregoing, during the first three
years after the Issue Date, the Company may redeem up
to 33 1/3% of the aggregate principal amount of Notes
originally issued with the net proceeds of one or
more Public Equity Offerings at a redemption price of
110.125% of the principal amount thereof, in each
case plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date; PROVIDED,
HOWEVER, that at least 66 2/3% of the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
aggregate principal amount of Notes originally issued
remains outstanding immediately after such
redemption. See "Description of Notes -- Optional
Redemption."
Subsidiary Guarantees............... The Notes are guaranteed on a senior subordinated
basis by the Subsidiary Guarantors, which consist of
all of the Company's current and future domestic
subsidiaries. As of the date of this Prospectus,
Wavetek U.S. Inc. is the only Subsidiary Guarantor.
The Subsidiary Guarantees may be released under
certain circumstances. See "Description of Notes --
Subsidiary Guarantees."
Ranking............................. The Notes are subordinated in right of payment to all
existing and future Senior Debt of the Company,
including borrowings under the New Credit Agreement.
The Subsidiary Guarantees are subordinated in right
of payment to all existing and future Senior Debt of
the Subsidiary Guarantors, including guarantees of
the New Credit Agreement. The Notes, the Subsidiary
Guarantees and borrowings under the New Credit
Agreement will be effectively subordinated to the
indebtedness of the Foreign Subsidiaries. As of June
30, 1997, the Company and its Subsidiary Guarantors
had approximately $25.0 million of Senior Debt and
the Foreign Subsidiaries had approximately $4.3
million of outstanding debt, all of which effectively
ranks senior to the Notes and the Subsidiary
Guarantees. The Indenture permits the Company and its
Subsidiaries to incur additional Indebtedness,
including Senior Debt, subject to certain
limitations, and prohibits the incurrence of any
Indebtedness by the Company and the Subsidiary
Guarantors that is senior to the Notes and the
Subsidiary Guarantees, as the case may be, and
subordinated to Senior Debt and Senior Debt of the
Subsidiary Guarantors, as the case may be. See
"Description of Notes -- Subordination," "-- Certain
Covenants" and "Description of Other Indebtedness."
Change of Control................... Upon the occurrence of a Change of Control, holders
of the Notes will have the right to require the
Company to purchase all or any part of their Notes at
a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase.
See "Description of Notes -- Certain Covenants --
Change of Control."
Certain Covenants................... The Indenture contains certain covenants that, among
other things, limit the ability of the Company and
its subsidiaries to: (i) pay dividends or make
certain other Restricted Payments (as defined); (ii)
incur additional Indebtedness (as defined); (iii)
encumber or sell assets; (iv) enter into certain
guarantees of Indebtedness; (v) enter into
transactions with affiliates; and (vi) merge or
consolidate with any other entity or to transfer or
lease all or substantially all of their assets. In
addition, under certain circumstances, the Company
will be
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
required to offer to purchase Notes at a price of
100% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any,
to the date of purchase with the proceeds of certain
Asset Sales (as defined). See "Description of Notes
-- Certain Covenants."
Exchange Offer; Registration Rights;
Liquidated Damages................ Pursuant to the Registration Rights Agreement, the
Company agreed (i) to file a registration statement
on or prior to 60 days after the Issue Date with
respect to the Exchange Offer to issue the New Notes
in exchange for the Old Notes and (ii) to use its
best efforts to cause the Exchange Offer Registration
Statement to be declared effective by the Commission
on or prior to 120 days after the Issue Date. The
Exchange Offer is being made to satisfy the
contractual obligations of the Company under the
Registration Rights Agreement. In certain
circumstances, the Company will be required to
provide a shelf registration statement to cover
resales of the Old Notes by the holders thereof. If
the Company fails to satisfy these registration
obligations, it will be required to pay liquidated
damages ("Liquidated Damages") to the Holders of Old
Notes under certain circumstances. See "Description
of Notes -- Registration Rights; Liquidated Damages."
The New Notes will not be entitled to registration
rights.
</TABLE>
RISK FACTORS
For a discussion of certain matters that should be considered by holders of
Old Notes before tendering their Old Notes for the New Notes offered hereby, see
"Risk Factors."
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data for the fiscal years ended
September 30, 1994, 1995 and 1996 are derived from the audited consolidated
financial statements of the Company. The summary historical financial data of
the Company for the nine month periods ended June 30, 1996 and 1997 and as of
and for the twelve months ended June 30, 1997 are derived from the unaudited
consolidated financial statements of the Company. The pro forma financial data
for the twelve months ended June 30, 1997 is derived from the Unaudited Pro
Forma Consolidated Financial Data of the Company. The summary consolidated
financial data should be read in conjunction with the consolidated financial
statements of the Company and the Unaudited Pro Forma Consolidated Financial
Data of the Company included elsewhere herein.
<TABLE>
<CAPTION>
TWELVE
NINE MONTHS ENDED MONTHS
FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30, ENDED
---------------------------------- ---------------------- JUNE 30,
1994 1995 1996 1996 1997 1997
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales................................... $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700 $ 154,512
Gross margin............................ 33,442 60,970 78,629 59,402 63,221 82,448
Operating expenses...................... 27,911 54,073 62,558 45,068 47,426 64,916
Operating income........................ 5,531 6,897 16,071 14,334 8,734 10,471
Net income.............................. 3,710 3,069 13,475 12,436 4,451 5,490
OTHER FINANCIAL DATA:
EBITDA (1).............................. $ 7,141 $ 9,944 $ 20,933 $ 16,988 $ 18,327 $ 22,272
Stock option compensation related to
recapitalization (2).................. -- -- -- -- 7,061 7,061
Provision for restructuring operations
(3)................................... -- -- 1,832 188 -- 1,644
Depreciation and amortization expense... 1,610 3,047 3,030 2,466 2,532 3,096
Capital expenditures.................... 1,332 2,920 4,544 3,207 4,784 6,121
EBITDA as a percentage of sales......... 9.5% 7.4% 13.9% 14.7% 15.4% 14.4%
PRO FORMA DATA (4):
Interest expense........................ $ 11,692
Ratio of EBITDA to interest expense..... 1.9x
Ratio of net debt to EBITDA (5)......... 5.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents (6)............. $ 7,059
Total assets.............................. 79,963
Total debt................................ 118,360
Stockholders' deficit..................... (72,969)
</TABLE>
(SEE NOTES ON FOLLOWING PAGE)
11
<PAGE>
- ------------------------
(1) EBITDA is operating income plus depreciation and amortization expense, stock
option compensation related to recapitalization and provision for
restructuring operations. While EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position or cash flows, the Company has included EBITDA because it
is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a Company's ability to service debt. A similar concept to
EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in
the calculation of certain covenants therein. See "Description of Notes --
Certain Covenants" and "-- Certain Definitions."
(2) In connection with the Recapitalization Transactions, the Company made cash
payments upon the surrender of stock options by employees in an aggregate
amount of $7.1 million. This amount is included in operating expenses for
the nine month period ended June 30, 1997.
(3) In fiscal 1996, the Company initiated a plan to restructure certain
corporate management functions, its European manufacturing, service and
sales activities, and its San Diego manufacturing activities. The
restructuring costs primarily include expenses for employee severance and
closedown of certain manufacturing operations. The restructuring is expected
to be completed during fiscal 1997.
(4) See "Unaudited Pro Forma Consolidated Financial Data."
(5) Net debt is total debt less cash and cash equivalents and short-term
investments. As of June 30, 1997, net debt was $111.3 million.
(6) Cash and cash equivalents includes short-term investments of $3.0 million,
which are comprised primarily of U.S. Treasury securities and guaranteed
obligations of the U.S. government or its agencies with original maturities
between 3 and 12 months.
12
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE
TENDERING THEIR OLD NOTES FOR THE NEW NOTES OFFERED HEREBY, HOLDERS OF OLD NOTES
SHOULD CONSIDER CAREFULLY THE FOLLOWING MATTERS, WHICH (OTHER THAN "CONSEQUENCES
OF EXCHANGE AND FAILURE TO EXCHANGE OLD NOTES" AND "ABSENCE OF PUBLIC MARKET")
ARE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE NEW NOTES.
CONSEQUENCES OF EXCHANGE AND 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 all of 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 within the United States or to United States Persons (as such
terms are defined under the Securities Act) except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. The Company does not intend to register the Old Notes under the
Securities Act, and such Old Notes will not be entitled to any further
registration rights under the Registration Rights Agreement. In addition, any
holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for the Old Notes
could be adversely affected. See "The Exchange Offer," "Description of the
Notes--Registration Covenant; Exchange Offer" and "Plan of Distribution."
LEVERAGE
As a result of the Recapitalization Transactions, the Company became highly
leveraged. As of June 30, 1997, including the issuance of the Old Notes and
incurrence of Indebtedness under the New Credit Agreement, the Company had
approximately $114.1 million of outstanding debt, of which $25.0 million was
Senior Debt. In addition, the Company's foreign subsidiaries ("Foreign
Subsidiaries") had approximately $4.3 million in outstanding debt, which debt
was effectively senior to the Notes. See "Capitalization." This leverage,
together with restrictions in the New Credit Agreement and the Indenture, may
limit the Company's ability to obtain additional debt financing in the future,
to implement its business strategies, to pursue strategic acquisitions or to
respond to changing business and economic conditions. In addition, required
payments of principal and interest on the Company's debt are expected to be
financed from operating cash flow, thus limiting the availability of such cash
flow for other corporate purposes. The Company's ability to generate sufficient
cash to meet its obligations is subject to many factors, certain of which are
beyond its control, including economic conditions, competition, technological
changes and regulatory standards. In addition, the Company depends on dividends
from its operating subsidiaries to generate income to meet its debt obligations.
While the Company believes that, based on current levels of operations and
anticipated growth, its cash flow from operations, together with funds available
under its revolving credit facility under the New Credit Agreement will be
adequate to meet its obligations, there can be no assurance that its actual cash
flow will in fact be sufficient to service its debt. In the event the Company's
operating cash flow and working capital are not sufficient to fund the Company's
expenditures or to service its debt, including the Notes and borrowings under
the New Credit Agreement, the Company would be required to raise additional
funds through the sale of capital stock or assets or the refinancing of all or
part of its debt. There can be no assurance that any of these sources of funds
would be available in amounts sufficient for the Company to meet its
obligations. See "Description of Notes" and "Description of Other Indebtedness."
13
<PAGE>
RANKING
The Notes are subordinated in right of payment to all existing and future
Senior Debt of the Company, including borrowings under the New Credit Agreement.
The Subsidiary Guarantees are subordinated in right of payment to all existing
and future Senior Debt of the Subsidiary Guarantors, including guarantees of the
New Credit Agreement. The Notes, the Subsidiary Guarantees and borrowings under
the New Credit Agreement are effectively subordinated to the indebtedness of the
Foreign Subsidiaries.
As of June 30, 1997, the Company and its Subsidiary Guarantors had
approximately $25.0 million of Senior Debt and the Foreign Subsidiaries had
approximately $4.3 million of outstanding debt, all of which effectively ranks
senior to the Notes and the Subsidiary Guarantees. In the event of a bankruptcy,
liquidation, dissolution, reorganization or other winding up of the Company or
any of the Subsidiary Guarantors, the assets of the Company or the Subsidiary
Guarantors, as the case may be, will be available to pay the Notes and the
Subsidiary Guarantees only after all Senior Debt has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on the Notes or
Subsidiary Guarantees. Additional Senior Debt may be incurred by the Company and
its subsidiaries from time to time, subject to certain restrictions. See
"Description of Notes -- Subordination," "-- Certain Covenants" and "Description
of Other Indebtedness."
COMPETITION
The Company operates in markets that are highly competitive, and the Company
expects that competition will increase in the future. Some of the industries in
which the Company operates are characterized by rapid technological advances and
emerging industry standards. Failure to keep pace with technological advances
could adversely affect the Company's competitive positions and results of
operations. The Company competes primarily on the basis of technology,
performance, price, brand identity, quality, reliability, distribution and
customer service and support. To remain competitive, the Company must continue
to develop new products, periodically enhance its existing products and compete
effectively in the areas described above. Although the Company believes its
products are competitive in each of these areas, there can be no assurance that
existing or future competitors, some of which have greater financial resources
than the Company, will not introduce comparable or superior products
incorporating more advanced technology at lower prices. The Company's
competitors are numerous, ranging from some of the world's largest corporations
to many relatively small and highly specialized firms. Some of these competitors
have more extensive engineering, manufacturing and marketing capabilities and
substantially greater financial, technological and personnel resources than the
Company. See "Business -- Competition."
DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGICAL CHANGE
The communications industry is characterized by large communications service
providers competing with opposing technologies, some but not all of which are
served by the Company's equipment. To the extent that certain of these opposing
technologies are in direct competition and some communications service providers
will gain at the expense of others, the markets for the Company's products may
be affected adversely if those technologies not served by the Company are more
successful. Such changes in market demand may require the Company to develop new
products or expand into new markets or technologies. While the Company is
currently evaluating a number of potential new products, some of which will
address emerging technologies, there can be no assurance that these products
will be successful or profitable.
The Company participates in markets where timely introduction of new
products is critical to the success and market acceptance of the products. The
Company's new product development programs are subject to delays due to
unforeseen complexities in the design of the products that arise during the
development process. When encountered, these complexities may cause delays in
product introductions or
14
<PAGE>
costly design modifications which could have a material adverse impact on the
Company. See "Business -- Product Development."
DEPENDENCE ON PROPRIETARY RIGHTS
The Company's success and ability to compete depends in part upon protecting
its proprietary technology. There can be no assurance that the steps taken by
the Company will be adequate to deter misappropriation or independent
third-party development of its technology or that its intellectual property
rights can be successfully enforced or defended if challenged. Given the rapid
development of technology, there can be no assurance that certain aspects of the
Company's products do not or will not infringe upon the existing or future
proprietary rights of others or that, if licenses or rights are required to
avoid infringement, such licenses or rights could be obtained or obtained on
terms that would not have a material adverse effect on the Company. See
"Business -- Intellectual Property."
The Company has been notified by two competitors that they believe that
certain of the Company's CATV products, including in one case, its Stealth line
of products, infringe patents that have been issued to each of them. The Company
has investigated or is currently investigating the validity of those two claims.
Neither competitor has commenced litigation against the Company and, in each
case, the Company has been engaged in an exchange of correspondence with the
patent owner regarding the substance of the claims of infringement. Based upon
its investigation to date, the Company believes that both of these claims can be
resolved in a manner that will not have a material adverse impact on the
Company. However, there can be no assurance that either or both of these
competitors will not initiate litigation against the Company and may not prevail
in such litigation. To the extent that the Company does not prevail in any such
litigation or either or both of these claims are proven, the Company could be
required to: (i) redesign existing or future products so that they do not use
the rights covered by the patent rights in question; (ii) negotiate licenses or
other rights to use those patent rights; (iii) withdraw existing products or not
introduce future products that are covered by those patent rights; or (iv) pay
damages for any past infringement, any and all of which could have a material
adverse impact on the Company.
The Company is also a defendant in a litigation alleging that the design of
certain models of hand-held DMMs formerly sold by the Company violated the trade
dress rights of another competitor and in a recently filed patent infringement
litigation involving certain limited CATV products. The Company does not believe
that the likely outcome of either action will have a material adverse impact on
the Company or its ability to develop new products. See "Business -- Legal
Proceedings."
RELIANCE ON SUPPLIERS
A portion of the Company's manufacturing operations is dependent on the
ability of significant suppliers to deliver completed products, integral
sub-assemblies or components in time to meet critical distribution and
manufacturing schedules. The Company periodically experiences constrained supply
of certain component parts in some product lines as a result of strong demand in
those product lines as well as strong demand in the industry. Continued
constraints may adversely affect the Company's operating results until alternate
sourcing is developed.
Although the Company attempts to use common, multi-source components
throughout its design, certain technological requirements may necessitate the
use of single-source, unique components. The Company attempts to minimize its
exposures on these components through careful vendor qualification and
purchasing, though risk exists that these parts may become obsolete,
necessitating re-design or withdrawal of product from the market. See "Business
- -- Manufacturing."
RELIANCE ON DISTRIBUTION CHANNELS
Changing industry practices and customer preferences require the Company to
expand into new distribution channels. As more of the Company's products are
distributed through distributors and
15
<PAGE>
independent representatives, these channels become more critical to the
Company's success. Some of these distributors are thinly capitalized and may be
unable to withstand changes in business conditions. The Company's financial
results could be adversely affected in the event that the financial condition of
these distributors weakens. See "Business -- Sales and Distribution."
FACTORS AFFECTING CATV SALES
Demand for test equipment for CATV networks has historically depended
primarily upon capital spending cycles by CATV operators for constructing,
rebuilding, upgrading and maintaining their systems. Sales of the Company's CATV
products accounted for approximately 28% of the Company's LTM sales. Such
capital spending by CATV operators is affected by a variety of factors including
general economic conditions, access by CATV operators to financing, changes in
governmental regulation of the CATV industry, competitive pressures, advances in
technology and alternatives to CATV. Over the last year, certain CATV operators
in the United States, including Tele-Communications, Inc. ("TCI"), one of the
Company's largest customers in fiscal 1996, have begun to slow down their
equipment spending. There can be no assurance that capital spending by CATV
operators will not be further reduced in the future, adversely affecting the
demand for the Company's CATV products.
PERIODIC FLUCTUATIONS
A variety of factors may cause period-to-period fluctuations in the
operating results of the Company. Such factors include, but are not limited to,
product mix, European summer holidays and other seasonal influences, competitive
pricing pressures, materials costs, currency fluctuations, revenue and expenses
related to new products and enhancements of existing products, as well as delays
in customer purchases in anticipation of the introduction of new products or
product enhancements by the Company or its competitors. The majority of the
Company's revenues in each quarter results from orders received in that quarter.
As a result, the Company establishes its production, inventory and operating
expenditure levels based on anticipated revenue levels. Thus, if sales do not
occur when expected, expenditure levels could be disproportionately high and
operating results for that quarter, and potentially future quarters, would be
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Periodic Fluctuations."
INTERNATIONAL SALES AND REGULATORY STANDARDS
Customers outside of the United States accounted for approximately 61% of
the Company's LTM sales. The Company expects that international sales will
continue to represent a significant percentage of its total sales in the future.
The communications industry is characterized by proprietary standards that vary
from region to region around the world and may evolve rapidly with time, in a
divergent manner from region to region. Several of the Company's product lines
address technologies where meeting current global standards, as well as changes
in those standards, is critical to competing successfully in the market. As the
number of such competing standards grows, the Company may find that is does not
have adequate resources to maintain products which address all significant
standards, resulting in an adverse effect on the Company. The Company's
international business may be affected by changes in demand resulting from
fluctuations in currency exchange rates as well as other risks such as tariff
regulations and difficulties in obtaining export licenses. In addition, the
ability of certain of the Company's customers to access the currencies in which
the Company sells its products may have an adverse effect on their ability to
purchase the Company's products. See "Business -- Sales and Distribution" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
officers and key personnel, many of whom, including Gooding, the Company's
Chairman and Chief Executive Officer, and Derek T.
16
<PAGE>
Morikawa ("Morikawa"), the Company's President and Chief Operating Officer,
would be difficult to replace. Although the Company has entered into executive
severance agreements with such officers in connection with the Recapitalization
Transactions, the loss of either could have a material adverse effect on the
Company. The Company's continued growth depends on its ability to attract and
retain skilled employees. See "Management."
VOTING CONTROL BY OFFICERS, DIRECTORS AND AFFILIATES
DLJMB, Gooding and GEI beneficially own 34.3%, 31.3% and 15.4%,
respectively, of the outstanding shares of Common Stock. Accordingly, together,
DLJMB, Gooding and GEI have the ability to elect all of the Company's directors,
and to control corporate actions requiring stockholder approval. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, the stockholders of
the Company have entered into a stockholders agreement (the "Stockholders
Agreement") with respect to election of directors, transfer restrictions on
shares of Common Stock, rights of first offer for the sale of shares and certain
other matters. See "The Recapitalization Transactions," "Management -- Executive
Officers and Directors," "Ownership of Capital Stock" and "Certain Relationships
and Related Transactions."
FRAUDULENT CONVEYANCE MATTERS
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the incurrence of indebtedness by the Company in the
Recapitalization Transactions, including the issuance of the Old Notes and the
Subsidiary Guarantees. To the extent that a court were to find that (x) such
indebtedness or guarantees were incurred by the Company or a Subsidiary
Guarantor with intent to hinder, delay or defraud any present or future creditor
or the Company or the Subsidiary Guarantor contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (y) the Company or the Subsidiary Guarantor did not receive fair
consideration or reasonably equivalent value for issuing such indebtedness or
guarantee and the Company or the Subsidiary Guarantor (i) was insolvent, (ii)
was rendered insolvent by reason of such issuance, (iii) was engaged or about to
engage in a business or transaction for which the remaining assets of the
Company or Subsidiary Guarantor constituted unreasonably small capital to carry
on its business or (iv) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, the court could
avoid or subordinate the Notes or the Subsidiary Guarantee in favor of the
Company's or the Subsidiary Guarantor's creditors. Among other things, a legal
challenge of the Notes or a Subsidiary Guarantee may focus on the benefits, if
any, realized by the Company or the Subsidiary Guarantor as a result of the
Company's issuance of the Notes or the Subsidiary Guarantor's issuance of its
Subsidiary Guarantee.
The Indenture contains a savings clause, which generally limits the
obligations of any Subsidiary Guarantor under its Subsidiary Guarantee to the
maximum amount as will, after giving effect to all of the liabilities of such
Subsidiary Guarantor, result in such obligations not constituting a fraudulent
conveyance. To the extent any Subsidiary Guarantee was avoided or limited as a
fraudulent conveyance or held unenforceable for any other reason, holders of the
Notes would cease to have any claim against such Subsidiary Guarantor and would
be creditors solely of Wavetek Corporation. In such event, the claims of holders
of the Notes against such Subsidiary Guarantor would be subject to the prior
payment of all liabilities (including trade payables) of such Subsidiary
Guarantor. There can be no assurance that, after providing for all prior claims,
there would be sufficient assets to satisfy the claims of the holders of the
Notes relating to any avoided portion of the Subsidiary Guarantees.
The measure of insolvency for the purposes of the foregoing considerations
will vary depending upon the law applied in any such proceeding. Generally,
however, a company may be considered insolvent if the sum of its debts,
including contingent liabilities, is greater than the fair marketable value of
all of its assets at a fair valuation or if the present fair marketable value of
its assets is less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become
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absolute and mature. Based upon financial and other information, the Company
believes that the Notes and the Subsidiary Guarantees are being incurred for
proper purposes and in good faith and that the Company and the Subsidiary
Guarantors are solvent and will continue to be solvent after issuing the Notes
and the Subsidiary Guarantees, will have sufficient capital for carrying on
their respective businesses after such issuance and will be able to pay their
debts as they mature. There can be no assurance, however, that a court passing
on such standards would agree with such beliefs. See "Description of Notes --
Subsidiary Guarantees."
FOREIGN SUBSIDIARIES
The Indenture and the New Credit Agreement permit the Company and its
subsidiaries to make investments in, and intercompany loans to, the Foreign
Subsidiaries. Payments to the Company or its other subsidiaries by such Foreign
Subsidiaries, including the payment of dividends, redemption of capital stock or
repayment of such intercompany loans, may be restricted by the credit agreements
of the Foreign Subsidiaries. The Company's inability to make such payments or
repatriate such monies may have a material adverse effect on the Company's
ability to pay interest or Liquidated Damages, if any, on or principal of the
Notes when due. In addition, in the event of a liquidation, bankruptcy or
reorganization of the Company, the right of the Company to collect amounts owed
to it by the Foreign Subsidiaries may be similarly restricted. All intercompany
loans from the Company to the Foreign Subsidiaries are pledged to the lenders
under the New Credit Agreement.
POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
The New Credit Agreement prohibits the Company from purchasing Notes and
also provides that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an event of default under
the Indenture which would, in turn, constitute a default under the New Credit
Agreement. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the holders of Notes. See "Description of
Notes -- Certain Covenants -- Change of Control" and "Description of Other
Indebtedness -- New Credit Agreement."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is no active trading market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of holders of the Notes to sell their Notes, or the price at which
holders would be able to sell their Notes. Future trading prices of the Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchaser has advised the Company that it currently intends to make
a market in the Notes. However, the Initial Purchaser is not obligated to do so
and any market-making may be discontinued at any time without notice. In
addition, such market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. The Company does not intend to apply
for listing of the Notes on any securities exchange.
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THE RECAPITALIZATION TRANSACTIONS
The Old Notes were originally issued in connection with the following
Recapitalization Transactions: (i) the New Equity Investors purchased shares of
Common Stock from the Company, representing 49.7% of the Common Stock
outstanding following the Recapitalization Transactions, for an aggregate of
$43.5 million; (ii) the Company issued the Old Notes; and (iii) the Company
incurred indebtedness under the New Credit Agreement of approximately $25.0
million under a five year and six month term loan facility and entered into a
five year and six month revolving credit facility providing for borrowings up to
$20.0 million. See "Description of Other Indebtedness -- New Credit Agreement."
These proceeds were used to repurchase shares of Common Stock and Class B Common
Stock from existing stockholders for an aggregate of $152.5 million. All of the
outstanding Class B Common Stock were repurchased and retired, leaving only
Common Stock outstanding. An amendment to the Company's Certificate of
Incorporation was filed, eliminating the two classes of common stock in favor of
one class with identical rights, preferences and privileges, and effecting a 10
for 1 stock split. Gooding, Yokogawa and certain other existing stockholders
retained 50.3% of the Common Stock outstanding following the Recapitalization
Transactions. See "Ownership of Capital Stock."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. The proceeds to the Company from the Old Notes, together
with the other sources of funds in the Recapitalization Transactions, were used
to: (i) repurchase shares of Common Stock and Class B Common Stock from existing
stockholders; (ii) make cash payments upon surrender of stock options; and (iii)
pay fees and expenses of the Recapitalization Transactions. See "The
Recapitalization Transactions" and "Capitalization."
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company and the Initial
Purchaser entered into the Registration Rights Agreement, pursuant to which the
Company agreed to file and to use its best efforts to cause to be declared
effective by the Commission a registration statement with respect to the
exchange of the Old Notes for New Notes with terms identical in all material
respects to the terms of the Old Notes. See "Description of Notes--Registration
Rights; Liquidated Damages."
The Exchange Offer is being made to satisfy the contractual obligations of
the Company under the Registration Rights Agreement. The terms of the New Notes
are identical in all material respects to the respective terms of the Old Notes,
except that the New Notes have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Notes and will not be entitled to registration rights.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Notes are registered on
the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose Old Notes
are held of record by Cede & Co. who desires to deliver such Old Notes by
book-entry transfer at The Depository Trust Company ("DTC").
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof the Old Subsidiary Guarantee for the New
Subsidiary Guarantee. The New Subsidiary Guarantee has been registered under the
Securities Act.
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TERMS OF EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $85,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date and not properly withdrawn in accordance with the procedures
described below. The Company will issue, promptly after the Expiration Date, an
aggregate principal amount of up to $85,000,000 of New Notes in exchange for a
like principal amount of outstanding Old Notes tendered and accepted in
connection with the Exchange Offer. The terms of the New Notes are identical in
all material respects to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that (i) the New Notes will
generally be freely transferable by holders thereof and (ii) the holders of the
New Notes will not be entitled to registration rights under the Registration
Rights Agreement. See "Description of Notes -- Registration Rights; Liquidated
Damages." The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture. See "Description of Notes."
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $85,000,000
aggregate principal amount of Old Notes is outstanding.
Old Notes which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Indenture, but will not be entitled to any further
registration rights under the Registration Rights Agreement. See "Risk Factors
Consequences of a Failure to Exchange Old Notes" and "Description of Old Notes."
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering holder thereof promptly after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATIONS TO HOLDERS OF
OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR
OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR
OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Officer will expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on ________, 1997, unless
the Exchange Offer is extended by the Company (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended).
The Company expressly reserves the right in its sole discretion, subject to
applicable law, at any time and from time to time, (i) to delay the acceptance
of the Old Notes for exchange, (ii) to terminate the Exchange Offer (whether or
not any Old Notes have theretofore been accepted for exchange) if the
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Company determines, in its sole discretion, that any of the events or conditions
referred to under " Conditions to the Exchange Offer" have occurred or exist,
(iii) to extend the Expiration Date of the Exchange Offer and retain all Old
Notes tendered pursuant to the Exchange Offer, subject, however, to the right of
holders of Old Notes to withdraw their tendered Old Notes as described under "
Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms
of the Exchange Offer in any respect. If the Exchange Offer is amended in a
manner determined by the Company to constitute a material change, or if the
Company waives a material condition of the Exchange Offer, the Company will
promptly disclose such amendment by means of an amended or supplemented
Prospectus that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, New Notes for Old
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-- Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Notes in exchange for Old Notes tendered and
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or (in the case of a book-entry transfer) an Agent's Message in lieu
of the Letter of Transmittal, and (iii) any other documents required by the
Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The
term "Agent's Message" means a message, transmitted by DTC to and received by
the Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce such Letter
of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents, and as agent for tendering holders
for the purpose of receiving Old Notes, Letters of Transmittal and related
documents and transmitting New Notes to validly tendering holders. Such exchange
will be made promptly after the Expiration Date. If for any reason whatsoever,
acceptance for exchange or the exchange of any Old Notes tendered pursuant to
the Exchange Offer is delayed (whether before or after the Company's acceptance
for exchange of Old Notes) or the Company extends the Exchange Offer or is
unable to accept for exchange or exchange Old Notes tendered pursuant to the
Exchange Offer, then, without prejudice to the Company's rights set forth
herein, the Exchange Agent may, nevertheless, on
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behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Old Notes and such Old Notes may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"-- Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Old Notes will warrant and agree in the Letter of Transmittal that it
has full power and authority to tender, exchange, sell, assign and transfer Old
Notes, that the Company will acquire good, marketable and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances, and the Old Notes tendered for exchange are not subject to any
adverse claims or proxies. The holder also will warrant and agree that it will,
upon request, execute and deliver any additional documents deemed by the Company
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Old Notes tendered pursuant to the
Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER. Except as set forth below, in order for Old Notes to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of a book-entry tender) an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must be
received by the Exchange Agent at its address set forth under "-- Exchange
Agent," and either (i) tendered Old Notes must be received by the Exchange
Agent, or (ii) such Old Notes must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal, must be received by the Exchange Agent, in each case on or prior to
the Expiration Date, or (iii) the guaranteed delivery procedures set forth below
must be complied with.
If less than all of the Old Notes are tendered, a tendering holder should
fill in the amount of Old Notes being tendered in the appropriate box on the
Letter of Transmittal. The entire amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF THE NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK ENTRY TRANSFER. The Exchange Agent will make a request to establish an
account with respect to the Old Notes at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Notes by causing DTC to transfer such
Old Notes into the Exchange Agent's account at DTC in accordance with DTC's
procedures for transfers. However, although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must in any case
be delivered to and received by the Exchange Agent at its address set forth
under "-- Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
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SIGNATURE GUARANTEES. The Old Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (i) an Old Note
is registered in a name other than that of the person surrendering the
certificate or (ii) such registered holder completes the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" in the Letter of
Transmittal. In the case of (i) or (ii) above, such Old Notes must be duly
endorsed or accompanied by a properly executed bond power, with the endorsement
or signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (an "Eligible Institution"), unless surrendered on behalf of such
Eligible Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to
the Exchange Offer and the Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent on or before the
Expiration Date, or the procedures for book-entry transfer cannot be completed
on a timely basis, such Old Notes may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is received by the Exchange Agent on or prior to Expiration
Date; and
(iii) all of the tendered Old Notes (or a book-entry confirmation),
in proper form for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice.
Notwithstanding any other provision hereof, the delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of Transmittal
(or facsimile thereof or Agent's Message in lieu thereof), together with any
required signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New Notes might not be made to all
tendering holders at the same time, and will depend upon when Old Notes,
book-entry confirmations with respect to Old Notes and other required documents
are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering holder and the Company upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole discretion, to reject any and
all tenders determined by it not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to the Company, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive
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any of the conditions of the Exchange Offer as set forth under "-- Conditions to
the Exchange Offer" or any condition or irregularity in any tender of Old Notes
of any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company, proper
evidence satisfactory to the Company, in its sole discretion, of such person's
authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be delivered to the Company and transferred and to
acquire New Notes issuable upon the exchange of such tendered Old Notes, and
that, when the same are accepted for exchange, the Company will acquire good,
marketable and unencumbered title to the tendered Old Notes, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The Transferor also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes. The Transferor further agrees that acceptance of any tendered Old Notes
by the Company and the issuance of New Notes in exchange therefor shall
constitute performance in full by the Company of obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder except in certain limited circumstances.
All authority conferred by the Transferor will survive the death or incapacity
of the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Old Notes and executing the Letter of Transmittal, the
Transferor certifies that it is not an Affiliate of the Company within the
meaning of Rule 405 under the Securities Act, that it is not a broker-dealer
that owns Old Notes acquired directly from the Company or any Affiliate of the
Company, it is acquiring the New Notes offered hereby in the ordinary course of
such Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such New Notes.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under
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"-- Exchange Agent" on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Notes to be
withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if
such Old Notes have been tendered) the name of the registered holder of the Old
Notes as set forth on the Old Notes, if different from that of the person who
tendered such Old Notes. If Old Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Notes, the tendering holder must submit the certificate numbers shown on the
particular Old Notes to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Old Notes tendered for the account of an Eligible Institution. If Old Notes have
been tendered pursuant to the procedures for book-entry transfer set forth in
"-- Procedures for Tendering Old Notes," the notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawal of
Old Notes, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission
on or prior to the Expiration Date. Withdrawals of tenders of Old Notes may not
be rescinded. Old Notes properly withdrawn will not be deemed validly tendered
for purposes of the Exchange Offer, but may be retendered at any subsequent time
on or prior to the Expiration Date by following any of the procedures described
above under "-- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company or the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the New
Notes, such interest to be payable with the first interest payment on the New
Notes, but will not receive any payment in respect of interest on the Old Notes
accrued after the issuance of the New Notes.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to accept for exchange,
or to exchange, any Old Notes for any New Notes, and, as described below, may
terminate the Exchange Offer (whether or not any Old Notes have theretofore been
accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions has occurred or exists:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than broker-
dealers and any such holder which is an Affiliate) 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 holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
New Notes;
(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange Offer which, in the Company's judgment, would reasonably
be expected to impair the ability of the Company to proceed with the
Exchange Offer;
25
<PAGE>
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by United States
federal or California or New York State authorities which, in the
Company's judgment, would reasonably be expected to impair the ability of
the Company to proceed with the Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Company's
judgment, would reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer;
(f) a stop order shall have been issued by the Commission or any
state securities authority suspending the effectiveness of the
Registration Statement or proceedings shall have been initiated or, to
the knowledge of the Company, threatened for that purpose or any
governmental approval has not been obtained, which approval the Company
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby; or
(g) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its
subsidiaries has occurred which, in the judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer.
If the Company determines in its sole discretion that any of the foregoing
events or conditions has occurred or exists, the Company may, subject to
applicable law, terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of an amended or supplemented
Prospectus that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal, all whether by registered or
certified mail, by hand or by overnight courier, should be directed to the
Exchange Agent as follows:
The Bank of New York
101 Barclay Street
New York, NY 10286
Attention: Shilpa Priveda
Telephone: (212) 815-5789
and if by facsimile, to (212) 815-6339
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket
26
<PAGE>
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Notes, and in handling or tendering
for their customers.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with 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.
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Sullivan & Cromwell, counsel to the Company, the exchange
of Old Notes for New Notes in the Exchange Offer should not be a taxable
exchange for federal income tax purposes and, accordingly, a holder should not
recognize any taxable gain or loss as a result of such exchange.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their Old
Notes. Holders of the Old Notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have satisfied its obligations under the Registration Rights
Agreement. Holders of the Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights, and subject to all the limitations applicable thereto, under the
Indenture, such holders will have no further rights to registration of Old Notes
under the Registration Rights Agreement. See "Description of the Notes --
Registration Rights; Liquidated Damages." All untendered Old Notes will continue
to be subject to the restriction on transfer set forth in the Indenture. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Old Notes could be adversely affected. See "Risk
Factors -- Consequences of Exchange and Failure to Exchange Old Notes."
The Company may in the future seek to acquire untendered Old Notes in the
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Old Notes
that are not tendered in the Exchange Offer.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data are derived
from the Company's consolidated financial statements appearing elsewhere herein,
as adjusted to give effect to the Recapitalization Transactions. The unaudited
pro forma consolidated statement of income data for the fiscal year ended
September 30, 1996 and nine month periods ended June 30, 1996 and 1997 give
effect to the Recapitalization Transactions as if they had occurred at the
beginning of such periods. The pro forma adjustments are based upon available
data and certain assumptions that the Company believes are reasonable. The
unaudited pro forma consolidated financial data does not purport to represent
what the Company's results of operations would actually have been had the
Recapitalization Transactions in fact occurred at such prior times or to project
the Company's results of operations for any future period. The unaudited pro
forma consolidated financial data should be read in conjunction with the
consolidated financial statements of the Company and the information contained
in "The Recapitalization Transactions," "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1996
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales....................................................................... $ 150,993 $ 150,993
Cost of goods sold.......................................................... 72,364 72,364
---------- -----------
Gross margin................................................................ 78,629 78,629
Operating expenses:
Marketing and selling..................................................... 36,197 36,197
Research and development.................................................. 12,917 12,917
General and administrative................................................ 11,612 11,612
Provision for restructuring operations.................................... 1,832 1,832
---------- -----------
62,558 62,558
---------- -----------
Operating income............................................................ 16,071 16,071
Non-operating income (expense):
Interest income........................................................... 167 167
Interest expense.......................................................... (762) $ (11,171)(1) (11,933)
Other, net................................................................ (1,036) (1,036)
---------- ----------- -----------
(1,631) (11,171) (12,802)
---------- ----------- -----------
Income before provision for income taxes.................................... 14,440 (11,171) 3,269
Provision for income taxes.................................................. 965 (896)(2) 69
---------- ----------- -----------
Net income (3).............................................................. $ 13,475 $ (10,275) $ 3,200
---------- ----------- -----------
---------- ----------- -----------
EBITDA (4).................................................................. $ 20,933 $ 20,933
---------- -----------
---------- -----------
Ratio of earnings to fixed charges (5)...................................... 9.9x 1.3x
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, 1996
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales....................................................................... $ 115,181 $ 115,181
Cost of goods sold.......................................................... 55,779 55,779
---------- -----------
Gross margin................................................................ 59,402 59,402
Operating expenses:
Marketing and selling..................................................... 26,809 26,809
Research and development.................................................. 9,416 9,416
General and administrative................................................ 8,655 8,655
Provision for restructuring operations.................................... 188 188
---------- -----------
45,068 45,068
---------- -----------
Operating income............................................................ 14,334 14,334
Non-operating income (expense):
Interest income........................................................... 99 99
Interest expense.......................................................... (616) $ (8,364)(1) (8,980)
Other, net................................................................ (488) (488)
---------- ----------- -----------
(1,005) (8,364) (9,369)
---------- ----------- -----------
Income before provision for income taxes.................................... 13,329 (8,364) 4,965
Provision for income taxes.................................................. 893 (789)(2) 104
---------- ----------- -----------
Net income (3).............................................................. $ 12,436 $ (7,575) $ 4,861
---------- ----------- -----------
---------- ----------- -----------
EBITDA (4).................................................................. $ 16,988 $ 16,988
---------- -----------
---------- -----------
Ratio of earnings to fixed charges (5)...................................... 11.4x 1.5x
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data
29
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, 1997
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales....................................................................... $ 118,700 $ 118,700
Cost of goods sold.......................................................... 55,479 55,479
---------- -----------
Gross margin................................................................ 63,221 63,221
Operating expenses:
Marketing and selling..................................................... 27,913 27,913
Research and development.................................................. 11,635 11,635
General and administrative................................................ 7,878 7,878
Stock option compensation related to recapitalization (3)................. 7,061 7,061
---------- -----------
54,487 54,487
---------- -----------
Operating income............................................................ 8,734 8,734
Non-operating income (expense):
Interest income........................................................... 254 254
Interest expense.......................................................... (948) $ (7,791)(1) (8,739)
Other, net................................................................ (861) (861)
---------- ----------- -----------
(1,555) (7,791) (9,346)
---------- ----------- -----------
Income (loss) before provision for income taxes............................. 7,179 (7,791) (612)
Provision for income taxes.................................................. 2,728 (2,959)(2) (231)
---------- ----------- -----------
Net income (loss)........................................................... $ 4,451 $ (4,832) $ (381)
---------- ----------- -----------
---------- ----------- -----------
EBITDA (4).................................................................. $ 18,327 $ 18,327
---------- -----------
---------- -----------
Ratio of earnings to fixed charges (5)...................................... 5.4x 0.9x
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
(dollars in thousands)
(1) The pro forma adjustment to interest expense is as follows:
<TABLE>
<CAPTION>
FISCAL NINE MONTHS ENDED
YEAR ENDED JUNE 30,
SEPTEMBER 30, --------------------
1996 1996 1997
------------- --------- ---------
<S> <C> <C> <C>
Interest expense on the Notes and on borrowings under the New Credit
Agreement at an assumed weighted average interest rate of 9.62%, including
revolving credit commitment and administration fees........................ $ 10,581 $ 7,922 $ 7,382
Amortization of deferred debt issuance costs................................. 590 442 409
------------- --------- ---------
Total adjustment to interest expense..................................... $ 11,171 $ 8,364 $ 7,791
------------- --------- ---------
------------- --------- ---------
</TABLE>
(2) The pro forma provision for income taxes reflects an assumed effective rate
of 2.1%, 2.1% and 37.7% for fiscal 1996 and the nine months ended June 30,
1996 and 1997, respectively. The effective historical tax rates for fiscal
year 1996 and the nine months ended June 30, 1996 are lower than expected
statutory rates due primarily to the reduction of certain deferred tax asset
valuation allowances due to the realization of such deferred tax assets
becoming more likely than not. The pro forma effective tax rates for the
periods presented differ from the historical effective tax rate because the
pro forma adjustment to interest expense would have resulted in a lower
reduction in the deferred tax valuation allowance available to the Company.
(3) The Company recorded a charge of $7,061 in June 1997 related to its cash
payments to certain employees in exchange for their surrender of stock
options in connection with the Recapitalization Transactions. This
non-recurring expense, and a related non-recurring income tax benefit of
$2,779, are not reflected in the pro forma income statement data for fiscal
1996 or the nine months ended June 30, 1996.
(4) EBITDA is operating income plus depreciation and amortization expense, stock
option compensation related to recapitalization and provision for
restructuring operations. While EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position or cash flows, the Company has included EBITDA because it
is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a Company's ability to service debt. A similar concept to
EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in
the calculation of certain covenants therein. See "Description of Notes --
Certain Covenants" and
"-- Certain Definitions."
(5) For purposes of computing this ratio, earnings consist of income before
provision for income taxes plus fixed charges. Fixed charges consist of
interest expense, including amortization of deferred debt issuance costs,
and one-third of the rent expense from operating leases, which management
believes is a reasonable approximation of the interest factor of the rent.
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of September 30, 1995
and 1996 and for the fiscal years ended September 30, 1994, 1995 and 1996 are
derived from, and should be read in conjunction with, the audited consolidated
financial statements of the Company included elsewhere herein. The selected
consolidated financial data of the Company as of September 30, 1992, 1993 and
1994 and for the fiscal years ended September 30, 1992 and 1993 are derived from
audited consolidated financial statements of the Company that are not contained
herein. The selected historical consolidated financial data for the nine month
periods ended June 30, 1996 and 1997 have been derived from the unaudited
consolidated financial statements of Wavetek contained herein and reflect all
adjustments (consisting of normal recurring adjustments) that, in the opinion of
management of Wavetek, are necessary for a fair presentation of such
information. Operating results for the nine months ended June 30, 1997 are not
necessarily indicative of results that may be expected for fiscal 1997. The pro
forma data for the twelve months ended June 30, 1997 are derived from the
Unaudited Pro Forma Consolidated Financial Data of the Company. The selected
consolidated financial data should be read in conjunction with the consolidated
financial statements of the Company, the Unaudited Pro Forma Consolidated
Financial Data of the Company and the information contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Sales........................................ $ 58,081 $ 71,891 $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700
Cost of goods sold........................... 30,483 41,112 41,373 72,649 72,364 55,779 55,479
--------- --------- --------- --------- --------- --------- ---------
Gross margin................................. 27,598 30,779 33,442 60,970 78,629 59,402 63,221
Operating expenses:
Marketing and selling...................... 14,017 15,539 16,429 32,586 36,197 26,809 27,913
Research and development................... 5,507 5,114 5,425 12,096 12,917 9,416 11,635
General and administrative................. 5,350 5,704 6,057 9,391 11,612 8,655 7,878
Stock option compensation related to
recapitalization (1)..................... -- -- -- -- -- -- 7,061
Provision for restructuring operations
(2)...................................... -- -- -- -- 1,832 188 --
--------- --------- --------- --------- --------- --------- ---------
24,874 26,357 27,911 54,073 62,558 45,068 54,487
--------- --------- --------- --------- --------- --------- ---------
Operating income............................. 2,724 4,422 5,531 6,897 16,071 14,334 8,734
Non-operating income (expense):
Interest income............................ 117 24 33 90 167 99 254
Interest expense........................... (966) (676) (645) (1,190) (762) (616) (948)
Loss on sale and leaseback financing....... -- -- -- (1,824) -- -- --
Other, net................................. 1,077 24 (387) (288) (1,036) (488) (861)
--------- --------- --------- --------- --------- --------- ---------
228 (628) (999) (3,212) (1,631) (1,005) (1,555)
--------- --------- --------- --------- --------- --------- ---------
Income before provision for income taxes..... 2,952 3,794 4,532 3,685 14,440 13,329 7,179
Provision for income taxes................... 90 168 822 616 965 893 2,728
--------- --------- --------- --------- --------- --------- ---------
Net income................................... $ 2,862 $ 3,626 $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
EBITDA (3)................................... $ 3,760 $ 5,903 $ 7,141 $ 9,944 $ 20,933 $ 16,988 $ 18,327
Depreciation and amortization expense........ 1,036 1,481 1,610 3,047 3,030 2,466 2,532
Capital expenditures......................... 1,062 2,108 1,332 2,920 4,544 3,207 4,784
EBITDA as a percentage of sales.............. 6.5% 8.2% 9.5% 7.4% 13.9% 14.7% 15.4%
Ratio of earnings to fixed charges (4)....... 3.2x 4.7x 5.3x 2.8x 9.9x 11.4x 5.4x
PRO FORMA DATA (5):
Interest expense.............................
Ratio of EBITDA to interest expense..........
Ratio of net debt to EBITDA (6)..............
Ratio of earnings to fixed charges (4).......
<CAPTION>
TWELVE
MONTHS
ENDED
JUNE 30,
1997
-----------
<S> <C>
STATEMENT OF INCOME DATA:
Sales........................................ $ 154,512
Cost of goods sold........................... 72,064
-----------
Gross margin................................. 82,448
Operating expenses:
Marketing and selling...................... 37,301
Research and development................... 15,136
General and administrative................. 10,835
Stock option compensation related to
recapitalization (1)..................... 7,061
Provision for restructuring operations
(2)...................................... 1,644
-----------
71,977
-----------
Operating income............................. 10,471
Non-operating income (expense):
Interest income............................ 322
Interest expense........................... (1,094)
Loss on sale and leaseback financing....... --
Other, net................................. (1,409)
-----------
(2,181)
-----------
Income before provision for income taxes..... 8,290
Provision for income taxes................... 2,800
-----------
Net income................................... $ 5,490
-----------
-----------
OTHER FINANCIAL DATA:
EBITDA (3)................................... $ 22,272
Depreciation and amortization expense........ 3,096
Capital expenditures......................... 6,121
EBITDA as a percentage of sales.............. 14.4%
Ratio of earnings to fixed charges (4)....... 5.2x
PRO FORMA DATA (5):
Interest expense............................. $ 11,692
Ratio of EBITDA to interest expense.......... 1.9x
Ratio of net debt to EBITDA (6).............. 5.0x
Ratio of earnings to fixed charges (4)....... 0.8x
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF JUNE 30, 1997
----------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Cash and cash equivalents
(7).......................... $ 3,531 $ 3,513 $ 3,807 $ 3,689 $ 6,126 $ 7,059
Total assets................... 28,701 36,755 34,705 62,578 68,852 79,963
Total debt..................... 6,647 9,269 9,860 14,684 5,954 118,360
Stockholders' equity
(deficit).................... 11,535 14,592 11,637 19,416 32,688 (72,969)
</TABLE>
(SEE NOTES ON FOLLOWING PAGE)
32
<PAGE>
- ------------------------------
(1) In connection with the Recapitalization Transactions, the Company made cash
payments upon the surrender of stock options by employees in an aggregate
amount of $7.1 million. This amount is included in operating expenses for
the nine month period ended June 30, 1997.
(2) In fiscal 1996, the Company initiated a plan to restructure certain
corporate management functions, its European manufacturing, service and
sales activities and its San Diego manufacturing activities. The
restructuring costs primarily include expenses for employee severance and
closedown of certain manufacturing operations. The restructuring is expected
to be completed during fiscal 1997.
(3) EBITDA is operating income plus depreciation and amortization expense, stock
option compensation related to recapitalization and provision for
restructuring operations. While EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position or cash flows, the Company has included EBITDA because it
is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a Company's ability to service debt. A similar concept to
EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in
the calculation of certain covenants therein. See "Description of Notes --
Certain Covenants" and "-- Certain Definitions."
(4) For purposes of computing this ratio, earnings consist of income before
provision for income taxes plus fixed charges. Fixed charges consist of
interest expense, amortization of deferred debt issuance costs and one-third
of the rent expense from operating leases, which management believes is a
reasonable approximation of the interest factor of the rent.
(5) See "Unaudited Pro Forma Consolidated Financial Data."
(6) Net debt is total debt less cash and cash equivalents and short-term
investments. As of June 30, 1997, net debt was $111.3 million.
(7) Cash and cash equivalents includes short-term investments, which are
comprised primarily of U.S. Treasury securities and guaranteed obligations
of the U.S. government or its agencies with original maturities between 3
and 12 months.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the Unaudited Pro Forma Consolidated
Financial Data of the Company included elsewhere herein.
OVERVIEW
Wavetek is a leading global designer, manufacturer and distributor of a
broad range of electronic test instruments, with a primary focus on
application-specific instruments for testing voice, video and data
communications equipment and networks. The Company also designs, manufacturers
and distributes precision instruments to calibrate and test electronic equipment
and provides repair, upgrade and calibration services for its products on a
worldwide basis.
The Company derives its revenues primarily from the sale of its products to
a broad international base of over 5,000 customers operating in a wide range of
industries. A majority of the Company's sales come from its Communications Test
product lines which serve the CATV, Wireless, Telecom, LAN and Test Tools market
segments of the test instrument industry. The Company also sells Calibration
Instruments and provides repair, upgrade and calibration services for its
products on a worldwide basis. The Company sells products that are manufactured
at its four facilities located in: (i) Indianapolis, Indiana; (ii) Norwich,
England; (iii) St. Etienne, France; and (iv) Munich, Germany. In major markets
such as the United States, England, France and Germany, the Company sells its
products to customers in their local currencies. In the rest of the world, the
Company generally sells its products to customers or local distributors in the
functional currency of the location where the products are manufactured. During
fiscal 1996, approximately 59% of the Company's sales were generated outside of
the United States and approximately 47% of the Company's sales were made in
currencies other than the United States dollar. As a result of such foreign
currency sales, the equivalent United States dollar amount of the Company's
sales is impacted by changes in foreign currency exchange rates. The Company's
ability to maintain and grow its sales depends on a variety of factors including
its ability to maintain its competitive position in areas such as technology,
performance, price, brand identity, quality, reliability, distribution and
customer service and support, and its ability to continue to introduce new
products that respond to technological change and market demand in a timely
manner.
Wavetek's cost of goods sold, and its resulting gross margin, are driven
primarily by the cost of the material in its products, the cost of the labor to
manufacture such products and the overhead expenses in its facilities. In recent
years, the Company has focused on improving its gross margin by: (i)
consolidating manufacturing operations; (ii) focusing its new product
development efforts on lower-cost, easier to manufacture designs; (iii)
controlling headcount and expenses in its manufacturing facilities; and (iv)
gaining efficiencies and economies of scale in its material and component
procurement activities.
The Company's operating expenses are substantially impacted by marketing and
selling activities and by research and development activities. Marketing and
selling expenses are primarily driven by: (i) sales volume, with respect to
sales force expenses and sales and commission expenses; (ii) the extent of
market research activities for new product design efforts; (iii) advertising and
trade show activities; and (iv) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities. This increase has resulted from the Company's
October 1994 acquisition of its Wireless and Telecom businesses, which had a
higher spending level than the Company's historical activities, and from a
planned increase in spending to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial
34
<PAGE>
international operations, the United States dollar amount of its expenses is
impacted by changes in foreign currency exchange rates.
In recent years, the Company's results of operations have been significantly
impacted by its October 1994 acquisition of its Wireless and Telecom businesses,
the Company's efforts to improve the operating results of these businesses and
by the rapid growth in sales and profitability of the Company's CATV product
lines.
RESULTS OF OPERATIONS
The following table sets forth selected financial information as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED
JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................. 55.3 54.4 47.9 48.4 46.7
--------- --------- --------- --------- ---------
Gross margin....................................... 44.7 45.6 52.1 51.6 53.3
Operating expenses................................. 37.3 40.4 41.5 39.1 45.9
--------- --------- --------- --------- ---------
Operating income................................... 7.4 5.2 10.6 12.5 7.4
Interest expense, net.............................. (0.8) (0.8) (0.4) (0.5) (0.7)
Other non-operating income (expense), net.......... (0.5) (1.6) (0.7) (0.4) (0.7)
--------- --------- --------- --------- ---------
Income before provision for income taxes........... 6.1 2.8 9.5 11.6 6.0
Provision for income taxes......................... (1.1) (0.5) (0.6) (0.8) (2.3)
--------- --------- --------- --------- ---------
Net income......................................... 5.0% 2.3% 8.9% 10.8% 3.7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
EBITDA (1)......................................... 9.5% 7.4% 13.9% 14.7% 15.4%
</TABLE>
- ------------------------
(1) EBITDA is operating income plus depreciation and amortization expense, stock
option compensation related to recapitalization and provision for
restructuring operations. While EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position or cash flows, the Company has included EBITDA because it
is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a Company's ability to service debt. A similar concept to
EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in
the calculation of certain covenants therein. See "Description of Notes --
Certain Covenants" and "-- Certain Definitions."
35
<PAGE>
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
SALES. Sales in the nine months ended June 30, 1997 increased $3.5 million,
or 3.1%, to $118.7 million from $115.2 million in the comparable fiscal 1996
period. This increase was due to an increase in sales to international customers
of $5.3 million, or 7.7%, offset by a decrease of $1.7 million, or 3.7%, in
sales to customers in the United States. The Company's sales to customers
outside the United States increased to 62.2% in the nine months ended June 30,
1997 from 59.5% in the comparable fiscal 1996 period. Changes in foreign
exchange rates had an unfavorable impact on the United States dollar equivalent
of international sales in the nine months ended June 30, 1997. Sales of the
Company's Communications Test products increased $1.0 million, or 1.1%, from the
comparable fiscal 1996 period primarily as a result of an increase in
international sales partially offset by reduced domestic sales. Sales of
Calibration Instruments products increased $2.5 million, or 14.2%, from the
comparable fiscal 1996 period, due partially to changes in foreign exchange
rates and partially to higher shipments in connection with a planned reduction
in the backlog of this product line. Sales from repair, upgrade and calibration
services remained relatively constant during the nine months ended June 30,
1997, increasing $0.1 million, or 0.8%, from the comparable fiscal 1996 period.
Within its Communications Test product lines, sales of the Company's CATV
and Wireless products increased in the nine months ended June 30, 1997 from the
comparable fiscal 1996 period, while sales of the Company's Telecom, LAN and
Test Tools products declined. The growth in CATV sales in the first nine months
of fiscal 1997 can be substantially attributed to the Company's continued
penetration of international markets as it continues to benefit from the
increasing international investment in CATV infrastructure. The increase in
Wireless product sales in the first nine months of fiscal 1997 is due primarily
to the shipment of a large order to a customer in Korea, offset by the impact of
the devaluation of the Deutsche mark against the United States dollar. The
Company's Telecom sales decreased during the first nine months of fiscal 1997 as
a result of reduced sales in France, including sales to one of the Company's
largest Telecom customers. Telecom sales in the first nine months of fiscal 1997
were also adversely affected by the devaluation in the French franc against the
United States dollar. Decreases in sales of LAN and Test Tools products during
the first nine months of fiscal 1997 were primarily attributable to pending
transitions to new or updated LAN and Test Tools products which are being
introduced in fiscal 1997. The Company's sales were also adversely impacted in
the first nine months of fiscal 1997 by the discontinuance of selected non-core
Communications Test products.
GROSS MARGIN. The Company's gross margin in the nine months ended June 30,
1997 increased $3.8 million, or 6.4%, to $63.2 million from $59.4 million in the
first nine months of fiscal 1996. Gross margin as a percentage of sales
increased to 53.3% in the first nine months of fiscal 1997 from 51.6% in the
first nine months of fiscal 1996. The increase in the gross margin percentage
during the first nine months of fiscal 1997 results from a higher proportion of
the Company's sales coming from its higher margin CATV products, offset by
reductions in the gross margin percentage achieved in its Wireless, Telecom and
Calibration Instruments product lines. The Company has also experienced higher
gross margin percentages in the first nine months of fiscal 1997 as a result of
a more favorable geographic mix. The decline in Wireless gross margin
percentages in the first nine months of fiscal 1997 is due primarily to a large
sale of a non-core product to a customer in Korea on which a lower than average
gross margin percentage was achieved.
OPERATING EXPENSES. Operating expenses in the nine months ended June 30,
1997 increased $9.4 million, or 20.9%, to $54.5 million from $45.1 million in
the comparable fiscal 1996 period. Operating expenses as a percentage of sales
increased to 45.9% in the first nine months of fiscal 1997 from 39.1% in the
first nine months of fiscal 1996. The increase in operating expenses in the
first nine months of fiscal 1997 was due to a one-time charge of $7.1 million,
or 5.9% of sales, for stock option compensation related to the Recapitalization
Transactions and an increase in spending for research and development activities
of $2.2 million, to 9.8% of sales in the first nine months of fiscal 1997 from
8.2% of sales in the first nine months of fiscal 1996, in order to accelerate
the timing of new product introductions. The increase in the
36
<PAGE>
first nine months of fiscal 1997 was also partially due to increased spending,
as a percentage of sales, in marketing and selling activities to 23.5% in the
first nine months of fiscal 1997 from 23.3% in the first nine months of fiscal
1996. These increases in the first nine months of fiscal 1997 were partially
offset by reduced spending in general and administrative activities of $0.8
million to 6.6% in the first nine months of fiscal 1997 from 7.5% in the first
nine months of fiscal 1996, reflecting the Company's ability to spread certain
fixed expenses over a higher sales volume.
NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in the nine
months ended June 30, 1997 increased by $0.6 million over the comparable fiscal
1996 period to $1.6 million. The Company's net interest expense increased to
$0.7 million during the nine months ended June 30, 1997 from $0.5 million in the
comparable fiscal 1996 period, reflecting additional interest expense due to the
Notes and the New Credit Agreement. In addition, in the nine months ended June
30, 1997, the Company's exchange losses from foreign currency transactions,
included in the "Other, net" caption in the Company's consolidated statements of
income, increased by $0.5 million over the comparable fiscal 1996 period.
PROVISION FOR INCOME TAXES. The Company's effective tax rate in the nine
months ended June 30, 1997 was 38.0%. In the nine months ended June 30, 1996,
the Company's effective tax rate was only 6.7% due to the reduction of certain
deferred tax asset valuation allowances due to the realization of such deferred
tax assets becoming more likely than not. At June 30, 1997, the deferred tax
assets were $4.5 million.
NET INCOME. As a result of the above factors, net income was $4.5 million
in the nine months ended June 30, 1997 as compared to $12.4 million in the nine
months ended June 30, 1996.
EBITDA. EBITDA was $18.3 million in the nine months ended June 30, 1997 as
compared to $17.0 million in the nine months ended June 30, 1996. EBITDA as a
percentage of sales increased to 15.4% in the first nine months of fiscal 1997
from 14.7% in the first nine months of fiscal 1996.
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995
SALES. Sales in fiscal 1996 increased $17.4 million, or 13.0%, to $151.0
million from $133.6 million in fiscal 1995. The Company's mix of business in the
United States versus international markets remained constant at approximately
41% domestic and approximately 59% international in each of fiscal 1996 and
1995. Changes in foreign exchange rates did not have a material impact on total
sales in fiscal 1996 compared to fiscal 1995. Sales of the Company's
Communications Test products in fiscal 1996 increased $15.6 million, or 15.7%,
from fiscal 1995. Sales of Calibration Instruments products in fiscal 1996
increased by $0.7 million, or 2.8%, from fiscal 1995. Revenues from repair,
upgrade and calibration services increased $1.1 million in fiscal 1996, or
10.6%, over fiscal 1995 primarily due to increased service revenues for the
Company's Wireless and Telecom products in France and Germany.
Within its Communications Test product lines, sales of the Company's CATV
products increased in fiscal 1996 as a result of the impact of new products
introduced in fiscal 1996 and 1995 and the positive impact of overall growth in
CATV markets due to infrastructure upgrading by United States CATV operators and
the rapid increase of cable subscribers and cable infrastructure development in
international markets. Sales of the Company's LAN products also increased in
fiscal 1996 as a result of the full-year effect of the Company's LANTEKPRO
family of products that were introduced mid-year in fiscal 1995. These CATV and
LAN increases in fiscal 1996 were offset by decreases in sales of the Company's
Test Tools products primarily due to the discontinuance of non-core product
lines and a decrease in sales of the Company's Wireless products attributable to
declines in sales of older products. The Company's Communications Test sales
were also impacted by the sale of a non-strategic business in fiscal 1996.
GROSS MARGIN. The Company's gross margin in fiscal 1996 increased $17.7
million, or 29.0%, to $78.6 million from $61.0 million in fiscal 1995. Gross
margin as a percentage of sales increased to 52.1% in fiscal 1996 from 45.6% in
fiscal 1995. The increase in gross margin in fiscal 1996 was due to: (i) the
closing of the Company's San Diego manufacturing facility in fiscal 1996; (ii)
increased sales of higher gross margin
37
<PAGE>
Communications Test products; (iii) the benefits of improved overhead absorption
due to the significant increase in volume of sales of CATV and LAN products; and
(iv) reduced overhead spending in the Company's Wireless and Telecom business
areas, which were acquired in October 1994.
OPERATING EXPENSES. Operating expenses in fiscal 1996 increased $8.5
million, or 15.7%, to $62.6 million from $54.1 million in fiscal 1995. Operating
expenses as a percentage of sales increased to 41.5% in fiscal 1996 from 40.4%
in fiscal 1995. The increase in operating expenses in fiscal 1996 was due to:
(i) a provision recorded by the Company of $1.8 million for the restructuring of
certain corporate management functions, its European manufacturing, service and
sales activities and San Diego manufacturing activities; and (ii) an increase in
general and administrative activities of $2.2 million, to 7.7% of sales in
fiscal 1996 from 7.0% of sales in fiscal 1995, due to higher than normal charges
in 1996 for executive recruitment and relocation and provisions for potentially
doubtful accounts receivable. Excluding the $1.8 million provision for
restructuring operations, operating expenses as a percentage of sales would have
decreased to 40.2% in fiscal 1996 from 40.4% in fiscal 1995. The increase in
fiscal 1996 was partially offset by reduced spending, as a percentage of sales,
in marketing and selling activities to 24.0% in fiscal 1996 from 24.4% in fiscal
1995 and in research and development activities to 8.6% in fiscal 1996 from 9.1%
in fiscal 1995, reflecting the Company's efforts to reduce expenses in the
Wireless and Telecom business areas it acquired in October 1994.
NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in fiscal 1996
decreased to $1.6 million from $3.2 million in fiscal 1995. The Company's net
interest expense decreased to $0.6 million in fiscal 1996 from $1.1 million in
fiscal 1995, reflecting a reduction in average net borrowings. Other non-
operating expenses decreased to $1.0 million in fiscal 1996 from $2.1 million in
fiscal 1995, due primarily to a loss of $1.8 million incurred in fiscal 1995
related to the sale and leaseback financing of the Company's Indianapolis
facility. This decrease was partially offset by an increase in other expense of
$0.7 million in fiscal 1995 due primarily to certain non-recurring legal
expenses.
PROVISION FOR INCOME TAXES. The Company's effective tax rate in fiscal 1996
was 6.7% due to the reduction of certain deferred tax asset valuation allowances
due to the realization of such deferred tax assets becoming more likely than
not, compared to a fiscal 1995 effective rate of 16.7%.
NET INCOME. As a result of the above factors, net income was $13.5 million
in fiscal 1996 as compared to $3.1 million in fiscal 1995.
EBITDA. EBITDA was $20.9 million in fiscal 1996 as compared to $9.9 million
in fiscal 1995. EBITDA as a percentage of sales increased to 13.9% in fiscal
1996 from 7.4% in fiscal 1995.
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1994
SALES. Sales in fiscal 1995 increased $58.8 million, or 78.6%, to $133.6
million from $74.8 million in fiscal 1994. The Company's sales to customers
outside the United States increased to 59.5% of sales in fiscal 1995 from 42.6%
in fiscal 1994. The increases in total sales and the international portion of
total sales are substantially attributable to the Company's acquisition of the
Wireless and Telecom business of Schlumberger in October 1994. Additionally,
sales of the Company's CATV products increased due to the early effects of the
overall growth in the CATV market and infrastructure spending described above,
and sales of the Company's LAN products grew due to the introduction of a new
product platform in the middle of fiscal 1995.
GROSS MARGIN. The Company's gross margin in fiscal 1995 increased $27.5
million, or 82.3%, to $61.0 million from $33.4 million in fiscal 1994. Gross
margin as a percentage of sales increased to 45.6% in fiscal 1995 from 44.7% in
fiscal 1994. The increase in margins was due to the positive effects of volume
increases in the CATV and LAN product lines, offset by the impact of lower gross
margins associated with the acquired Wireless and Telecom business.
38
<PAGE>
OPERATING EXPENSES. Operating expenses in fiscal 1995 increased $26.2
million, or 93.7%, to $54.1 million from $27.9 million in fiscal 1994. Operating
expenses as a percentage of sales increased to 40.4% in fiscal 1995 from 37.3%
in fiscal 1994, reflecting increased fixed expenses, higher spending levels and
goodwill amortization associated with the acquired Wireless and Telecom
business.
NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in fiscal 1995
increased to $3.2 million from $1.0 million in fiscal 1994. The Company's net
interest expense increased to $1.1 million during fiscal 1995 from $0.6 million
during fiscal 1994, reflecting increased borrowings to complete the October 1994
acquisition by the Company of its Wireless and Telecom businesses. Other
non-operating expenses increased to $2.1 million in fiscal 1995 from $0.4
million in fiscal 1994, due primarily to a loss of $1.8 million incurred in
fiscal 1995 related to the sale and leaseback financing of the Company's
Indianapolis facility.
PROVISION FOR INCOME TAXES. The Company's effective tax rate in fiscal 1995
was 16.7%, compared to a fiscal 1994 effective rate of 18.1%.
NET INCOME. As a result of the above factors, net income was $3.1 million
in fiscal 1995 as compared to $3.7 million in fiscal 1994.
EBITDA. EBITDA was $9.9 million in fiscal 1995 as compared to $7.1 million
in fiscal 1994. EBITDA as a percentage of sales decreased to 7.4% in fiscal 1995
from 9.5% in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow from operating activities was $6.4 million, $12.5
million and $15.1 million in fiscal 1994, 1995 and 1996, respectively, and $14.1
million (excluding a one-time charge of $7.1 million for stock option
compensation related to the Recapitalization Transactions) for the nine months
ended June 30, 1997. The Company had cash, cash equivalents and short-term
investments at June 30, 1997 of $7.1 million. The Company invests its excess
cash in money market funds and U.S. Treasury obligations. Historically the
Company has funded its business through operating cash flow, has not relied on
sales of equity to provide cash and has used short-term debt primarily for cash
management purposes. The Company's European subsidiaries had borrowings
outstanding under their existing credit agreements (the "Existing Credit
Agreements") of $3.4 million at June 30, 1997 for funding short-term working
capital requirements, and the Company had additional obligations outstanding
totalling approximately $2.1 million in the form of letters of credit and bank
guarantees. As of June 30, 1997, the Company had outstanding an unsecured note
of approximately $0.9 million issued in the October 1994 acquisition of the
Company's Telecom business and a financing obligation of $4.1 million recorded
in connection with the sale and leaseback of the Company's facilities in
Indianapolis, Indiana. See "Description of Other Indebtedness -- Other Debt."
The Company's primary cash needs have been for the funding of working
capital requirements (primarily inventory) and capital expenditures. The Company
made capital expenditures in fiscal 1994, 1995 and 1996 of $1.3 million, $2.9
million and $4.5 million, respectively, and $4.8 million for the nine months
ended June 30, 1997. Capital expenditures in fiscal 1994 and 1995 primarily
reflect spending for manufacturing and engineering equipment resulting from the
increase in the size of the business and the number of facilities following the
October 1994 acquisition by the Company of its Wireless and Telecom businesses.
In fiscal 1996, the expenditures reflect increasing investment in manufacturing
and engineering equipment and also include approximately $1.1 million related to
investing in new management information system hardware and software. The
Company expects its capital expenditures to increase to approximately $6.0
million in fiscal 1997, which would represent a higher than average percentage
of sales as compared to historical levels. These higher than average
expenditures primarily reflect the Company's continued investment in new
management information systems and manufacturing equipment.
39
<PAGE>
As part of the Recapitalization Transactions, the Company entered into the
New Credit Agreement with Fleet National Bank, DLJ Capital Funding, Inc. and
various other lenders providing for a term loan facility of $25.0 million and a
revolving credit facility providing for borrowings up to $20.0 million, of which
the Company borrowed all $25.0 million of the term loan facility and none of the
revolving credit facility to complete the Recapitalization Transactions. See
"Description of Other Indebtedness -- New Credit Agreement." In connection with
entering into the New Credit Agreement, the Company terminated $4.0 million of
availability under its Existing Credit Agreements, leaving borrowing
availability of approximately $10.5 million at its Foreign Subsidiaries. The
Company believes that its cash flow from operations, combined with the remaining
available borrowings under the Existing and New Credit Agreements will be
sufficient to fund its debt service obligations, including its obligations under
the Notes, and working capital requirements, as well as implement its growth
strategy.
FOREIGN OPERATIONS
As discussed above, a significant portion of the Company's sales and
expenses are denominated in currencies other than the United States dollar. In
order to maintain access to such foreign currencies, the Company's subsidiaries
in the United Kingdom, France and Germany have credit facilities providing for
borrowings in British pounds, French francs and Deutsche marks, respectively.
The revolving credit facility under the New Credit Agreement provides for up to
an aggregate of $7.5 million of borrowings in British pounds, French francs and
Deutsche marks. Adjustments made in translating the balance sheet accounts of
the Foreign Subsidiaries from their respective functional currencies at
appropriate exchange rates are included as a separate component of stockholders'
equity. In addition, the Company periodically uses forward exchange contracts to
hedge certain known foreign exchange exposures. Gains or losses from such
contracts are included in the Company's statements of income to offset gains and
losses from the underlying foreign currency transactions.
The Indenture and the New Credit Agreement permit the Company and its
subsidiaries to make investments in, and intercompany loans to, the Foreign
Subsidiaries. Payments to the Company or its other subsidiaries by such Foreign
Subsidiaries, including the payment of dividends, redemption of capital stock or
repayment of such intercompany loans, may be restricted by the credit agreements
of the Foreign Subsidiaries. All intercompany loans from the Company to the
Foreign Subsidiaries are pledged to the lenders under the New Credit Agreement.
PERIODIC FLUCTUATIONS
A variety of factors may cause period-to-period fluctuations in the
operating results of the Company. Such factors include, but are not limited to,
product mix, European summer holidays and other seasonal influences, competitive
pricing pressures, materials costs, currency fluctuations, revenues and expenses
related to new products and enhancements of existing products, as well as delays
in customer purchases in anticipation of the introduction of new products or
product enhancements by the Company or its competitors. The majority of the
Company's revenues in each quarter results from orders received in that quarter.
As a result, the Company establishes its production, inventory and operating
expenditure levels based on anticipated revenue levels. Thus, if sales do not
occur when expected, expenditures levels could be disproportionately high and
operating results for that quarter, and potentially future quarters, would be
adversely affected.
40
<PAGE>
BUSINESS
GENERAL
Wavetek is a leading global designer, manufacturer and distributor of a
broad range of electronic test instruments, with a primary focus on
application-specific instruments used for testing voice, video and data
communications equipment and networks. The Company also designs, manufacturers
and distributes precision instruments to calibrate and test electronic equipment
and provides repair, upgrade and calibration services for its products on a
worldwide basis. The Company was acquired in 1991 by an investment group led by
Gooding and consummated the Recapitalization Transations in June 1997 with the
New Equity Investors. The Company has increased sales from $58.1 million in
fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA from $3.8 million in
fiscal 1992 to $20.9 million in fiscal 1996 by increasing its penetration of
existing markets and by entering additional markets through introductions of new
products and acquisitions. For the LTM ended June 30, 1997, Wavetek had sales
and EBITDA of $154.5 million and $22.3 million, respectively.
Wavetek believes it has achieved its success by: (i) focusing on the $2.5
billion Communications Test market segment of the test instrument industry,
which is expected to grow by approximately 10% per annum through 2001; (ii)
identifying changing industry trends and customer needs and successfully
introducing responsive new products on a timely basis; (iii) serving the
increasing demand for application-specific, portable field service and
maintenance equipment, which accounted for over 70% of the Company's LTM sales;
and (iv) leveraging its operations and development capabilities outside the
United States, where the Company generated 61% of its LTM sales. Wavetek
believes that its product development capabilities, product quality, breadth of
product line and geographic diversity should enable it to continue to expand its
share of existing markets and successfully enter new markets.
The Company's Communications Test products, which accounted for 75% of the
Company's LTM sales, serve the CATV, Wireless, Telecom, LAN and Test Tools
segments of the test instrument industry. The primary end users for the
Company's Communications Test products are service, installation and maintenance
personnel of CATV operators, wireless communications companies,
telecommunications companies and data communications equipment installers. The
Company's CATV products are used by CATV operators to diagnose and monitor CATV
systems, test cable for signal quality and leakage and ensure the proper
installation of new services such as cable modems. The Company's Wireless
products are used by wireless operators, equipment manufacturers and retailers
to test mobile phones during production, repair, or at the point-of-sale and by
wireless operators to test base stations. The Company's Telecom products are
used by telecommunications companies to install and maintain fiber optic cable.
The Company's LAN products are used by LAN installation and service
professionals to test LAN cables and connectors ("physical layer"). The
Company's Test Tools products, primarily hand-held DMMs, are used to test a wide
variety of electronic and electrical equipment. The Company has strong
competitive positions in its target markets and believes it is the worldwide
market leader in the manufacture of CATV test equipment, the second largest
supplier of hand-held DMMs and one of the five largest manufacturers of Wireless
and physical layer LAN test equipment.
The Company's Calibration Instruments products, which accounted for 17% of
the Company's LTM sales, are used in metrology, engineering and manufacturing
environments worldwide to calibrate electronic equipment and certify compliance
with international standards. The Company believes it is the second largest
global manufacturer of Calibration Sources and Transfer Standards. The Company's
Calibration Instruments products also include Precision DMMs. The Company
successfully competes in this market based on its technical expertise,
relationships with national laboratories and product reputation.
The Company's Service business, which accounted for 8% of the Company's LTM
sales, provides repair, upgrade and calibration services for the Company's
products through eight Wavetek service centers worldwide and an international
network of independent representatives.
41
<PAGE>
Wavetek has global design, manufacturing, marketing and distribution
capabilities through facilities located in the United States, the United
Kingdom, France and Germany. The Company is committed to providing high quality
manufacturing and has received or is in the process of receiving ISO 9000
certification for each of its manufacturing facilities. In addition, Wavetek
supports its broad international base of over 5,000 customers with regional
sales offices in San Diego, Indianapolis, Norwich, Munich, Paris, Vienna,
Singapore, Hong Kong, Beijing and Shanghai. The Company's products are sold
through direct sales teams in the United States, the United Kingdom, France and
Germany and a global network of over 250 distributors and independent
representatives.
BUSINESS STRATEGY
Wavetek believes that it has achieved its strong position in the
Communications Test and Calibration Instruments market segments by identifying
changing industry trends and customer needs, and by successfully introducing
high-quality, cost-effective, application-specific products to meet such needs
on a timely basis. The Company's business strategy is to further enhance its
strong position in these markets and to continue to increase sales and EBITDA
through the following key initiatives:
- FOCUS ON THE LARGE, RAPIDLY GROWING COMMUNICATIONS TEST SEGMENT. The
Company generated 75% of its LTM sales from Communications Test products
and intends to continue to focus on this segment of the test instrument
industry. Prime Data expects sales in the Communications Test market to
grow at approximately 10% per annum from approximately $2.5 billion in
1996 to approximately $4.0 billion in 2001. The Company believes that the
drivers of this growth include (i) rapidly changing communications
technology; (ii) growing demand for personal communications services
(including mobile phones, interactive CATV and internet access); and (iii)
increasing worldwide investment to build or upgrade data and
communications infrastructure. Wavetek intends to capitalize on this
large, rapidly growing market segment through its broad Communications
Test product portfolio, extensive international presence and strong market
positions in CATV, Wireless and LAN.
- DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR TARGET MARKETS ON A TIMELY
BASIS. Wavetek's product development strategy is to: (i) focus on
application-specific products that are responsive to customer needs; (ii)
minimize development time in order to address rapidly changing technology;
and (iii) leverage design efforts by generating multiple product line
extensions from existing product platforms. Wavetek has a history of
successful new product introductions, including eight new products in
fiscal 1996, and the Company expects to introduce approximately ten new
products in fiscal 1997.
- MEET DEMAND FOR ENHANCED PORTABLE TEST INSTRUMENTS. The Company generated
over 70% of its LTM sales from portable field service and maintenance
equipment and intends to continue to focus on these types of products. The
increasing complexity of communications technology is creating demand for
field test equipment that incorporates enhanced measurement performance.
Furthermore, service, installation and maintenance personnel are demanding
smaller, more portable products that enable them to service systems and
equipment in the field rather than at a service facility. As a result of
its product design, manufacturing and distribution strengths in portable
test instruments, the Company believes it will continue to benefit from
these demand trends.
- LEVERAGE INTERNATIONAL OPERATIONS AND DISTRIBUTION. The Company believes
that international capital investment in communications infrastructure has
provided and will continue to provide growth in the worldwide
Communications Test market. Wavetek believes it is well-positioned to
capitalize on this growth with its substantial international operations
that include: (i) three foreign manufacturing facilities; (ii) established
international sales and distribution channels; and (iii) approximately 450
employees located outside of the United States. The Company generated 61%
of its LTM sales from customers outside the United States and believes its
international operations should enable it
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to gain market share in existing international markets and successfully
enter new markets, particularly in the Asia-Pacific, Eastern Europe and
South America regions. Additionally, the Company believes that its
strategic alliance formed in 1996 with Yokogawa, a leading Japanese
process control and test and measurement company, coupled with the
development of new products tailored for the Japanese market, will
increase the Company's sales in Japan.
- ENHANCE PROFITABILITY THROUGH CONTINUED IMPROVEMENT IN THE WIRELESS AND
TELECOM BUSINESSES. Wavetek has taken measures to improve the operations
of its Wireless and Telecom businesses acquired in October 1994,
including: (i) introducing new products with higher gross margins; (ii)
rationalizing old, low margin businesses and products; (iii) reducing
headcount; (iv) hiring new management; and (v) reducing marketing and
selling expenses as a percentage of sales. As a result of these ongoing
efforts, the Company has significantly improved the operating results of
these acquired businesses. As new products with higher margins continue to
replace older products, and as the Company makes additional cost
improvements in its European manufacturing operations, the Company expects
results from these businesses to continue to improve.
TEST INSTRUMENT INDUSTRY
The global test instrument industry encompasses the manufacturing, marketing
and distribution of a wide variety of electronic test equipment used in the
design, development and service of various types of electronic equipment, cables
and systems. Test instruments are used primarily by service, installation,
maintenance, manufacturing and research and engineering professionals in a broad
range of industries, including communications, technology, aerospace, process
control and automotive. Selected products include signal meters, DMMs, sweep
generators, spectrum analyzers, function generators and network analyzers.
Wavetek focuses on two segments of the $7.8 billion test instrument industry:
Communications Test and Calibration Instruments.
COMMUNICATIONS TEST
The Communications Test segment is the largest and one of the fastest
growing segments of the test instrument industry. This segment consists of a
broad range of equipment used to install, diagnose, maintain and service
equipment for voice, video and data communications networks. According to Prime
Data, sales in the Communications Test segment have grown from approximately
$1.2 billion in 1989 to approximately $2.5 billion in 1996. Prime Data further
expects this segment to grow approximately 10% per annum to over $4.0 billion by
2001. In 1995, approximately 61% of Communications Test market revenues occurred
outside of the United States, with Asia and Europe representing 25% and 28% of
the market, respectively, and the rest of the world representing 8%. The
following graph presents the historical and projected size (as compiled by Prime
Data) of the Communications Test segment of the test instrument industry:
WORLDWIDE COMMUNICATIONS TEST INSTRUMENT SALES
(dollars in millions)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1989 $1,182
<S> <C>
1990 $1,265
1991 $1,351
1992 $1,416
1993 $1,558
1994 $1,867
1995 $2,187
1996 $2,460
1997E $2,710
1998E $3,000
1999E $3,315
2000E $3,670
2001E $4,005
</TABLE>
- --------------
Source: Prime Data 1997.
43
<PAGE>
The Company believes that the consistent growth of the Communications Test
segment has been driven and will continue to be driven, in large part, by the
following factors:
RAPIDLY CHANGING TECHNOLOGY. Many segments of the communications industry
are experiencing rapid change due to new and competing technologies. For
example, digital formats are replacing analog formats in many forms of
communication systems. In addition, the need to increase data capacity should
lead to higher bandwidths, new signalling formats and new transmission
technologies. Each change or upgrade in communications systems or infrastructure
requires substantial testing, which creates demand for new or upgraded test
instruments.
SUBSTANTIAL CAPITAL INVESTMENT IN COMMUNICATIONS INFRASTRUCTURE. Developed
countries, such as the United States, are investing substantial capital to
construct, rebuild, upgrade and maintain information and communications systems.
Although such expenditures have slowed in certain areas, operators generally
need to upgrade their systems in order to support the increased demand for new
services and methods of communication that require more technologically advanced
communications infrastructure. Less mature countries, including selected
Asia-Pacific, Eastern European and South American countries, are building
communications infrastructure to meet increasing demand for basic communications
services such as CATV, Wireless and Telecom. Demand for Communications Test
products has historically depended upon capital spending for such communications
infrastructure.
INCREASED DEMAND FOR WIRELESS PRODUCTS. According to industry sources, the
number of global cellular and personal communications system ("PCS") subscribers
is expected to grow from 123 million in 1996 to 334 million in 2001,
representing an average growth rate of approximately 22% per annum. In addition
to the growth in subscribers, wireless technologies are constantly evolving. The
Company believes that the combination of growth in cellular and PCS subscribers
and changing technology should increase the need for wireless Communications
Test products.
SHIFT TO ENHANCED PORTABLE FIELD TEST EQUIPMENT. The increasing complexity
of communications technology is creating demand for field test equipment that
incorporates enhanced measurement performance. Furthermore, service and
installation personnel are demanding smaller, more portable products that enable
them to service systems and equipment in the field rather than at a service
facility. As a result, there is a continuing need to develop more portable field
test equipment with enhanced features and technology.
CALIBRATION INSTRUMENTS
The Calibration Instruments segment of the test instrument industry is
comprised of instruments which measure voltage, current, power quality,
frequency, temperature, pressure and other key functional parameters of
electronic equipment. Calibration Instruments are typically used by engineering
and manufacturing professionals and national laboratories to ensure that the
accuracy of the calibration or verification of electronic test equipment can be
traced to national, international or military reference standards. The Company
focuses on the metrology area of Calibration Instruments with three types of
products: Calibration Sources, Transfer Standards and Precision DMMs.
Calibration Sources provide high accuracy voltages and currents for calibrating
and verifying the accuracy of voltage measuring equipment. Transfer Standards
transfer the accuracy of voltage measurements from national standards
laboratories to industry calibration laboratories. Precision DMMs measure
voltages and currents produced by electronic equipment to accuracies up to 8 1/2
digits.
The Company estimates that the aggregate market for these products was $365
million in 1996, with DMMs (of which Precision DMMs are a small segment),
Calibration Sources and Transfer Standards representing approximately 78%, 19%
and 3%, respectively, of the market. The Company believes that future growth in
the Calibration Instruments industry will be primarily driven by: (i) increased
adherence to quality standards such as ISO 9000, which require companies to
regularly calibrate and verify electronic
44
<PAGE>
equipment used in manufacturing and repair; (ii) demand for more automated and
user-friendly Calibration Instruments to increase efficiency and allow less
skilled technicians to administer calibration procedures; and (iii) demand for
Calibration Instruments to accommodate a wider range of equipment with specific
test programs in order to increase efficiency and reduce the cost of calibration
and maintenance.
The Company believes that several barriers to entry exist in the Calibration
Instruments market that limit the number of competitors. Users of Calibration
Instruments depend on the accuracy of such instruments and generally require
instrument manufacturers to have long standing reputations for technical
expertise and product quality. Furthermore, sales often depend on relationships
with major quality standards organizations such as national laboratories and
worldwide first tier metrology labs.
BUSINESS
Within the test instrument industry, Wavetek has a primary focus on
Communications Test instruments. The Company also manufactures Calibration
Instruments and provides repair, upgrade and calibration services for its
products on a worldwide basis. The Company's Communications Test, Calibration
Instruments and Service businesses accounted for 75%, 17% and 8%, respectively,
of the Company's LTM sales.
COMMUNICATIONS TEST
The Company's Communications Test business, which accounted for 75% of the
Company's LTM sales, consists of CATV, Wireless, Telecom, LAN and Test Tools.
CATV. The Company is the global leader in developing and manufacturing test
equipment used for commissioning new and maintaining existing CATV networks.
Major products include: sweep systems, signal level meters, leakage meters,
monitoring systems and related software. These products allow CATV operators to
test and monitor the quality of signals transmitted over a CATV network. The
Company believes that the development and deployment by CATV operators of
advanced services, including two-way data paths to provide telephony or internet
services, has created new product opportunities for Wavetek. For example,
Wavetek's close customer relationships gave the Company early indication of the
need for return path testing capability. Wavetek used this information to create
an extension to Wavetek's successful Stealth product line to assist CATV
technicians in the installation and servicing of the return path of CATV
networks.
One of the primary technical problems facing two-way CATV networks is
interference (noise) on the return path. If the return path is not securely
installed with tight connectors and well-maintained cable, noise from external
sources such as computers, home appliances and motors can enter the CATV system,
be amplified and interfere with data on the return path. In order to reduce the
time and difficulty in locating the source of noise, Wavetek has developed a
family of leakage meters, including the CLI 1750, that assists installers in
detecting leaks in CATV networks.
Significant CATV customers of the Company include Continental Cablevision,
Inc., Deutsche Telekom A.G., TCI and Time Warner Cable. The Company's CATV
business is headquartered in Indianapolis, Indiana.
45
<PAGE>
The following table lists selected CATV product offerings of the Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- ------------------- ---------------------------------------------------- ------------------------ ------------
<S> <C> <C> <C>
MicroStealth Hand-held unit which tests signal quality at CATV service technicians $ 1,200
multiple points in a CATV network and installers
SAM 4040 Hand-held, broadband communication service monitor CATV service technicians $ 2,500
which performs CATV network maintenance and installers
CLI 1750 Tests for interfering signals in a CATV network CATV service technicians $ 2,000
and installers
Stealth Flexible, portable instrument for testing specific CATV service technicians $ 3,600
segments of a CATV network and installers
3SM Monitors and controls signal parameters of up to 200 Network operations and $ 4,300
remote head ends or hub sites reliability managers
Benchmark 1175 Versatile sweep/scalar analyzer used to test for Radio frequency ("RF") $ 10,000
sweep response, transmission loss or gain amplifier manufacturers,
service and repair
facilities
</TABLE>
WIRELESS. The Company's Wireless business, acquired from Schlumberger in
October 1994, is one of the world's five largest manufacturers of test
instruments for mobile phone and base station testing and service. Wavetek
manufactures instruments to test most analog and digital formats including PCS,
Groupe Speciale Mobile ("GSM"), Time Division Multiple Access ("TDMA") and Code
Division Multiple Access ("CDMA"). The Company's products are used during the
manufacturing process, at service facilities and at the point-of-sale. Wavetek's
point-of-sale application-specific product for the Wireless market, the 4100 GSM
Tester, was designed to address the increasing demand for testing in the GSM
market. The shift in phone repair from local repair shops or retail stores to
high volume service facilities, combined with the high cost to process, ship and
test a phone at a service facility, is creating a need for "go/no-go" testing at
retail sites to minimize the number of properly functioning phones that are
mistakenly returned to the manufacturer for repair. The 4100 GSM Tester family
provides accurate "go/no-go" testing at a price point approximately one-third of
the price of traditional service testers, allowing economical sorting of phones
at the point-of-sale. Wavetek was able to bring the 4100 GSM Tester family to
market quickly, due in part to the application of technology from its LAN
products and existing wireless products.
Wavetek's 3600D CDMA Tester provides application-specific, low cost service
capability on cellular or PCS phones that use CDMA technology. In the early
phase of the deployment of a new phone technology, phones must be thoroughly
tested prior to delivery to customers, as well as during repair. This testing
can be performed with manufacturing-oriented test instruments ranging in price
from $50,000-$60,000. However, as new phones are shipped in higher volumes, a
more economical, easier to use tester is desired. The 3600D CDMA Tester is a
lower cost (approximately $28,000) solution for phone commissioning and repair.
Significant Wireless customers of the Company include AT&T and Ericsson. The
Company's Wireless business is headquartered in Munich, Germany, with
engineering and marketing teams in Indianapolis, Indiana.
46
<PAGE>
The following table lists selected Wireless product offerings of the
Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- ------------------- ---------------------------------------------------- ------------------------ ------------
<S> <C> <C> <C>
4032 (MS) Benchtop tester for analog and digital cellular or Phone manufacturers, $ 27,000
PCS phones carriers, repair
organizations
4032 (BTS) Portable tester for cellular base stations in Manufacturers of base $ 34,000
commissioning and maintenance stations, carriers
3600D CDMA Tester Benchtop tester for analog and digital cellular or Phone manufacturers, $ 28,000
PCS phones carriers, repair
organizations
4015 Benchtop tester for many types of analog radios Service shops, $ 14,000
governments, aircraft
workshops
4100 GSM Tester Hand-held, point-of-sale tester for cellular or PCS Phone manufacturers, $ 6,000
phones carriers, retail outlets
</TABLE>
TELECOM. The Company's Telecom business, also acquired from Schlumberger in
October 1994, designs and manufactures test instruments, systems and software
used for the installation, maintenance and monitoring of fiber optic cable. The
Company serves this market with both mainframe and portable optical time domain
reflectometers ("OTDRs"), remote fiber test systems ("RFTS"), light sources,
optical power meters and various other products. As Telecom operators install
more passive optical networks ("PONs") and provide fiber to the home ("FTTH"),
demand has increased for more versatile OTDRs. Wavetek's new MTS-5000 OTDR
family responds to this trend by offering a modular product that allows
installers to have specialized high resolution modules for PONs and FTTH
networks, in addition to high performance modules for long distance links. With
this family of products Wavetek combined the high performance optical knowledge
of its OTDR design team with the low cost design expertise of its CATV
engineering group, resulting in a product that offers high performance features
at a competitive cost. Wavetek intends to add multi-mode modules used for LAN
fiber measurements to its OTDR family.
Significant Telecom customers of the Company include France Telecom, Russia
Telecom and Siemens A.G. The Company's Telecom business is headquartered in St.
Etienne, France.
The following table lists selected Telecom product offerings of the Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- ------------------- ---------------------------------------------------- ------------------------ ------------
<S> <C> <C> <C>
Flash Mini OTDR Hand-held, portable tester of fiber optic networks Telecom operators, LAN $ 12,000
fiber installers,
utilities, private
networks
MTS-5000 OTDR Modular portable OTDR, next generation platform Telecom operators, CATV $ 12,000
operators, LAN fiber
installers
Helios Mainframe, high performance OTDR, measures and Telcom operators, fiber $ 26,000
characterizes fiber optic networks manufacturers,
utilities, private
networks
Atlas Fiber optic network monitoring (construction and Telcom operators, $ 50,000
maintenance) utilities, private
networks
</TABLE>
47
<PAGE>
LAN. The Company acquired its LAN business as part of the Beckman
acquisition in October 1992, and the Company is now one of the five largest
global manufacturers of physical layer LAN test equipment. LAN testing products
include diagnostic instruments used to certify and verify the integrity of the
LAN physical layer. The Company's products are used by third party cable
installers, value added resellers of network equipment and management
information systems managers to verify the quality of cable installation. The
Company has developed its LT-8000 family of LAN cable testers to measure the
next generation of LAN cable rated to 650 MHz bandwidth, compared to the current
100 MHz standard. The Company was able to design the LT-8000, a cost effective,
high performance unit, by combining its expertise in high speed oscilloscope
calibration from its Calibration Instruments business with expertise in RF
technology from its CATV business.
Significant LAN customers of the Company include distributors such as
Anixter International, Inc. and Graybar Electric Company, Inc. The Company's LAN
business is headquartered in San Diego, California.
The following table lists selected LAN product offerings of the Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- ------------------- ------------------------------------------------- ------------------------ ---------------
<S> <C> <C> <C>
LANTEKPRO XL Hand-held, portable unit used to certify and LAN technicians, network $4,600
troubleshoot LAN cable installation managers
LT-8000 Hand-held, portable unit used to certify and LAN technicians, network $ 2,000-$6,000
troubleshoot LAN cable installation. Supports managers
emerging 350 and 650 MHz LAN cable technologies
</TABLE>
TEST TOOLS. The Company's Test Tools business, also acquired as part of the
Beckman acquisition, develops and distributes portable measurement instruments
that are used to measure and service a broad range of electrical and electronic
equipment including wiring, appliances, computer equipment and consumer
electronics. The Company's Test Tools products are used by the electronic and
electro-mechanical installation, maintenance and service industries. Hand-held
DMMs are the primary instrument in this segment and range from hobbyist products
to tools for professional electrical and electronic technicians. The Company is
the second largest supplier of hand-held DMMs. Wavetek believes that its
shipments of over 100,000 hand-held DMMs per year worldwide increase the
Company's overall visibility in the test instruments industry. The Company also
believes that the Test Tools business complements its other Communications Test
businesses by providing a distribution channel for certain of its LAN products
and potential new low cost Communications Test products.
Significant Test Tools customers of the Company include Newark Electronics
and W. W. Grainger. The Company's Test Tools business is headquartered in San
Diego, California.
48
<PAGE>
The following table lists selected Test Tools product offerings of the
Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- -------------- -------------------------------------------------------- -------------------------- ------------
<S> <C> <C> <C>
Hand-held DMMs Portable, field troubleshooting of electronic and Electronics repair $20-$350
electrical circuits personnel, electricians,
electronics engineers,
industrial plant
servicers, home/ hobbyist
Clamp-on Verify and test electrical circuits Electricians, electrical $100-$300
Multimeters repair personnel, wiring
installers, industrial
plant service personnel
Component Verify quality and sorting of electronic parts Electronic technicians and $70-$180
Checkers quality control
departments of electronic
manufacturers
</TABLE>
CALIBRATION INSTRUMENTS
The Company's Calibration Instruments products, which accounted for 17% of
the Company's LTM sales, are used in metrology, engineering and manufacturing
environments worldwide to calibrate electronic equipment and certify compliance
with international standards. The Company believes it is the second largest
global manufacturer of Calibration Sources and Transfer Standards. The Company
also produces Precision DMMs. The Company believes that it successfully competes
in the Calibration Instruments market by capitalizing on its technical
expertise, relationships with national laboratories and product reputation.
Wavetek has recognized the needs of an increasing number of companies to
calibrate their test equipment, including oscilloscopes and DMMs, in order to
comply with international quality standards such as ISO 9000. In response to
such customer needs, Wavetek repackaged its high precision calibration
technology into more application-specific instruments, such as its 9100
Multi-function Calibrator and 9500 Oscilloscope Calibrator, replacing expensive,
manually operated equipment, with small, accurate, automated test solutions.
Significant Calibration Instruments customers of the Company include
Northrop Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. The
Company's Calibration Instruments business is headquartered in Norwich, England.
49
<PAGE>
The following table lists selected Calibration Instruments product offerings
of the Company:
<TABLE>
<CAPTION>
APPROXIMATE
U.S. PRICE
PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT
- ------------------- ------------------------------------------- --------------------------- ------------------
<S> <C> <C> <C>
1271/81 Precision Provides accurate measurement of voltage Military forces, aerospace $10,000
DMM and current up to 8 1/2 digits contractors, government
institutes, automated test
equipment manufacturers,
calibration/service repair
providers, national
laboratories
4800/4808 Calibrates Precision DMMs up to 8 1/2 Calibration/service repair $20,000-$34,000
Calibration Source digits providers, national
laboratories
9100 Multi-function Universal calibrator for general purpose Calibration/service repair $14,000
Calibrator analog and digital test equipment providers, ISO- accredited
certification to ISO 9000 standards industries, oscilloscope
manufacturers
9500 Oscilloscope Calibrates oscilloscopes up to 1GHz Calibration/service, repair $32,000
Calibrator providers, ISO- accredited
industries, oscilloscope
manufacturers, national
laboratories
</TABLE>
SERVICE
Wavetek's Service business, which accounted for 8% of the Company's LTM
sales, provides repair, upgrade and calibration services for the Company's
products through eight Wavetek service centers and a network of independent
representatives worldwide. The Company believes that opportunities exist to
expand this business, and is in the process of developing a comprehensive
worldwide customer care plan ("Care Plan") for its customers. The Care Plan
program offers customers the opportunity to extend their standard warranty and
add a package of various service and calibration options for a fee paid at the
time of purchase.
CUSTOMERS
The Company has a broad international base of over 5,000 customers operating
in a wide range of industries. The primary end users for the Company's
Communication Test products are service, installation and maintenance personnel
of CATV operators, wireless communications companies, telecommunications
companies and data communications equipment installers. Significant customers of
the Company's Communications Test business include AT&T, Continental
Cablevision, Inc., Deutsche Telekom A.G., Ericsson, France Telecom, Russia
Telecom, Siemens A.G., TCI and Time Warner Cable. The Company's Calibration
Instruments products are used primarily by service and quality personnel in
metrology, engineering and manufacturing environments in a wide variety of
industries. Significant Calibration Instruments customers include Northrop
Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. For fiscal
1996, no
50
<PAGE>
one customer accounted for more than 5% of the Company's sales and the top ten
customers represented approximately 17% of sales.
PRODUCT DEVELOPMENT
The Company seeks to develop and introduce application-specific products for
its target markets on a timely basis. The Company designs products for domestic
and international markets and often deploys market research and product
definition teams worldwide to meet and work with major communications and
metrology customers in order to determine and address the needs of its
customers.
Wavetek's product development strategy is to: (i) focus on
application-specific products that are responsive to market-driven customer
needs; (ii) minimize development time in order to be responsive to shifts in
market demand and meet customer needs on a timely basis; (iii) aggressively
drive cost reductions throughout the design process; and (iv) leverage design
efforts by generating product families and product line extensions from existing
product platforms.
As of March 31, 1997, the Company had approximately 130 employees involved
in its engineering activities who operate in teams based out of five locations
and generally focus on product development within a particular business area. In
addition, Wavetek's engineering teams share or apply other teams' product
designs where possible to improve use of resources. The Company typically
introduces 8 to 12 major new products or product extensions per year and expects
to introduce approximately 10 new products in fiscal 1997.
The Company intends to continue to develop products to meet market demands
for reduced cost, size and weight, while achieving increased performance through
the use of application-specific integrated circuits ("ASICs"), digital signal
processing ("DSP") technology and increasing computing power available in
embedded processors. The Company has made a significant effort in recent years
to supplement its engineering staff with engineers skilled in these key
technology areas, as well as emerging technology areas such as digital
communications and advanced signal processing. The Company also makes selective
use of outside technical consulting companies to supplement internal
capabilities.
SALES AND DISTRIBUTION
Wavetek products are sold through direct sales teams in the United States,
the United Kingdom, France and Germany. The Company also utilizes a network of
over 250 distributors and independent representatives. Wavetek sales personnel
manage and provide technical support to the distributors and independent
representatives. Sales offices are located in the United States, the United
Kingdom, France, Germany, Austria, Singapore, Hong Kong, Beijing and Shanghai.
As of March 31, 1997, Wavetek had approximately 130 employees involved in sales
and customer support activities. The Company also markets its products through
advertising and participating in trade shows.
YOKOGAWA RELATIONSHIP
In April 1996, Wavetek formed a strategic alliance with Yokogawa to jointly
develop Communications Test products for the Japanese market and to distribute
Wavetek's products in Japan. In September 1996, Yokogawa also purchased
approximately 12.0% of the Company's Common Stock outstanding prior to the
Recapitalization Transactions. As of the date of this Prospectus, Yokogawa owns
approximately 5.8% of the outstanding Common Stock of Wavetek. See "Ownership of
Capital Stock."
Yokogawa, based in Tokyo, Japan, is a leading supplier of process control
equipment and test and measurement equipment. It currently distributes Wavetek's
CATV, Wireless, LAN and Calibration Instruments product lines in Japan. In
fiscal 1996, Wavetek's sales through Yokogawa were approximately $1.8 million.
In addition, Wavetek and Yokogawa have joint engineering and marketing programs
for Wireless products. With the support of Yokogawa engineers located in
Wavetek's Indianapolis and Munich facilities,
51
<PAGE>
Wavetek and Yokogawa are developing products aimed at the Japanese cellular
market. The first product is a cellular tester for the Japanese CDMA market
based on Wavetek's 3600D CDMA Tester product line, which is expected to be
introduced in late fiscal 1997.
BACKLOG
As of June 30, 1997, the Company had a firm open order backlog of $22.3
million (compared to $32.4 million as of June 30, 1996), of which it expects
less than $1.0 million may not be shippable prior to September 30, 1997. Backlog
reflects firm customer orders for products and services scheduled for shipment
within 12 months. The level of backlog at any particular time is not necessarily
indicative of future operating performance of the Company. Delivery schedules
may be extended, and orders may be canceled at any time subject to certain
cancellation penalties.
MANUFACTURING
Wavetek has four manufacturing facilities worldwide. All North American
designed products except Test Tools (CATV, LAN and US-designed Wireless
products) are manufactured in Indianapolis. The Company manufactures its
Calibration Instruments products in Norwich, England, its Telecom products in
St. Etienne, France and its German-designed Wireless products in Munich,
Germany. Since the Company outsources certain of its manufacturing to
subcontractors, including the printed circuit boards for its French and German
products, the manufacturing at its St. Etienne and Munich facilities consists
primarily of final assembly and test. These facilities were acquired in the
October 1994 Schlumberger acquisition, and the Company is currently evaluating
consolidation opportunities in order to improve manufacturing efficiency and
capitalize on economies of scale. The Company's Test Tools products are
manufactured by third party suppliers, primarily in Taiwan.
Although the Company attempts to use common, multi-sourced components
throughout its design, certain technological requirements may necessitate the
use of single-sourced, unique components. The Company attempts to minimize its
exposure on these components through careful vendor qualification and
purchasing, though risk exists that these parts may become obsolete,
necessitating redesign or withdrawal of the product from the market.
PROPERTIES AND FACILITIES
The table below sets forth selected relevant statistics for Wavetek's
current facilities:
<TABLE>
<CAPTION>
LEASE
LOCATION FACILITY TYPE/USE SIZE OF FACILITY TITLE EXPIRATION
- ------------------------ ----------------------------------------- -------------------- --------- ------------
<S> <C> <C> <C> <C>
San Diego, California Executive offices (1) 4,305 sq. ft. Leased 12/31/1999
Headquarters for LAN and Test Tools 70,000 sq. ft. Leased 6/29/2006
businesses; U.S. distribution center for
Test Tools and Calibration Instruments
(2)
Indianapolis, Indiana U.S. manufacturing center; headquarters 206,000 sq. ft. (3) Leased 10/31/2014
for CATV business; U.S. distribution
center for Communications Test products
Norwich, England Headquarters for Calibration Instruments 40,000 sq. ft. Owned --
business, including manufacturing; UK 3.2 acres-land Leased 3/31/2103
sales and distribution; European
distribution center for Test Tools
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
LEASE
LOCATION FACILITY TYPE/USE SIZE OF FACILITY TITLE EXPIRATION
- ------------------------ ----------------------------------------- -------------------- --------- ------------
<S> <C> <C> <C> <C>
St. Etienne, France Headquarters for Telecom business, 23,414 sq. ft. Leased 9/30/2005
including final assembly and test
Munich, Germany Headquarters for Wireless business, 51,067 sq. ft. Leased 12/31/2002
including final assembly and test; German
sales office
</TABLE>
- ------------------------
(1) Gooding has the right to take control of the lease at this facility under
certain circumstances. See "Certain Relationships and Related Transactions."
Wavetek has a renewal option on the lease for this facility, permitting it
to extend the term up to an additional five years.
(2) The Company leases this facility from a company controlled by Gooding. See
"Certain Relationships and Related Transactions."
(3) 120,739 sq. ft. of this facility are subleased to unrelated parties through
October 31, 1999.
The Company also leases sales offices in Paris, Vienna, Hong Kong,
Singapore, Beijing and Shanghai.
COMPETITION
The Company operates in markets that are highly competitive, and the Company
expects that competition will increase in the future. Some of the industries in
which the Company operates are characterized by rapid technological advances and
emerging industry standards. Failure to keep pace with technological advances
would adversely affect the Company's competitive positions and results of
operations. The Company competes primarily on the basis of technology,
performance, price, brand identity, quality, reliability, distribution and
customer service and support. To remain competitive, the Company must continue
to develop new products, periodically enhance its existing products and compete
effectively in the areas described above. Although the Company believes its
products are competitive in each of these areas, there can be no assurance that
existing or future competitors, some of which have greater financial resources
than the Company, will not introduce comparable or superior products
incorporating more advanced technology at lower prices.
The Company's competitors are numerous, ranging from some of the world's
largest corporations to many relatively small and highly specialized firms.
Although no single company competes in all of the Company's product markets,
some of the major competitors which compete in the individual product markets
include Anritsu Corporation, Fluke Corporation, Hewlett-Packard Company,
Microtest, Inc., Rohde & Schwartz, Inc. and Tektronix, Inc. Some of these
competitors have more extensive engineering, manufacturing and marketing
capabilities and substantially greater financial, technological and personnel
resources than the Company.
INTELLECTUAL PROPERTY
The Company's success and ability to compete depends in part upon protecting
its proprietary technology. The Company relies upon a combination of patents,
trademark and trade secret laws, together with licenses, confidentiality
agreements and other contractual covenants, to establish and protect its
technology and other intellectual property rights.
53
<PAGE>
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to deter misappropriation or independent
third-party development of its technology, or that its intellectual property can
be successfully enforced or defended if challenged. Given the rapid development
of technology, there can be no assurance that certain aspects of the Company's
products do not or will not infringe upon the existing or future proprietary
rights of others or that, if licenses or rights are required to avoid
infringement, such licenses or rights could be obtained or obtained on terms
that would not have a material adverse effect on the Company. In any event,
because of the rapid pace of technological change in many of the Company's
product industries, the Company believes that patent protection for its products
is less significant to its success than the knowledge, ability and experience of
its employees and the frequent introduction and market acceptance of new
products and product enhancements. The Company uses a number of trademarks in
its business, including Wavetek-Registered Trademark-,
LANTEK-Registered Trademark- and Stabilock which are registered in various
countries where the Company operates. The Company currently has fourteen patents
and two pending patent applications and expects to rely on patents to a greater
extent in the future.
EMPLOYEES
As of June 30, 1997, the Company had approximately 800 employees. Many of
the Company's employees are highly skilled and the Company's continued success
will depend in part upon its ability to attract and retain these employees. Many
of the Company's manufacturing employees in Europe are members of standard
unions. The Company believes its relationship with its employees is good.
LEGAL PROCEEDINGS
In the ordinary course of its business, the Company from time to time is
subjected to legal claims. The Company does not believe that the likely outcome
of any such claims or related lawsuits would have a material adverse effect on
the Company or its ability to develop new products.
A matter is pending in the United States District Court for the Western
District of Washington involving a claim that certain models of the Company's
hand-held DMMs infringe the trade dress of certain Fluke Corporation ("Fluke")
competitive products in violation of Section 43(a) of the Lanham Act, 15 U.S.C.
Section1125(a) and state statutory and common law, seeking injunctive and
monetary relief of approximately $1 million. Wavetek no longer sells hand-held
DMMs with the trade dress that Fluke alleged infringed its trade dress, and
Wavetek sold such DMMs for a period of less than ten months. The Company and
Fluke have entered into a settlement agreement resolving all of Fluke's claims,
but the action has not yet been dismissed with prejudice due to the inability of
the parties to agree upon the language of a Consent Judgment, which is to be
entered pursuant to the settlement. Under the terms of the settlement, Wavetek
has no financial obligations. However, if the settlement is not finalized, it is
possible that Fluke will be permitted to reassert its claims. The Company does
not believe that the litigation, even if the present settlement is not
finalized, is likely to have a material adverse impact on the Company.
A matter is pending in the United States District Court for the Southern
District of Indiana, involving a claim by Trilithic, Inc. ("Trilithic") that
certain products of the Company infringe Trilithic's patent on a radio frequency
leakage detection system for a CATV system and seeks injunctive and unspecified
monetary relief. The product line potentially affected by this claim, and by a
second patent that has been issued to Trilithic subsequent to the filing of the
lawsuit, had LTM sales of approximately $5.8 million. Trilithic's complaint,
which was served on the Company in March 1997, was the first notice to the
Company of Trilithic's patent. The Company is presently obtaining advice of
counsel as to the claim of infringement and as to the validity and
enforceability of the patent. In the event the outcome of such investigation is
not favorable, the Company could be required to: (i) redesign existing or future
products so that they do not use the rights covered by Trilithic's patent; (ii)
negotiate licenses from Trilithic; or (iii) withdraw existing products or not
introduce future products that are covered by those patent rights. The Company
could also be liable to Trilithic for damages for any infringement since March
1997. The Company does not believe that any such damages are likely to have a
material adverse impact on the Company.
In addition, the Company has been notified by two other competitors that
they believe that certain of the Company's CATV product lines, including in one
case its Stealth line of products, infringe their patents. The Company has
investigated or is currently investigating the validity of these two claims and,
based upon its investigation to date, believes that both of these claims can be
resolved in a manner that will not have a material adverse impact on the
Company. See "Risk Factors--Dependence on Proprietary Rights."
54
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information regarding each director and executive
officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Terence J. Gooding (1)(3) 63 Chairman of the Board and Chief Executive Officer
Derek T. Morikawa (1) 42 President, Chief Operating Officer and Director
Ben J. Constantini 54 Executive Vice President, Sales and Director
Joseph A. Budano 35 Senior Vice President, North American Operations
Vickie L. Capps 36 Treasurer, Secretary, Vice President and Chief Financial Officer
Kenneth Baker (2) 62 Director
Malcolm R. Bates (1)(3) 62 Director
Kenneth D. Moelis (1) 38 Director
Peter J. Nolan (1)(2)(3) 38 Director
David B. Wilson (2)(3) 38 Director
</TABLE>
- ------------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
The following are biographies of the Company's executive officers and
directors:
TERENCE J. GOODING, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. In
June 1991, Terence J. Gooding formed a holding company to acquire Wavetek
Corporation. Dr. Gooding has been involved in the management of technology
companies since 1965 when he formed Maxwell Laboratories, which today is a
successful defense contractor. He was President of Kratos (1971-1979), Chairman
of the Board of Cambridge Instruments and Leica plc (1979-1990) and President of
Picker International (1981-1986).
DEREK T. MORIKAWA, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Derek
T. Morikawa has been with Wavetek for 11 years, and was promoted to President
and Chief Operating Officer in October 1996. Prior to that he was Executive Vice
President of Operations, managing Wavetek's operating divisions and integrating
the Wireless and Telecom businesses acquired from Schlumberger in October 1994.
Mr. Morikawa has been Vice President and General Manager of the Indianapolis
CATV Division, the San Diego LAN Division and the former Microwave Division of
Wavetek. Prior to joining Wavetek, Mr. Morikawa spent seven years with the
Microwave Instrumentation Division of Hewlett-Packard where he managed the
Product Marketing Department.
BEN J. CONSTANTINI, EXECUTIVE VICE PRESIDENT, SALES AND DIRECTOR. Ben J.
Constantini joined Wavetek in June 1991 with responsibility for worldwide sales
and customer service. Prior to joining Wavetek, Mr. Constantini was President of
North American Operations for Leica plc. He has also been Senior Vice President,
Sales for Picker International and District Sales Manager for Siemens Medical
Systems, Inc. Prior to that, he spent ten years with General Motors in various
management positions.
JOSEPH A. BUDANO, SENIOR VICE PRESIDENT, NORTH AMERICAN OPERATIONS. Joseph
A. Budano joined Wavetek April 1994 as the General Manager of the CATV Division.
Mr. Budano has since been promoted to his current position of Senior Vice
President, North American Operations with responsibility for
55
<PAGE>
Wavetek's CATV, LAN and Test Tools Divisions. Prior to joining Wavetek, Mr.
Budano worked at the Boston Consulting Group as a Management Consultant and held
several positions in Development Engineering and Manufacturing at Motorola's
Paging Products and Land Mobile Products Divisions.
VICKIE L. CAPPS, TREASURER, SECRETARY, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. Vickie L. Capps joined Wavetek in October 1992 as Group Controller --
North America and was later promoted to Vice President, Corporate Finance and in
October 1996 to her current position as Chief Financial Officer. Ms. Capps is
also the Secretary and Treasurer of the Company. Prior to joining Wavetek, Ms.
Capps was a Senior Manager at Ernst & Young LLP where she specialized in
providing audit and consulting services, for over ten years, to both publicly
and privately owned corporations in technology and other industries. Ms. Capps
is a Certified Public Accountant.
KENNETH BAKER, DIRECTOR. Kenneth Baker has served as a director of Wavetek
since 1992. Mr. Baker has served as a Member of Parliament in the United Kingdom
since 1968. In the early 1980's he was the Minister of Information Technology
and later was promoted to Margaret Thatcher's Cabinet and served as Environment
Secretary, Education Secretary and Home Secretary. He served as Chairman of the
Conservative Party from 1989 to 1990. Mr. Baker serves on the board of directors
of Hanson plc, Bell Cablemedia Inc. and Millenium Chemicals Inc.
MALCOLM R. BATES, DIRECTOR. Malcolm R. Bates became a director of the
Company on July 21, 1997. Mr. Bates has been Chairman of Pearl Group PLC since
March 1996 and Chairman of Premier Farnell plc since January 1997. Until March
31, 1997, Mr. Bates was the Deputy Managing Director of The General Electric
Company, p.l.c. (GEC), a position he held for twelve years, having joined GEC as
Senior Commercial Director in January 1976. He serves on the board of directors
of several companies, including BICC plc and is a member of the Advisory Board
of Phoenix Equity Partners II. Mr. Bates is also a member of the United Kingdom
Government's Industrial Development Advisory Board, Chairman of Business in the
Arts and a Governor of The University of Westminster.
KENNETH D. MOELIS, DIRECTOR. Kenneth D. Moelis became a director of the
Company upon consummation of the Recapitalization Transactions. Mr. Moelis is a
Managing Director and is in charge of Corporate Finance at DLJ and has been with
DLJ since 1990. Mr. Moelis is also a director of Levitz Furniture Corporation.
PETER J. NOLAN, DIRECTOR. Peter J. Nolan became a director of the Company
upon consummation of the Recapitalization Transactions. He has been an executive
officer and equity owner of Leonard Green & Partners, L.P., a merchant banking
firm which manages GEI, since April 1997. Mr. Nolan had previously been a
Managing Director of DLJ and had been with DLJ since 1990. Mr. Nolan is also a
director of adidas AG, The Recycler, Inc. and M2 Automotive, Inc.
DAVID B. WILSON, DIRECTOR. David B. Wilson became a director of the Company
upon consummation of the Recapitalization Transactions. Mr. Wilson is a
Principal at DLJMB and has been with DLJMB since 1992. From 1989 to 1991, he was
a Vice President at Grauer & Wheat, Inc. Mr. Wilson is also a director of
Manufacturers' Services Limited.
BOARD OF DIRECTORS
Members of the Board of Directors serve until the next annual meeting of
Stockholders and until a successor has been elected and qualified. Pursuant to
the Stockholders Agreement, the members are designated as follows: (i) two (or
three if an additional director is designated as described in this paragraph) of
such members shall be persons designated by DLJMB for as long as DLJMB and/or
their Permitted Transferees own at least 20% of the outstanding Common Stock of
the Company; (ii) one of such members shall be a person designated by GEI for so
long as GEI and/or its Permitted Transferees shall own at least 5% of the
outstanding Common Stock of the Company; (iii) three (or four if an additional
director is designated as described in this paragraph) of such members will be
persons designated by Gooding for as long as Gooding and/or his Permitted
Transferees own at least 10% of the
56
<PAGE>
outstanding Common Stock of the Company; and (iv) one of such members shall be a
person designated by Gooding for as long as Gooding and/or his Permitted
Transferees own at least 10% of the outstanding Common Stock of the Company,
subject to approval by DLJMB for as long as DLJMB and/or their Permitted
Transferees own at least 20% of the outstanding Common Stock of the Company. In
the event DLJMB and/or their Permitted Transferees own at least 10% but less
than 20% of the outstanding Common Stock of the Company, DLJMB shall have the
right to appoint only two directors. In the event DLJMB and/or their Permitted
Transferees own at least 5% but less than 10% of the outstanding Common Stock of
the Company, DLJMB shall have the right to appoint only one director. In the
event Gooding and/or his Permitted Transferees own at least 5% but less than 10%
of the outstanding Common Stock of the Company, Gooding shall have the right to
appoint only two directors. Prior to a Qualified IPO (as defined in the
Stockholders Agreement), each of DLJMB and Gooding may designate an additional
director. There are currently seven directors of the Company, each of whom is
named under "--Executive Officers and Directors."
The Company's Certificate of Incorporation contains a provision permitted
under the Delaware General Corporation Law (the "DGCL") eliminating each
director's personal liability for monetary damages for breach of fiduciary duty
as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the DGCL as currently in effect at the
time. The Company's Bylaws authorize the Company to indemnify its present and
former directors, officers and employees against expenses, judgments, fines and
amounts paid in settlement if such person is made a party, or is threatened to
be made a party, to a legal proceeding by reason of the fact that such person is
or was a director, officer, employee or agent of the Company, or was serving in
such position at another company at the request of Wavetek. Such indemnification
is mandatory in certain circumstances and permissive in others, subject to
authorization by the Company's Board of Directors. In addition, the Bylaws
authorize the Company to advance litigation expenses to such person prior to the
final disposition of the legal proceeding.
BOARD COMMITTEES
The Board of Directors has three standing committees: an Executive
Committee, an Audit Committee and a Compensation Committee (together, the
"Committees"). The Executive Committee, currently consisting of Messrs. Bates,
Gooding, Moelis, Morikawa and Nolan, has the power to exercise all of the powers
and authority of the Board of Directors in the management of the business of the
Company, with certain exceptions. The Audit Committee, currently consisting of
Messrs. Baker, Nolan and Wilson, meets with the Company's financial management
and its independent accountants at various times during each year, reviews
internal control conditions, audit plans and results, and makes recommendations
to the Board of Directors concerning the Company's engagement of independent
accountants. The Compensation Committee, currently consisting of Messrs. Bates,
Gooding, Nolan and Wilson, reviews and proposes to the Board of Directors
compensation arrangements for directors and officers of the Company.
57
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid in fiscal year 1996 to
the Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION TOTAL
---------------------- AUTO 401(K) ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS ALLOWANCE MATCH COMPENSATION
- ------------------------------------------- ---------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Terence J. Gooding ........................ $ 292,512 $ 202,500 $ 5,820 $ 3,000 $ 503,832
Chairman of the Board and
Chief Executive Officer
Derek T. Morikawa ......................... 182,115 111,000 5,820 3,000 301,935
President and Chief
Operating Officer
Ben J. Constantini ........................ 172,692 105,000 5,820 3,000 286,512
Executive Vice President, Sales
Joseph A. Budano .......................... 130,923 68,300 5,820 3,000 208,043
Senior Vice President, North American
Operations
Vickie L. Capps ........................... 113,124 51,750 5,820 2,351 173,045
Treasurer, Secretary, Vice President and
Chief Financial Officer
</TABLE>
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended September 30, 1996 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES OF PERCENT OF STOCK PRICE
UNDERLYING TOTAL OPTION EXERCISE APPRECIATION
OPTIONS GRANTS IN PRICE PER EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ----------------------------- ------------- ------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terence J. Gooding........... -- -- -- -- -- --
Derek T. Morikawa............ 3,000 15.7% $ 52.09 4/28/02 $ 212,959 $ 285,332
Ben J. Constantini........... -- -- -- -- -- --
Joseph A. Budano............. 2,000 10.5% 52.09 4/28/02 141,973 190,888
Vickie L. Capps.............. -- -- -- -- -- --
</TABLE>
The following table sets forth information with respect to each of the Named
Executive Officers concerning the exercise of stock options and unexercised
stock options held at September 30, 1996.
58
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END*
SHARES ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terence J. Gooding....... -- -- -- -- -- --
Derek T. Morikawa........ -- -- 3,200 10,800 533,200 1,641,190
Ben J. Constantini....... -- -- -- 4,800 -- 689,088
Joseph A. Budano......... -- -- -- 6,000 -- 867,970
Vickie L. Capps.......... -- -- 200 3,800 33,325 593,585
</TABLE>
- ------------------------
* The value of $179.125 per share is used representing the purchase price per
share for the New Equity Investment in the Recapitalization Transactions.
EMPLOYMENT AGREEMENTS
The Company does not currently have any employment agreements with any of
its directors or executive officers. In connection with the Recapitalization
Transactions, the Company entered into executive severance agreements with each
of the Named Executive Officers providing for a specified level of U.S. benefits
and for a lump sum payment upon termination other than for cause equal to twenty
four months salary if termination occurs in the first month following June 11,
1997, the date on which the Recapitalization Transactions were consummated,
declining by one month for each month thereafter until the twelfth month
following June 11, 1997, after which the lump sum payment will equal twelve
months salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee in July 1997.
Messrs. Bates, Gooding, Nolan and Wilson are the members of the Compensation
Committee. Other than Mr. Gooding, none of the members of the Compensation
Committee has served as an officer or employee of the Company. Prior to the
establishment of the Compensation Committee, all decisions relating to
compensation of executive officers were made by the Company's Board of
Directors. For a description of the transactions between the Company and members
of the Compensation Committee and entities affiliated with such members, see
"Certain Relationships and Related Transactions." No executive officer of the
Company serves as a member of the board of directors or compensation committee
of any entity which has one or more executive officers serving as a member of
the Company's Board of Directors or Compensation Committee.
COMPENSATION OF DIRECTORS
Executive officers of the Company and representatives of the New Equity
Investors who serve on the Board of Directors do not receive any compensation
for such services. Other directors receive $10,000 per year, plus a fee of
$2,500 per Board meeting attended and are reimbursed for their expenses incurred
in connection with attendance of meetings of, and other activities relating to
serving on, the Board of Directors. Members of the Committees of the Board of
Directors receive no additional compensation for their membership in, or
participation in the meetings of, such Committees.
59
<PAGE>
OWNERSHIP OF CAPITAL STOCK
The following table sets forth certain information about persons known to
the Company to own beneficially more than 5% of the outstanding Common Stock,
each director of the Company, each named executive officer and all directors and
executive officers of the Company as a group, in each case as of the date of
this Prospectus. There are 4,884,860 shares of Common Stock outstanding. Share
numbers beneficially owned reflect the 10 for 1 stock split that was effected as
part of the Recapitalization Transactions. See "The Recapitalization
Transactions."
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED (1) OWNED
- ------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Terence J. Gooding (2)(3) ........................................................... 1,526,780 31.3%
DLJ Merchant Banking Partners II, L.P. (4) .......................................... 1,674,810 34.3
277 Park Avenue
New York, NY 10172
Green Equity Investors II, L.P. ..................................................... 753,660 15.4
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Schroder UK Venture Fund III L.P. (5) ............................................... 431,690 8.8
c/o Peter L. Everson, Director
Schroder Venture Managers Ltd.
22 Church Street
Hamilton HM 11, Bermuda
Yokogawa Electric Corporation ....................................................... 284,240 5.8
2-9-2 Nakacho
Musashino-shi, Tokyo 180
Japan
Derek T. Morikawa (3)(6) ............................................................ 155,000 3.1
Ben J. Constantini (3) .............................................................. 35,000 *
Joseph A. Budano (3) ................................................................ 30,000 *
Vickie L. Capps (3) ................................................................. 16,000 *
Kenneth Baker (7) ................................................................... 31,667 *
Malcolm R. Bates (8) ................................................................ 3,333 *
Kenneth D. Moelis (9) ............................................................... -- --
Peter J. Nolan (10) ................................................................. 753,660 15.4
David B. Wilson (11) ................................................................ -- --
All directors and executive officers as a
group (12) ........................................................................ 4,226,250 84.8
</TABLE>
- ------------------------
* Less than 1%.
(1) Computed in accordance with Rule 13d-3(d)(1) of the Securities Exchange Act
of 1934, as amended. Includes options that will be fully vested as part of
the Recapitalization Transactions.
(2) Includes 1,050,000 shares held by Gooding's spouse, children and
grandchildren and trusts for the benefit thereof over which Gooding has
investment and voting control.
(3) Address is c/o Wavetek Corporation, 11995 El Camino Real, Suite 301, San
Diego, CA 92130.
(4) Consists of shares held directly by the following investors related to DLJ
Merchant Banking Partners II, L.P.: DLJ Diversified Partners, L.P. ("DLJ
Diversified"), DLJ Offshore Partners II, C.V. ("DLJOP"), DLJMB Funding II,
Inc. ("DLJ Funding"), DLJ EAB Partners, L.P. ("DLJ EAB"), DLJ
60
<PAGE>
First ESC LLC ("DLJ ESC") and UK Investment Plan 1997 Partners ("UK
Investment"). See "The
Recapitalization Transactions" and "Plan of Distribution." The address of
each of DLJMB, DLJ Diversified, DLJ Funding, DLJ EAB and DLJ ESC is 277 Park
Avenue, New York, New York 10172. The address of DLJOP is John B.
Gorsiraweg, 14 Willemstad, Curacao, Netherlands Antilles. The address of UK
Investment is 2121 Avenue of the Stars, Los Angeles, California 90067.
(5) Includes shares owned by Schroder UK Venture Fund III L.P. 2 and Schoder UK
Venture Fund III Trust.
(6) Includes 40,000 shares held in two trusts for the benefit of his children.
Morikawa is the trustee of one of the trusts and his wife is the trustee of
the other.
(7) The address of the registered stockholder is Snow Hill Trustees - Account
SH, Snow Hill Trustees Limited, 1 Snow Hill, London EC1A 2EN. The beneficial
owners of the Common Stock (and number of shares owned) are: (i) Kenneth
Baker (18,000); (ii) Mary Baker (9,000); (iii) Sophia Baker (1,500); and
(iv) Oswin Baker (1,500).
(8) Address is Flat 10, 71 Upper Berkeley St., London, England, WIH 7BD
(9) Address is c/o Donaldson, Lufkin & Jenrette Securities Corporation, 2121
Avenue of the Stars, Los Angeles, CA 90067. Mr. Moelis is a Managing
Director of DLJ. Share data for Mr. Moelis excludes shares shown as held by
DLJMB and its affiliates, as to which Mr. Moelis disclaims beneficial
ownership.
(10) Address is c/o Green Equity Investors II, L.P., 11111 Santa Monica
Boulevard, Suite 2000, Los Angeles, CA 90025. The shares shown as
beneficially owned by Mr. Nolan include all of the shares owned of record by
GEI. GEI is a Delaware limited partnership managed by Leonard Green &
Partners, L.P. ("LGP"), which is an affiliate of the general partner of GEI.
Mr. Nolan, either directly (whether through ownership interest or position)
or through one or more intermediaries, may be deemed to control LGP and such
general partner. LGP and such general partner may be deemed to control the
voting and disposition of the shares of Common Stock of the Company owned by
GEI. As such, Mr. Nolan may be deemed to have shared voting and investment
power with respect to all shares held by GEI. However, Mr. Nolan disclaims
beneficial ownership of the securities held by GEI except to the extent of
his respective pecuniary interests therein.
(11) Address is c/o DLJ Merchant Banking Partners II, L.P., 277 Park Avenue, New
York, NY 10172. Mr. Wilson is a Principal at DLJ Merchant Banking II, Inc.,
the general partner of DLJMB and an affiliate of DLJ. Share data for Mr.
Wilson excludes shares shown as held by DLJMB and its affiliates, as to
which Mr. Wilson disclaims beneficial ownership.
(12) There are currently ten individuals in this group, including eight
directors. See "Management." Includes the shares referred to in Note 10
above.
STOCK OPTION PLAN
From time to time, the Company issues stock options to employees of the
Company in order to attract, retain and provide equity incentives to key
employees and to stimulate the efforts of such employees. One quarter of each
grant of stock options becomes exercisable on each anniversary date of their
issuance, so that after four years, all of the options are vested.
Pursuant to the Recapitalization Transactions, 75% of the stock options
existing prior to the Recapitalization Transactions, representing 805,000
shares, were vested and the holders thereof had the right to surrender such
options to the Company for a cash payment equal to the difference between the
purchase price per share of the New Equity Investment and the exercise price of
the options, less a pro rata portion of certain fees payable to DLJ.
Approximately 59% of the stock options existing prior to the Recapitalization
Transactions were surrendered for a cash payment. The aggregate pre-tax cost to
the Company was approximately $7.1 million ($4.3 million net of a related income
tax benefit).
61
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1994, the Company received loans from Gooding aggregating
$4.5 million. Such loans were fully repaid, with interest, on September 30,
1994.
During fiscal year 1994, the Company received a loan from Schroder UK
Venture Fund III L.P. ("Schroder") in the amount of $360,000. Such loan was
fully repaid, with interest, on October 26, 1994.
In September 1995, the Board of Directors of the Company resolved that in
the event Gooding's shareholdings in the Company are reduced to less than 50% of
the outstanding shares, and/or if Gooding's employment as Chief Executive
Officer of the Company is terminated for any reason, Gooding or his nominee
shall have the right, but not the obligation, to take over the lease and
occupancy of the Company's executive offices at 11995 El Camino Real, Suite 301,
San Diego, California 92130, and to purchase all of the leasehold improvements
and fixed assets (including furniture, fixtures, paintings and office equipment)
located in such offices at such time, at depreciated net book value. See
"Business -- Properties and Facilities."
The Company leases its headquarters for its LAN and Test Tools businesses in
San Diego from a corporation controlled by Gooding for an annual rent of
$585,000, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006. See "Business -- Properties and
Facilities."
The Company and Gooding were parties to shareholders agreements with
Yokogawa and Schroder, which were terminated as part of the Recapitalization
Transactions. The Company, Gooding, Yokogawa and Schroder entered into the
Stockholders Agreement with the New Equity Investors, which contains provisions
relating to the election of directors. See "Management -- Board of Directors."
The Stockholders Agreement also provides for transfer restrictions on the shares
of Common Stock held by such stockholders, rights of first offer, tag-along
rights, preemptive rights and certain other matters relating to the ownership
and sales of Common Stock of the Company.
The Company is a party to a distribution agreement with Yokogawa pursuant to
which Yokogawa has the right to distribute the Company's products in Japan and a
technical collaboration agreement pursuant to which Wavetek and Yokogawa develop
joint engineering and marketing programs for Wireless products, both of which
were entered into in connection with the purchase by Yokogawa of Common Stock of
the Company in April 1996. See "Business -- Yokogawa Relationship."
62
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued pursuant to the Indenture governing the Old
Notes between the Company and The Bank of New York, as Trustee. The terms of the
New Notes are identical in all material reports to the respective terms of the
Old Notes, except that the New Notes have been registered under the Securities
Act and therefore will not be subject to certain restrictions on transfer
applicable to the Old Notes and will not be entitled to registration rights. 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 (the "Trust
Indenture Act"). The Notes are subject to all such terms, and Holders of 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 Indenture and Registration Rights Agreement are filed as exhibits to the
Registration Statement of which this Prospectus is a part. The definitions of
certain terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this summary, the term "Company" refers
only to Wavetek Corporation and not to any of its Subsidiaries.
The Notes are subordinated in right of payment to all current and future
Senior Debt, including borrowings under the New Credit Agreement. The Subsidiary
Guarantees are subordinated in right of payment to all existing and future
Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit
Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New
Credit Agreement are effectively subordinated to the indebtedness of the Foreign
Subsidiaries. As of June 30, 1997, the Company and its Subsidiary Guarantors had
approximately $25.0 million of Senior Debt and the Foreign Subsidiaries had
approximately $4.3 million of outstanding debt, all of which would effectively
rank senior to the Notes and the Subsidiary Guarantees. The Indenture permits
the Company and its Subsidiaries to incur additional indebtedness, including
Senior Debt, subject to certain limitations, and prohibits the incurrence of any
indebtedness that is senior to the Notes and subordinated to Senior Debt.
The Notes are limited in aggregate principal amount to $85.0 million and
will mature on June 15, 2007. Interest on the Notes will accrue at the rate of
10 1/8% per annum and will be payable semi-annually on June 15 and December 15
of each year, commencing on December 15, 1997, to Holders of record on the
immediately preceding June 1 and December 1. 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 Issue Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of and premium, interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes; PROVIDED that all payments of principal, premium,
interest and Liquidated Damages, if any, with respect to Global Notes and with
respect to Certificated Notes the Holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Notes
will be issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors. As of the
date of this Prospectus, Wavetek U.S. Inc. is the only Subsidiary Guarantor. The
Subsidiary Guarantee of each Subsidiary Guarantor is subordinated to the prior
payment in full of all Senior Debt of the Subsidiary Guarantors, which, as of
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June 30, 1997 includes approximately $25.0 million of Indebtedness, which
presently consists solely of the Guarantees of the New Credit Agreement. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are
limited so as not to constitute a fraudulent conveyance under applicable law.
See, however, "Risk Factors -- Fraudulent Conveyance Matters."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary 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 Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Subsidiary Guarantee and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Company would be permitted by virtue
of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described above under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock." The requirements of clause (iii)
of this paragraph will not apply in the case of a consolidation or merger of a
Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary 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 Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Certain Covenants Asset Sales."
SUBORDINATION
The payment of principal of, premium, interest and Liquidated Damages, if
any, on the Notes are subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt whether or not allowable as a claim in
any such proceeding) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Debt are paid in full, any distribution to which the Holders of Notes
would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust described under "-- Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "Legal
Defeasance and Covenant Defeasance") if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt occurs and
is continuing or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits holders of the Designated Senior Debt as to
which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the
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Company or the holders of any Designated Senior Debt. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless a payment default on any Designated Senior Debt then exists. No
new period of payment blockage may be commenced unless and until 360 days have
elapsed since the delivery of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. As of June 30, 1997,
the principal amount of Senior Debt outstanding was approximately $25.0 million.
The Indenture limits, subject to certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
subsidiaries can incur. See "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the Company's
option prior to June 15, 2002. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, 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, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on June 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 105.063%
2003.............................................................................. 103.375
2004.............................................................................. 101.688
2005 and thereafter............................................................... 100.000
</TABLE>
Notwithstanding the foregoing, during the first three years after the Issue
Date, the Company may on any one or more occasions redeem up to an aggregate
33 1/3% of the principal amount of Notes originally issued at a redemption price
of 110.125% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the redemption date, with the net cash
proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2/3%
of the aggregate principal amount of Notes originally issued remains outstanding
immediately after such redemption; and PROVIDED, FURTHER, that such redemption
shall occur within 60 days of the date of the closing of such Public Equity
Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee 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 by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the
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date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
CERTAIN COVENANTS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's 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, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes 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"), pursuant to the procedures required by the Indenture and
described in such notice. The Company 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 Notes as a result of a Change of Control.
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 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.
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 Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Agreement currently prohibits the Company from purchasing any
Notes and also provides that certain change of control events with respect to
the Company would constitute a default thereunder. Any future credit agreements
or other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
then prior to purchasing the Notes in a Change of Control Offer, the Company
shall either repay all outstanding Senior Debt that contain such prohibitions or
obtain the requisite consents, if any, under all agreements governing such
outstanding Senior Debt. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Notes. In
such case, the Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute as default
under the New Credit Agreement. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes. See "Risk Factors -- Possible Inability to Purchase Notes Upon a Change
of Control."
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The Company 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 Company,
including any requirement to repay in full any Senior Debt or obtain the
consents of such lenders to such Change of Control Offer as set forth in the
preceding paragraph, and purchases all 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 Company 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 Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will 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 cash; PROVIDED 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),
shall be deemed to be cash for purposes of this provision.
Within 12 months after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay permanently
Senior Debt or Senior Debt of the Subsidiary Guarantors, or (b) to the
acquisition of an interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, in the
test instrumentation industry or a business reasonably related thereto. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce revolving indebtedness under the New Credit Agreement or otherwise 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 $5.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to 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, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. 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
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
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RESTRICTED PAYMENTS
The Indenture provides that the Company 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 Company's or any of its
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) 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);
(ii) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate 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 principal at Stated Maturity; 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 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 Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, 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 above 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 Company and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clauses
(ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum 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 the 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 net cash proceeds
received by the Company from the issue or sale since the date of the
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 the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment.
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 Company
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,
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redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Subsidiary of the Company to the holders
of its common Equity Interests on a pro rata basis; and (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 pursuant to any management
equity subscription agreement or stock option agreement; PROVIDED that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any twelve-month period and
$5.0 million in total and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction.
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. 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
the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company 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 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 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 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 of Indebtedness and letters of credit
(with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
under the New Credit Agreement and the incurrence by the Subsidiary Guarantors
of Guarantees thereof; PROVIDED that the aggregate principal amount of all
Indebtedness outstanding under the New Credit Agreement after giving effect to
such incurrence does not exceed $45.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently repay any such Indebtedness
or, in the case of any such revolving Indebtedness, permanently reduce
commitments therefor pursuant to the covenant described above under the caption
"-- Asset Sales";
(ii) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding or that are incurred by the Company or
any of its Subsidiaries to protect against currency exchange rate risk in the
conduct of its operations;
(iii) the incurrence by the Foreign Subsidiaries of Indebtedness in an
aggregate amount that, when combined with Existing Indebtedness of such Foreign
Subsidiaries (other than Indebtedness described in
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clause (iv) below), does not exceed $6.5 million and the incurrence by the
Company of Guarantees of such Indebtedness;
(iv) the incurrence by the Foreign Subsidiaries of Indebtedness in
connection with the issuance of completion bonds, performance guaranties or
letters of credit, and the incurrence by the Company of Guarantees thereof (with
such bonds, guaranties or letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Foreign Subsidiaries
thereunder) in an aggregate amount that, when combined with such Existing
Indebtedness of such Foreign Subsidiaries (other than Indebtedness described in
clause (iii) above), does not exceed $4.0 million;
(v) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(vi) the incurrence by the Company of Indebtedness represented by the Notes
and the incurrence by the Subsidiary Guarantors of Indebtedness represented by
the Subsidiary Guarantees;
(vii) 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 that was permitted by the Indenture
to be incurred;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; 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 if a
Subsidiary Guarantor 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 Subsidiary Guarantees 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 Wholly Owned Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Subsidiary,
as the case may be;
(ix) the incurrence by the Company or any of the Subsidiary Guarantors 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 improvements of
property used in the business of the Company or such Subsidiary Guarantors, in
an aggregate principal amount not to exceed $5.0 million at any time
outstanding; and
(x) the incurrence by the Company of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any other Indebtedness incurred pursuant to this clause (x), not to
exceed $15.0 million.
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 (x) 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. Any Indebtedness that may be incurred pursuant to this
covenant may be incurred under the New Credit Agreement.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company 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
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 the Indenture, (b) the New
Credit Agreement 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 in the aggregate with
respect to such dividend and other payment restrictions than those contained in
the New Credit Agreement as in effect on the date of the Indenture, (c) the
Indenture, the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any
instrument regarding the sale, lease or purchase of any asset or 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 Indebtedness was incurred 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, or the
property or assets of the Person, 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 licenses or
leases entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations or Capital Lease 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, or (h)
Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive in the aggregate than those contained in the agreements governing
the Indebtedness being refinanced.
LIMITATION ON LAYERING DEBT
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes. In addition, the Indenture provides
that the Subsidiary Guarantors will not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of the Subsidiary Guarantor and senior in
any respect in right of payment to the Subsidiary Guarantees.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, make any payment to, 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 transaction, 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 at least as favorable as
those that could reasonably be expected to be obtained by the Company or the
relevant Subsidiary 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 and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board
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of Directors and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; PROVIDED that the following shall
not be deemed to be Affiliate Transactions: (s) transactions pursuant to the
Distribution Agreement, dated April 23, 1996, and the Technical Collaboration
Agreement, dated as of April 23, 1996, each between the Company or one of its
Subsidiaries and Yokogawa, to the extent that such transactions are on terms
that are at least as favorable as those that could reasonably be expected to be
obtained by the Company or the relevant Subsidiary in a comparable transaction
by the Company or such Subsidiary with an unrelated Person; (t) lease payments,
renewals and extensions under the lease agreement, dated June 29, 1996, between
the Company and Toyon Investments, a corporation controlled by Gooding, to the
extent that aggregate annual lease payments do not exceed $585,000 per year,
plus annual consumer price index adjustments, not to exceed 3% per annum; (u)
any payments or transactions made in accordance with, or that are authorized
under, the Stockholders Agreement, including the engagement or appointment of
Donaldson, Lufkin & Jenrette Securities Corporation as underwriter in connection
with an initial public offering; (v) the engagement or appointment by the
Company of Donaldson, Lufkin & Jenrette Securities Corporation as its financial
advisor, investment banking firm or arranger with respect to the New Credit
Agreement, to the extent that the fees and expenses under such engagement are
reasonable and customary for such engagements; (w) the exercise by Gooding of
his option to purchase the Company's executive offices at 11995 El Camino Road,
San Diego, California including all the leasehold improvements and fixed assets
therein pursuant to the terms set forth in the resolution of the Company adopted
on September 19, 1995; (x) any employment agreement entered into by the Company
or any of its Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Subsidiary; (y) transactions
between or among the Company and/or its Subsidiaries; and (z) Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "-- Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Subsidiary (other than a Foreign Subsidiary) after the
date of the Indenture, then such newly acquired or created Subsidiary shall
execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance
with the terms of the Indenture.
The Indenture also provides that 100% of the Capital Stock of all Foreign
Subsidiaries must be owned directly or indirectly by the Company and that the
Company will not allow its Foreign Subsidiaries to acquire or create any
Subsidiaries.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), 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 Commission 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" and, with respect
to the annual information only, a report thereon by the Company's certified
independent auditors 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 addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (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 Company has agreed
that, for so long as any Notes remain outstanding, it will furnish to the
Holders and to
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prospective purchasers designated by such Holders, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may 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
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or 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 and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; 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 entity or 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 (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, 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."
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 Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the captions "-- Certain Covenants --
Change of Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence
of Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company
for 60 days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) 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
Subsidiary Guarantor, or any Person acing on behalf of any Subsidiary Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; (vi)
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 when due at final stated
maturity (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more; (vii) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $7.5 million, which judgments are not paid, discharged or stayed for a
period of 60 days; and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
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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 by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a notice of
acceleration (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the New Credit Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under the New Credit Agreement or five
Business Days after receipt by the Company and the Representative under the New
Credit Agreement of such Acceleration Notice but only if such Event of Default
is then continuing. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
the Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
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. 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 (vi) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (vi) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (i) the annulment of the acceleration of the
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction, and (ii) all existing Events of Default, except nonpayment of
principal or interest or Liquidated Damages on the Notes that became due solely
because of the acceleration of the Notes, have been cured or waived. 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 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 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 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 Notes. If an Event of Default occurs prior to June
15, 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 June 15, 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 Notes.
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 of the
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 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.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Notes, the
Indenture or any Subsidiary Guarantee or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the 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.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen 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 Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company 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 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 Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the 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 Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, 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 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,
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; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel 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; (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 borrowing of funds
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 the
New Credit Agreement or any other material agreement or instrument (other than
the 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; (vi) the Company must
deliver to the Trustee an Officers' Certificate stating that the deposit was not
made by the Company with the intent of preferring the Holders of Notes over the
other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and (vii) the Company 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.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange 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 Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a 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 or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption "--
Certain Covenants -- Change of Control" and "-- Asset Sales"), (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 Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the 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 Notes, (vi) make
any change in the provisions of the 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, (vii) waive a redemption payment
with respect to any Note (other than a payment required by the covenants
described above under the captions "-- Certain Covenants -- Change of Control"
or "-- Asset Sales") or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendment to the provisions of Article 10 of
the Indenture (which relate to subordination) will require the consent of the
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
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 obligations to Holders of 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 Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
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CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, 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 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 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 New Notes will be issued in the form of a Global Note (a "Global Note").
Each Global Note will be deposited with, or on behalf of, The Depositary Trust
Company ("DTC") and registered in the name of DTC or its nominee. Except as set
forth below, each Global Note may be transferred, in whole or in part, only to
DTC or another nominee of DTC. Investors may hold their beneficial interest in a
Global Note directly through DTC if they are participants in such system or
indirectly through organizations which are participants in such system.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers (including
the Initial Purchaser), banks and 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 (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or Indirect Participants.
Upon the issuance of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes. Ownership of the Notes evidenced by 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 interest of
Participant), the Participants and the Indirect Participants. Prospective
purchasers are advised that the laws of some states require that certain persons
take physical delivery in definitive form of securities they own. Consequently,
the ability to transfer Notes evidenced by the Global Notes will be limited to
such extent.
So long as the nominee of DTC is the registered owner or holder of any
Notes, such nominee will be considered the sole owner or Holder under the
Indenture of any Notes evidenced by the Global Notes. Beneficial owners of Notes
evidenced by a Global Note will not be considered the owners or Holders thereof
under the Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of DTC or for maintaining, supervising or reviewing any records
of DTC relating to the Notes. No beneficial owner of an interest in any Global
Note will be able to transfer that interest except in accordance with DTC's
procedures in addition to those provided for under the Indenture.
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Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the nominee
of DTC on the applicable record date will be payable by the Trustee to or at the
direction of DTC or its nominee in its capacity as the registered Holder under
the Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the person in whose names Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company, the Trustee nor any paying agent of the
Company has or will have any responsibility or liability for the payment of such
amounts to beneficial owners of Notes (including principal, premium, if any,
interest and Liquidated Damages, if any). The Company believes, however, that it
is currently the policy of DTC or its nominee, to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of DTC or its nominee. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC or its nominee
is no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture, then, upon surrender by
DTC or its nominee of its Global Notes, Notes in such form will be issued to
each person that DTC or its nominee identify as being the beneficial owner of
the corresponding Notes.
Neither the Company nor the Trustee will be liable for any delay by a holder
of a Global Note or DTC or its nominee in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee for all purposes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the sale of the Old Notes, the Company and the Initial
Purchaser entered into the Registration Rights Agreement on the Issue Date.
Pursuant to the Registration Rights Agreement, the Company agreed to file with
the SEC a registration statement on the appropriate form under the Securities
Act with respect to the New Notes (the "Exchange Offer Registration Statement").
The Exchange Offer is being made to satisfy the contractual obligations of the
Company under the Registration Rights Agreement and the Registration Statement
of which this Prospectus forms a part in the Exchange Offer Registration
Statement. If (i) the Company is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or SEC policy or (ii) any
Holder of Transfer Restricted Securities notifies the Company within the
specified time period that (A) it is prohibited by law or SEC policy from
participating in the Exchange Offer or (B) that it 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 or (C) that it is a
broker-dealer and owns Old Notes acquired directly from the Company or an
affiliate of the Company, the Company will file with the SEC a shelf
registration statement (the "Shelf Registration Statement") to cover resales of
the Notes by the Holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the SEC. For
purposes of the foregoing, "Transfer Restricted Securities" means each Old Note
until (i) the date on which such Note has been exchanged by a person other than
a broker-dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Old Note for a New Note,
the
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date on which such New Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of this Prospectus,
(iii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the SEC on or prior to 60 days after
the Issue Date, (ii) the Company will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the SEC on or prior to 120
days after the Issue Date, (iii) unless the Exchange Offer would not be
permitted by applicable law or SEC policy, the Company will commence the
Exchange Offer and use its best efforts to issue on or prior to 45 business days
after the date on which the Exchange Offer Registration Statement was declared
effective by the SEC, New Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Company will use its best efforts to file the Shelf
Registration Statement with the SEC on or prior to 60 days after such filing
obligation arises (and in any event within 120 days after the Issue Date) and to
cause the Shelf Registration to be declared effective by the SEC on or prior to
120 days after such filing obligation arises. If (a) the Company fails to file
any of the Registration Statements 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 SEC on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 45 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, 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
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 Company will pay Liquidated Damages to each Holder of Old Notes, with
respect to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Old Notes held by such Holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount of Old
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Old Notes. All accrued Liquidated
Damages will be paid by the Company to the Global Note Holder by wire transfer
of immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above. See "The Exchange Offer."
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.
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"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, and in the case of the Company and its
Subsidiaries, shall include Yokogawa until such time as Yokogawa has beneficial
ownership of less than five percent of the Company's Capital Stock. 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, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than sales of Cash Equivalents and inventory in the ordinary course of business
(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 the Indenture described above under
the caption "-- Certain Covenants -- Change of Control" and/or the provisions
described above under the caption "-- Certain Covenants -- Merger, Consolidation
or Sale of Assets" and not by the provisions of the Asset Sale covenant), and
(ii) the issue or sale by the Company or 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 (a)
that have a fair market value in excess of $2.0 million or (b) for net proceeds
in excess of $2.0 million. Notwithstanding the foregoing: (i) a transfer of
assets by the Company to a Wholly Owned Subsidiary or by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, (ii) an
issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary, and (iii) a Restricted Payment that is
permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments" will not be deemed to be Asset
Sales.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, (i) 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, or (ii) so long as the Master Lease, dated as of October
21, 1994, as amended, with respect to property in Indianapolis, Indiana, is not
accounted for as a capital lease, the amount of the liability with respect
thereto recorded on the Company's balance sheet.
"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) United States dollars or foreign currency that
is readily exchangeable into United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than 12 months
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits with maturities of 12 months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding 12 months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within 12 months after the date of acquisition.
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"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 Principals or their Related Parties (as defined below), (ii)
the consummation of any transaction (including, without limitation, any merger
or consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iii) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors, or (iv) the Company consolidates with, or merges
with or into, any Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to 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 the majority of the members of
the Board of Directors of such Person are Continuing Directors.
"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, extraordinary provision or provision for
restructuring operations 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 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, 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, minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP; PROVIDED that
Consolidated Net Income shall exclude the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes on the
income or profits of, and the depreciation and amortization and other non-cash
charges of, a Subsidiary of the referent Person shall be added to Consolidated
Net Income to compute Consolidated Cash Flow only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary either (i) without prior
governmental approval or (ii) with governmental approval that has been obtained
or that could readily and reasonably be obtained, and without direct or indirect
restriction 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 and
excluding any one-time charge or expense incurred in order to consummate
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the Recapitalization Transactions; 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 (unless such governmental approval could be readily and reasonably
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 and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges,
excluding goodwill and other purchased intangibles, as of such date, all of the
foregoing determined 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 on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors pursuant to the Stockholders Agreement or
with the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"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.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
New Credit Agreement and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"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), 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
that is 91 days after the date on which the Notes mature; PROVIDED, that Capital
Stock issued to employees pursuant to agreements providing that the employee may
require the Company to repurchase such Capital Stock in certain circumstances
shall not be deemed to be Disqualified Stock if such agreements provide that the
repurchase rights are subject to the limitations on such repurchases set forth
in the covenant entitled "-- Restricted Payments."
"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).
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"EXISTING INDEBTEDNESS" means up to $7.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Agreement) in existence on the date of the
Indenture after the Recapitalization Transactions, until such amounts are
repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense 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 any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations 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) and (ii) the consolidated interest
expense of such Person and its Subsidiaries that was capitalized during such
period, and (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) all dividend payments,
whether or not in cash, 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 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 for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues 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 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 (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.
"FOREIGN SUBSIDIARY" means, with respect to any person, any Subsidiary of
such person which is incorporated or otherwise organized under the laws of any
jurisdiction other than the United States of America, any state thereof or the
District of Columbia and substantially all of whose consolidated assets are
located outside the United States.
"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.
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"GOODING" means Terence J. Gooding.
"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.
"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, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or (iii) agreements or arrangements designed to protect such Person
against fluctuations in foreign currency exchange rates in the conduct of its
operations.
"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.
"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 the covenant described
above under the caption "Certain Covenants -- Restricted Payments."
"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, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"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 (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 (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales
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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 repay Indebtedness secured by such assets (other than pursuant to the
New Credit Agreement) and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as of June
11, 1997, by and among the Company and DLJ Capital Funding, Inc. and the banks
named therein, for $45.0 million aggregate principal amount of term loan and
revolving credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, extended, renewed, refunded, replaced or
refinanced from time to time.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means: (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company and that is engaged in the test
instrumentation industry or a business reasonably related thereto; (b) any
Investment in Cash Equivalents, to the extent that such Investment is not made
for speculative investment purposes; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Subsidiary of the Company that is a
Subsidiary Guarantor and that is engaged in the test instrumentation industry or
a business reasonably related thereto 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 Wholly Owned
Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in
the test instrumentation industry or a business reasonably related thereto; (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 "Certain Covenants -- Asset
Sales"; (e) any acquisition of assets in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; and (f) 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 (f) that are at the time outstanding, not to exceed $5.0 million.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or
unsecured debt securities that (i) are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) on terms at least as
favorable to the Senior Debt as those contained in Article 10 of the Indenture,
(ii) may be guaranteed by the Subsidiary Guarantor on terms at least as
favorable to the Senior Debt as those contained in the Subsidiary Guarantees,
and (iii) have a final maturity and weighted average life to maturity which is
the same as or greater than, the Notes.
"PERMITTED LIENS" means: (i) Liens securing Senior Debt or Senior Debt of
Subsidiary Guarantors that was permitted by the terms of the Indenture to be
incurred; (ii) Liens in favor of the Company or any Subsidiary; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; PROVIDED that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (iv) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens existing on the date of
the Indenture; (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (ix) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness and accessions, modifications,
products and proceeds thereof; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are
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being contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, PROVIDED that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; and
(ix) 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.
"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, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; 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, renewed, replaced, defeased or refunded (plus the amount of
premiums, prepayments, penalties, reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date equal to 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, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
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, 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, renewed, replaced, defeased or
refunded.
"PRINCIPALS" means Gooding, DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Diversified Partners, L.P., UK Investment Plan 1997
Partners, DLJ First ESC L.L.C., DLJ Offshore Partners II, C.V, DLJ EAB Partners,
L.P., DLJ Millennium Partners, L.P. and Green Equity Investors II, L.P.
"PUBLIC EQUITY OFFERING" means an initial registered public offering of the
Capital Stock of the Company, and any subsequent registered primary offerings of
Capital Stock of the Company.
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"REPRESENTATIVE" means (a) the administrative agent under the New Credit
Agreement or (b) the indenture trustee or other trustee, agent or representative
for any other Senior Debt.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"SENIOR DEBT" means (i) all Obligations (including without limitation
interest accruing after a filing of a petition in bankruptcy whether or not such
interest is an allowable claim in such proceeding) of the Company under the New
Credit Agreement, and (ii) any other Indebtedness permitted to be incurred by
the Company under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (v) any liability under
the Master Lease, dated as of October 21, 1994, as amended, with respect to
property in Indianapolis, Indiana, (w) any liability for federal, state, local
or other taxes owed or owing by the
86
<PAGE>
Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture.
"SENIOR DEBT OF THE SUBSIDIARY GUARANTORS" means (i) all Guarantees by the
Subsidiary Guarantors of Obligations (including without limitation interest
accruing after a filing of a petition in bankruptcy whether or not such interest
is an allowable claim in such proceeding) of the Company under the New Credit
Agreement, (ii) any Indebtedness permitted to be incurred by the Subsidiary
Guarantor under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that such Guarantee is on a
parity with or subordinated in right of payment to the Subsidiary Guarantees.
Notwithstanding anything to the contrary in the foregoing, Senior Debt of the
Subsidiary Guarantors will not include (v) any liability under the Master Lease,
dated as of October 21, 1994, as amended, with respect to property in
Indianapolis, Indiana, (w) any liability for federal, state, local or other
taxes owed or owing by the Subsidiary Guarantor, (x) any Indebtedness of any of
the Subsidiary Guarantors to the Company, any of their Subsidiaries or other
Affiliates thereof, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of the Indenture.
"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 hereof.
"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.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of June
11, 1997 by and among certain holders of Capital Stock of the Company.
"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 Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by 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).
"SUBSIDIARY GUARANTORS" means each of (i) Wavetek U.S. Inc. and (ii) any
other subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"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 and one or
more Wholly Owned Subsidiaries of such Person.
"YOKOGAWA" means Yokogawa Electric Corporation, a corporation organized
under the laws of Japan.
87
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT AGREEMENT
In connection with the Recapitalization Transactions, the Company entered
into a New Credit Agreement with Fleet National Bank, as Administrative Agent,
DLJ Capital Funding, Inc. ("DLJCF"), as Syndication Agent, and the several
lenders named therein. The New Credit Agreement provides for a five-year and six
month term loan in the principal amount of $25.0 million and a five year and six
month revolving credit facility providing for borrowings of up to $20.0 million,
which includes a swingline facility. The revolving credit facility under the New
Credit Agreement provides for up to an aggregate of $7.5 million of borrowings
in British pounds, French francs and Deutsche marks. The Company's obligations
under the New Credit Agreement constitute Senior Debt with respect to the Notes.
PRINCIPAL PAYMENTS. The term loan facility is subject to quarterly
amortization commencing in September 1998, in the following aggregate annual
amounts for fiscal years ending September 30: 1998 -- $1.0 million; 1999 --
$4.25 million; 2000 -- $5.25 million; 2001 -- $6.25 million; 2002 -- $6.75
million; and for the three months ending December 31, 2002 -- $1.5 million.
INTEREST RATE. Indebtedness under the New Credit Agreement bears interest,
at the option of the Company, at either (i) the Base Rate (as defined in the New
Credit Agreement) plus 1.5%, or (ii) at the reserve-adjusted Euro-Dollar Rate
(as defined in the New Credit Agreement) plus 2.5%, subject to reduction upon
achievement of certain performance levels and/or credit ratios. Loans under the
swingline facility bear interest at the Base Rate plus 1.5%.
GUARANTEES AND SECURITY. All current and future domestic subsidiaries of
the Company unconditionally guarantee the obligations under the New Credit
Agreement. In addition, all loans are secured by a lien on substantially all
existing and after-acquired property of the Company and its current and future
domestic subsidiaries, including a pledge of 100% of the stock of all domestic
subsidiaries of the Company, 65% of the stock of all foreign subsidiaries of the
Company and all intercompany loans from the Company to the Foreign Subsidiaries.
COVENANTS. The New Credit Agreement contains various affirmative, negative
and financial covenants, including, without limitation; (i) limitations on other
indebtedness, liens, investments, leases and guarantees; (ii) limitations on
redemptions and prepayments of the Notes and other junior debt prior to the
stated maturity thereof; (iii) limitation on mergers, acquisitions and sales of
assets; and (iv) a minimum EBITDA requirement, fixed charge coverage ratio
requirement, a minimum net worth test and a maximum leverage ratio test.
EVENTS OF DEFAULT. Events of default under the New Credit Agreement include
various events of default customary for such type of agreement. Without
limitation, a failure to make payments when due, noncompliance with covenants
and breaches of representations and warranties, payment defaults on other debt
and a change of control of the Company constitute an event of default.
OTHER DEBT
Wavetek U.S. Inc. had a Business Loan Agreement (the "Existing U.S. Credit
Agreement") with a bank providing for revolving line of credit borrowings of up
to $4.0 million through January 1998. The Existing Credit Agreement was
terminated as part of the Recapitalization Transactions.
The Company's subsidiaries in the United Kingdom, France, Germany and
Austria have agreements with banks providing for short-term revolving advances
and overdraft facilities in an aggregate total amount of approximately $6.5
million. In addition, the bank agreements with such subsidiaries also provide
for issuance of letters of credit and bank guarantees in an aggregate total
amount of approximately $4.0 million. At June 30, 1997, an aggregate amount of
$3.4 million had been borrowed under these facilities. Revolving borrowings
under these agreements bear interest at variable rates ranging from 4.2%
88
<PAGE>
to 8.4% as of June 30, 1997. These bank agreements also provide for long-term
borrowings and are generally secured by the assets of the local subsidiary and
the guarantee of the Company. Most of these agreements also provide for the
issuance of letters of credit and bank guarantees. At June 30, 1997, the Company
and its foreign subsidiaries were contingently liable for outstanding letters of
credit and bank guarantees aggregating $2.1 million. Borrowings under the
Company's revolving bank agreements have been classified as "Notes payable to
banks" in the Company's Consolidated Financial Statements due to the short-term
nature of the revolving advances taken under these agreements.
In connection with the October 1994 acquisition of its Telecom business, the
Company has a promissory note payable to Schlumberger in the amount of 5.2
million French francs ($0.9 million at June 30, 1997). The note is unsecured and
the full principal balance is payable in January 1998. Interest is payable
quarterly at PIBOR plus 0.50% (3.871% at June 30, 1997).
In fiscal 1995, the Company sold its facility in Indianapolis to a third
party investor. In connection with this sale, the Company entered a master lease
agreement with the buyer, under which the Company leased back the facility for a
period of 20 years for an annual rent of $473,000, subject to annual adjustments
based on changes in the consumer price index, not to exceed 3% per annum. In
December 1994, the Company subleased a portion of this facility to a third party
for five years for an annual base rent and common area expense reimbursement of
$387,000. Because of the significance of the sublease in relation to the
Company's master lease of the facility, generally accepted accounting principles
require that the transaction be recorded as a financing transaction, whereby the
building remains on the Company's balance sheet in an amount equal to the net
proceeds from the sale and an offsetting long-term financing obligation has been
recorded. As of June 30, 1997, this financing obligation was $4.1 million.
89
<PAGE>
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by Sullivan & Cromwell, Los Angeles, California.
EXPERTS
The consolidated financial statements of Wavetek Corporation as of September
30, 1995 and 1996, and for each of the three years in the period ended September
30, 1996, appearing in this Prospectus and 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.
PLAN OF DISTRIBUTION
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
Based on these interpretations by the staff of the Division of Corporation
Finance, and subject to the two immediately following sentences, the Company
believes that New Notes issued pursuant to this Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Notes. However, any
holder of Old Notes who is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act (an "Affiliate") or who intends to participate
in the Exchange Offer for the purpose of distributing New Notes, or any broker-
dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A
or any other available exemption under the Securities Act, (i) will not be able
to rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned interpretive letters,
(ii) will not be permitted or entitled to tender such Old Notes in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, broker-dealers ("Participating
Broker-Dealers") must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
Affiliate, (ii) any New Notes to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Notes and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Notes.
Each Participating Broker-Dealer must acknowledge that it acquired the Old Notes
for its own account as the result of market-making activities or other trading
activities and must agree 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.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Company
believes that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the New Notes received upon exchange of such Old
Notes (other than Old Notes which represent an unsold allotment from the
original sale of the Old Notes) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared
90
<PAGE>
for an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such New Notes. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. The Company
has agreed that 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 such New Notes for a period ending one year from the date on which the
Exchange Offer Registration Statement is declared effective (subject to
extension under certain limited circumstances). Any person, including any
Participating Broker-Dealer, who is an Affiliate may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Gooding, an Affiliate of the Company, is the beneficial owner of
$5,000,000 aggregate principal amount of Old Notes. This Prospectus may be used
by Gooding in connection with resales of such Old Notes.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal or delivery of an Agent's Message in lieu thereof,
that, upon receipt of notice from the Company of the occurrence of any event or
the discovery of any fact which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material respect or which causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will forthwith discontinue the disposition of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus and has furnished copies of the amended or supplemented
Prospectus to such Participating Broker-Dealer, or the Company has given notice
that the sale of the New Notes may be resumed, as the case may be.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. New Notes received by broker-dealers for their own
accounts 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 at 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 in connection with 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 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.
91
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2
Consolidated Balance Sheets as of September 30, 1995 and 1996 and June 30, 1997 (Unaudited)................ F-3
Consolidated Statements of Income for each of the three years in the period ended September 30, 1996 and
the nine months ended June 30, 1996 and 1997 (Unaudited)................................................. F-4
Consolidated Statements of Stockholders' Equity for each of the three years in the period ended September
30, 1996 and the nine months ended June 30, 1997 (Unaudited)............................................. F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 1996
and the nine months ended June 30, 1996 and 1997 (Unaudited)............................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Wavetek Corporation
We have audited the accompanying consolidated balance sheets of Wavetek
Corporation as of September 30, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Wavetek Corporation at September 30, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
November 22, 1996
F-2
<PAGE>
WAVETEK CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1995 1996
--------- --------- JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 3,689 $ 6,126 $ 4,059
Short-term investments, available for sale................................... -- -- 3,000
Accounts receivable (less allowance for doubtful accounts of $903 in 1995,
$2,023 in 1996 and $2,054 in 1997 (unaudited))............................. 23,098 20,866 25,280
Inventories.................................................................. 17,928 19,308 18,202
Deferred income taxes........................................................ 495 4,505 4,474
Other current assets......................................................... 1,492 1,188 2,226
--------- --------- -----------
Total current assets........................................................... 46,702 51,993 57,241
Property and equipment, net.................................................... 10,491 12,194 14,773
Deferred debt issuance costs, net.............................................. -- -- 4,293
Intangible assets, net......................................................... 4,451 3,867 3,424
Deferred income taxes.......................................................... 608 441 37
Other assets................................................................... 326 357 195
--------- --------- -----------
Total assets................................................................... $ 62,578 $ 68,852 $ 79,963
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable to banks....................................................... $ 6,263 $ 786 $ 3,377
Trade accounts payable....................................................... 12,306 12,007 15,834
Accrued compensation......................................................... 6,134 7,468 7,162
Income taxes payable......................................................... 792 1,427 2,021
Other current liabilities.................................................... 8,560 8,747 9,095
Current maturities of long-term obligations.................................. 86 95 988
--------- --------- -----------
Total current liabilities...................................................... 34,141 30,530 38,477
Long-term obligations, less current maturities................................. 8,335 5,073 113,995
Deferred income and other liabilities.......................................... 686 561 460
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, par value $.01; authorized, 15,000 shares; issued and
outstanding, 10,974 shares in 1995 and 1996 and 4,885 shares in 1997
(unaudited)................................................................ 11 11 49
Additional paid-in capital................................................... 5,604 5,637 43,748
Retained earnings (accumulated deficit)...................................... 13,271 26,746 (116,660)
Foreign currency translation adjustments..................................... 530 294 (106)
--------- --------- -----------
Total stockholders' equity (deficit)........................................... 19,416 32,688 (72,969)
--------- --------- -----------
Total liabilities and stockholders' equity (deficit)........................... $ 62,578 $ 68,852 $ 79,963
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
WAVETEK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
----------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------ ------------- ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.................................. $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700
Cost of goods sold..................... 41,373 72,649 72,364 55,779 55,479
------------ ------------- ------------ ------------- -------------
Gross margin........................... 33,442 60,970 78,629 59,402 63,221
Operating expenses:
Marketing and selling................ 16,429 32,586 36,197 26,809 27,913
Research and development............. 5,425 12,096 12,917 9,416 11,635
General and administrative........... 6,057 9,391 11,612 8,655 7,878
Stock option compensation related to
recapitalization................... -- -- -- -- 7,061
Provision for restructuring
operations......................... -- -- 1,832 188 --
------------ ------------- ------------ ------------- -------------
27,911 54,073 62,558 45,068 54,487
------------ ------------- ------------ ------------- -------------
Operating income....................... 5,531 6,897 16,071 14,334 8,734
Non-operating income (expense):
Interest income...................... 33 90 167 99 254
Interest expense..................... (645) (1,190) (762) (616) (948)
Loss on sale and leaseback
financing.......................... -- (1,824) -- -- --
Other, net........................... (387) (288) (1,036) (488) (861)
------------ ------------- ------------ ------------- -------------
(999) (3,212) (1,631) (1,005) (1,555)
------------ ------------- ------------ ------------- -------------
Income before provision for income
taxes................................ 4,532 3,685 14,440 13,329 7,179
Provision for income taxes............. 822 616 965 893 2,728
------------ ------------- ------------ ------------- -------------
Net income............................. $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451
------------ ------------- ------------ ------------- -------------
------------ ------------- ------------ ------------- -------------
Net income per share................... $ .37 $ .27 $ 1.17 $ 1.08 $ .40
------------ ------------- ------------ ------------- -------------
------------ ------------- ------------ ------------- -------------
Shares used in computation............. 10,100 11,540 11,520 11,485 11,123
------------ ------------- ------------ ------------- -------------
------------ ------------- ------------ ------------- -------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
WAVETEK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996 AND THE NINE MONTHS ENDED JUNE 30,
1997
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY TOTAL
---------------------- PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS EQUITY
--------- ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993.............. 9,940 $ 99 $ 8,081 $ 6,492 $ (80) $ 14,592
Shares issued for cash................. 40 1 49 -- -- 50
Shares repurchased for cash............ (40) (1) (51) -- -- (52)
Return of capital to stockholders...... -- -- (6,958) -- -- (6,958)
Net income............................. -- -- -- 3,710 -- 3,710
Foreign currency translation
adjustments.......................... -- -- -- -- 295 295
--------- ----- ----------- ----------- ----- ------------
Balance, September 30, 1994.............. 9,940 99 1,121 10,202 215 11,637
Shares issued for cash................. 1,570 16 7,529 -- -- 7,545
Shares repurchased for cash............ (576) (6) (3,194) -- -- (3,200)
Stock options exercised................ 40 1 49 -- -- 50
Net income............................. -- -- -- 3,069 -- 3,069
Foreign currency translation
adjustments.......................... -- -- -- -- 315 315
--------- ----- ----------- ----------- ----- ------------
Balance, September 30, 1995.............. 10,974 110 5,505 13,271 530 19,416
Income tax benefit from stock options
exercised............................ -- -- 33 -- -- 33
Net income............................. -- -- -- 13,475 -- 13,475
Foreign currency translation
adjustments.......................... -- -- -- -- (236) (236)
--------- ----- ----------- ----------- ----- ------------
Balance, September 30, 1996.............. 10,974 110 5,538 26,746 294 32,688
Shares repurchased for cash
(UNAUDITED).......................... (8,517) (85) (4,608) (147,857) -- (152,550)
Shares issued for cash, net of related
costs of $644 (UNAUDITED)............ 2,428 24 42,832 -- -- 42,856
Stock options repurchased for cash, net
of income tax benefit (UNAUDITED).... -- -- (14) -- -- (14)
Net income (UNAUDITED)................. -- -- -- 4,451 -- 4,451
Foreign currency translation
adjustments (UNAUDITED).............. -- -- -- -- (400) (400)
--------- ----- ----------- ----------- ----- ------------
Balance, June 30, 1997 (UNAUDITED)....... 4,885 $ 49 $ 43,748 $ (116,660) $ (106) $ (72,969)
--------- ----- ----------- ----------- ----- ------------
--------- ----- ----------- ----------- ----- ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
WAVETEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense.............................................. 1,333 2,493 2,453 2,031 2,102
Amortization expense.............................................. 277 554 577 435 430
Amortization of deferred debt issuance costs...................... -- -- -- -- 33
Provision for losses on accounts receivable....................... 103 561 1,542 407 252
Loss on sale of building.......................................... -- 1,824 -- -- --
Loss on disposal of property and equipment........................ 97 71 78 95 8
Deferred income................................................... (98) (98) (99) (74) (73)
Deferred income taxes............................................. -- (1,103) (3,843) (2,910) 435
Changes in operating assets and liabilities, net of effect of
purchased businesses:
Accounts receivable............................................. 485 183 (405) (3,049) (6,948)
Inventories and other assets.................................... 362 1,003 (2,166) (1,989) (335)
Accounts payable and accrued expenses........................... (522) 4,059 2,809 2,687 6,136
Income taxes payable, net....................................... 700 (68) 655 362 540
--------- --------- --------- --------- ---------
Net cash provided by operating activities........................... 6,447 12,548 15,076 10,431 7,031
INVESTING ACTIVITIES
Purchase of business, net of seller financing....................... -- (17,685) -- -- --
Proceeds from sale of business...................................... 946 -- 338 338 --
Purchase of property and equipment.................................. (1,332) (2,920) (4,544) (3,207) (4,784)
Proceeds from sale of property and equipment........................ 53 306 91 197 53
Purchase of short-term investments.................................. -- -- -- -- (3,000)
Payments received on notes receivable............................... 386 33 255 165 169
Issuance of notes receivable........................................ -- (117) (90) (90) --
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities................. 53 (20,383) (3,950) (2,597) (7,562)
FINANCING ACTIVITIES
Issuance of common shares for cash.................................. 50 7,595 -- -- 42,856
Repurchase of common shares and stock options for cash.............. (52) (3,200) -- -- (152,564)
Proceeds from sale and leaseback financing.......................... -- 4,321 -- -- --
Proceeds from revolving lines of credit and long-term obligations... 25,770 31,455 14,932 14,324 114,144
Principal payments on revolving lines of credit and long-term
obligations....................................................... (25,537) (32,129) (23,575) (21,802) (1,489)
Debt issuance costs................................................. -- -- -- -- (4,326)
Return of capital to stockholders................................... (6,958) -- -- -- --
Proceeds of loans from stockholders................................. 4,860 -- -- -- --
Repayment of loans from stockholders................................ (4,500) (360) -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities................. (6,367) 7,682 (8,643) (7,478) (1,379)
Effect of exchange rate changes on cash and cash equivalents........ 161 35 (46) (124) (157)
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents.................... 294 (118) 2,437 232 (2,067)
Cash and cash equivalents at beginning of period.................... 3,513 3,807 3,689 3,689 6,126
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.......................... $ 3,807 $ 3,689 $ 6,126 $ 3,921 $ 4,059
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.............................................. $ 527 $ 1,392 $ 753 $ 628 $ 440
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash paid for income taxes.......................................... $ 144 $ 1,949 $ 4,133 $ 3,507 $ 1,963
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Wavetek Corporation ("the Company") is a leading global designer,
manufacturer and distributor of a broad range of electronic test instruments,
with a primary focus on application-specific instruments for testing voice,
video and data communications equipment and networks. The Company also designs,
manufactures and distributes precision instruments to calibrate and test
electronic equipment and provides repair, upgrade and calibration services for
its products on a worldwide basis. The accompanying consolidated financial
statements include the operations of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
FOREIGN CURRENCY
The accounts of foreign subsidiaries consolidated herein have been
translated from their respective functional currencies into U.S. dollars at
appropriate exchange rates. Cumulative translation adjustments are included as a
separate component of stockholders' equity. Exchange gains and losses from
foreign currency transactions are included in "Other, net" in the accompanying
consolidated statements of income.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
It is the Company's policy to invest excess funds in highly liquid,
short-term investments. Such investments are comprised primarily of U.S.
Treasury securities, guaranteed obligations of the U.S. government or its
agencies, mutual funds, which invest in U.S. Treasury securities, and money
market accounts and are stated at cost, which approximates market. For purposes
of financial statement presentation, the Company considers all highly liquid
investments with a maturity of three months or less at date of purchase to be
cash equivalents.
INVENTORIES
Inventories are valued at cost determined on the first-in, first-out basis,
not in excess of market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation for financial
statement purposes is computed using the straight-line method based upon the
estimated useful lives of the various classes of assets which range from 3 to 35
years for buildings and improvements and from 3 to 10 years for fixtures and
equipment.
F-7
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED DEBT ISSUANCE COSTS
Costs associated with the issuance of long-term debt have been deferred and
are being amortized over the term of the related debt using the interest method.
Amortization expense for these costs is included in interest expense in the
accompanying consolidated statements of income.
INTANGIBLE ASSETS
Intangible assets consist of covenants not to compete and the excess of
purchase price over net tangible assets of businesses acquired (goodwill) and
are recorded at cost. Intangible assets are amortized over their estimated lives
ranging from five to fifteen years.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS 121"). SFAS 121 establishes
accounting standards for recording the impairment of long-lived assets,
including identifiable intangibles and goodwill. The adoption of SFAS 121 did
not have a material impact on the Company's financial position or the results of
its operations.
REVENUE AND CREDIT RISK
Sales are recognized at the time of shipment. The Company grants credit to
its customers based on an evaluation of the customers' financial condition, and
generally, collateral is not required. Credit losses have traditionally been
minimal and within management's expectations.
NET INCOME PER SHARE
Net income per share has been computed using the weighted average number of
common shares and dilutive common stock equivalents outstanding during the
periods presented. Common stock equivalents result from outstanding options to
purchase common stock.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"),
which is required to be initially adopted by the Company for its reporting
period ending December 31, 1997. At that time, the Company will be required to
change the method currently used to compute net income per share and to restate
all prior periods. Under the new requirements for calculating primary net income
per share, the dilutive effect of stock options will be excluded. The impact is
expected to result in no change to reported net income per share for the fiscal
year ended September 30, 1994, an increase in primary net income per share for
the fiscal years ended September 30, 1995 and 1996 of $.01 and $.05 per share,
respectively, and the nine month periods ended June 30, 1996 and 1997 of $.05
and $.02 per share, respectively.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"), which is effective for the year
F-8
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ending September 30, 1997. SFAS 123 allows companies to either account for
stock-based compensation under the new provisions of SFAS 123 or under the
provisions of Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES ("APB 25"), but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of SFAS
123 had been adopted. The Company has continued accounting for its stock-based
compensation in accordance with the provisions of APB 25.
FINANCIAL INSTRUMENTS
The Company periodically uses forward exchange contracts to hedge certain
transactions denominated in foreign currencies. Unrealized gains and losses on
forward contracts are deferred and offset against foreign exchange gains or
losses on the underlying hedged item. At September 30, 1996 and June 30, 1997,
the Company had no material forward exchange contracts outstanding.
2. FINANCIAL STATEMENT DETAILS
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Finished goods.............................................. $ 7,107 $ 7,852 $ 7,124
Work-in-progress............................................ 3,448 5,639 3,990
Materials................................................... 7,373 5,817 7,088
--------- --------- -----------
$ 17,928 $ 19,308 $ 18,202
--------- --------- -----------
--------- --------- -----------
</TABLE>
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Building and improvements................................... $ 5,458 $ 5,324 $ 5,779
Fixtures and equipment...................................... 9,890 13,684 17,851
--------- --------- -----------
15,348 19,008 23,630
Less: accumulated depreciation.............................. (4,857) (6,814) (8,857)
--------- --------- -----------
$ 10,491 $ 12,194 $ 14,773
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-9
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
2. FINANCIAL STATEMENT DETAILS (CONTINUED)
Intangible assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Goodwill.................................................... $ 4,171 $ 4,171 $ 4,171
Covenant not to compete..................................... 1,390 1,390 1,390
--------- --------- -----------
5,561 5,561 5,561
Less: accumulated amortization.............................. (1,110) (1,694) (2,137)
--------- --------- -----------
$ 4,451 $ 3,867 $ 3,424
--------- --------- -----------
--------- --------- -----------
</TABLE>
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Other....................................................... $ 7,752 $ 6,553 $ 8,433
Customer deposits........................................... 808 2,194 662
--------- --------- -----------
$ 8,560 $ 8,747 $ 9,095
--------- --------- -----------
--------- --------- -----------
</TABLE>
3. RECAPITALIZATION TRANSACTIONS
On June 11, 1997, the Company completed the following transactions (the
Recapitalization Transactions): (i) the Company sold an aggregate of 2,428,470
shares of its Common Stock, representing 49.7% of the Common Stock outstanding
following the Recapitalization Transactions, to DLJ Merchant Banking Partners
II, L.P. and its affiliates and Green Equity Investors II, L.P. and its
affiliates for an aggregate purchase price of $43.5 million, less related costs
of $644,000 (the New Equity Investment); (ii) the Company issued $85 million
aggregate principal amount of 10 1/8% Senior Subordinated Notes maturing June
15, 2007 (the Notes) (Note 6); (iii) the Company incurred indebtedness of $25
million under a five year and six month term loan facility and entered into a
five year and six month revolving credit facility providing for borrowings of up
to $20 million (the New Credit Agreement) (Note 6); (iv) the Company incurred
aggregate debt issuance costs of $4.3 million in connection with the issuance of
the Notes and with entering the New Credit Agreement; (v) the Company used the
net proceeds from the New Equity Investment, the issuance of the Notes and the
New Credit Agreement to repurchase an aggregate of 8,513,610 shares of Common
Stock from existing stockholders for an aggregate of $152.5 million and to make
cash payments upon surrender of stock options by employees in an aggregate
amount of $7.1 million (Note 9). Such existing stockholders retained 50.3% of
the shares of Common Stock outstanding following the Recapitalization
Transactions.
4. STRATEGIC ALLIANCE AND PURCHASE AND SALE OF BUSINESS
In April 1996, the Company entered into a Strategic Alliance with Yokogawa
Electric Corporation (Yokogawa), a leading Japanese process control and test and
measurement company. Under terms of the Strategic Alliance, Yokogawa acquired
all of the outstanding shares of the Company's Japanese subsidiary
F-10
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
4. STRATEGIC ALLIANCE AND PURCHASE AND SALE OF BUSINESS (CONTINUED)
for 10 million Japanese Yen (approximately $93,000) and 12% of the Company's
Common Stock from certain of the Company's stockholders. There was no
significant gain or loss on the sale of the Japanese subsidiary. Additionally,
Yokogawa will distribute the Company's products in Japan and Yokogawa and the
Company will collaborate to develop new products for the communications test
markets worldwide. In connection with the June 1997 Recapitalization
Transactions (Note 3), the Company repurchased a portion of the Common Stock
owned by Yokogawa, reducing Yokogawa's ownership of the outstanding Common Stock
to 5.8%.
In October 1995, the Company sold its Industrial Measurement Instruments
(IMI) product line to a third party for $502,000, resulting in a gain of
$56,000. The Company received $310,000 cash on the closing date. The remaining
proceeds were being paid under the terms of two promissory notes which were
fully repaid in June 1997 ($150,000 was outstanding at September 30, 1996).
Under the terms of the sale agreement, the Company is entitled to receive
royalties from the buyer based on its sales of IMI products for four years
following the closing date. The Company received royalties aggregating $92,000
in fiscal 1996, and $57,000 and $69,000 in the nine months ended June 30, 1996
and 1997, respectively.
In October 1994, the Company acquired certain worldwide assets and
liabilities of the communications test division of Schlumberger for
approximately $16.1 million (the "Schlumberger Acquisition"). Of the total
purchase price, $13.0 million was paid in cash on the closing date and an
additional $2.1 million was paid in cash in April 1995. The remaining balance of
5,167,000 French francs (approximately $900,000 at June 30, 1997) will be paid
under terms of a promissory note due in January 1998 (Note 6). The acquisition
was accounted for as a purchase and the assets and liabilities of the acquired
business were recorded at their estimated fair values, including goodwill of
$4.2 million. Additionally, $4.2 million was accrued as an estimate of the costs
that would be incurred to restructure and integrate the acquired business into
the Company, of which $3.4 million had been spent as of September 30, 1996 and
June 30, 1997 and $754,000 was included in other current liabilities in the
accompanying balance sheet at September 30, 1996 ($739,000 as of June 30, 1997).
In connection with this transaction, Schlumberger purchased 57,600 shares of the
Company's Common Stock for $3.0 million in cash. The Company repurchased these
shares in September 1995 for $3.2 million in cash.
5. SALE AND LEASEBACK FINANCING
To raise funds for the Schlumberger Acquisition, in October 1994, the
Company entered into a sale and leaseback financing whereby it sold its facility
in Indianapolis to a third party investor for $4.5 million, resulting in a
charge to income of $1.8 million, representing the excess of the net book value
of the property over the net proceeds received. The Company simultaneously
entered a Master Lease Agreement with the buyer, under which the Company leased
back the facility for a period of 20 years for an annual rental $473,000,
subject to annual adjustments based on the change in the consumer price index,
not to exceed 3.0% per annum. In December 1994, the Company subleased a portion
of this facility to a third party for five years for an annual base rental and
common area expense reimbursement of $387,000. Because of the significance of
the sublease in relation to the Company's master lease of the facility,
generally accepted accounting principles require that the transaction be
recorded as a financing transaction, whereby the building remains on the
Company's balance sheet in an amount equal to the net proceeds from the sale and
an offsetting long-term financing obligation has been recorded.
F-11
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS
The Company's U.S. subsidiary had a Business Loan Agreement (Agreement) with
a bank providing for revolving line of credit borrowings of up to $4.0 million.
This Agreement was terminated in June 1997. The Company had no borrowings under
this agreement as of September 30, 1996.
The Company's subsidiaries in the United Kingdom, France, Germany and
Austria also have agreements with banks providing for short-term revolving
advances and overdraft facilities in an aggregate total amount of approximately
$6.5 million. In addition, the bank agreements with such subsidiaries also
provide for issuance of letters of credit and bank guarantees in an aggregate
total amount of approximately $4.0 million. At September 30, 1996 and June 30,
1997, aggregate amounts of $786,000 and $3.4 million, respectively, had been
borrowed under these facilities. Revolving borrowings under these agreements
bear interest at variable rates ranging from 4.863% to 8.25% as of September 30,
1996 (4.20% to 8.40% as of June 30, 1997). These bank agreements also provide
for long-term borrowings (see table below) and are generally secured by the
assets of the local subsidiary and the guarantee of the Company. Most of these
agreements do not have stated expiration dates, but are cancellable by the banks
at any time. The Company's bank agreements also generally provide for the
issuance of letters of credit and bank guarantees. At September 30, 1996 and
June 30, 1997, the Company was contingently liable for outstanding letters of
credit and bank guarantees aggregating $1.3 million and $2.1 million,
respectively. Borrowings under the Company's revolving bank agreements have been
classified as "Notes payable to banks" in the accompanying consolidated balance
sheets due to the short-term nature of the revolving advances taken under these
agreements.
Long-term obligations are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Senior Subordinated Notes issued in connection with
Recapitalization Transactions (Note 3); total principal
balance due June 15, 2007; interest payable semi-annually on
June 15 and December 15 at 10.125%; secured by guarantee of
Company's subsidiaries in the United States.................. $ -- $ -- $ 85,000
Term Loan payable to banks obtained in connection with
Recapitalization Transactions (Note 3); payable in quarterly
installments commencing September 15, 1998; interest payable
at optional rates (8.1875% at June 30, 1997); secured by the
Company's U.S. assets and a pledge of 65% of the stock of the
Company's foreign subsidiaries............................... -- -- 25,000
Unsecured promissory note issued in connection with
Schlumberger Acquisition (Note 4); total principal balance
due January 1998; interest payable quarterly at PIBOR plus
0.5% (4.063% at September 30, 1996 and 3.871% at June 30,
1997)........................................................ 1,050 1,003 887
</TABLE>
F-12
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Financing obligation recorded in connection with sale and
leaseback of real property (Note 5); payable in monthly
installments of $39, including interest at 9.30%, through
October 2014; secured by Master Lease Agreement of
manufacturing facility....................................... 4,252 4,165 4,096
Term note payable to French bank; repaid in April 1996......... 2,033 -- --
Term note payable to German bank; repaid in May 1996........... 1,086 -- --
--------- --------- ----------
8,421 5,168 114,983
Less current maturities........................................ (86) (95) (988)
--------- --------- ----------
Long-term obligations, less current maturities................. $ 8,335 $ 5,073 $ 113,995
--------- --------- ----------
--------- --------- ----------
</TABLE>
As of September 30, 1996, the future annual principal payments on long-term
obligations outstanding at September 30, 1996 were as follows for fiscal years
ending September 30: 1997 -- $95,000; 1998 -- $1,106,000; 1999 -- $112,000; 2000
- -- $123,000; 2001 -- $135,000 and thereafter -- $3,597,000.
In connection with the Recapitalization Transactions (Note 3), the Company
issued $85 million aggregate principal amount of Senior Subordinated Notes
(Notes) pursuant to an Indenture (the Indenture) between the Company and the
Bank of New York, as trustee. The Notes bear interest at 10.125%, payable
semi-annually on each June 15 and December 15 commencing December 15, 1997. The
total principal balance of the Notes is due June 15, 2007. On or after June 15,
2002, the Notes will be redeemable at the option of the Company, in whole or in
part, at the following redemption prices (expressed as percentages of principal
amount) plus accrued and unpaid interest and liquidated damages, if any:
105.063% if redeemed during the twelve-month period beginning on June 15, 2002;
103.375% if redeemed during the twelve-month period beginning on June 15, 2003;
101.688% if redeemed during the twelve-month period beginning on June 15, 2004;
and 100% thereafter. Notwithstanding the foregoing, during the first three years
following the issue date of the Notes, the Company may redeem up to 33 1/3% of
the aggregate principal amount of the Notes with the proceeds of one or more
Public Equity Offerings (as defined in the Indenture) at a redemption price of
110.125% of the principal amount thereof, in each case plus accrued and unpaid
interest and liquidated damages, if any. The Notes are guaranteed on a senior
subordinated basis by the Company's current and future subsidiaries in the
United States. The Indenture requires the Company to comply with various
affirmative, negative, and financial covenants. The Company was in compliance
with all such covenants at June 30, 1997.
Also in connection with the Recapitalization Transactions, the Company
entered into a New Credit Agreement (New Credit Agreement) with a group of five
lending banks (the Lenders) including DLJ Capital Funding, Inc. as Syndication
Agent and Fleet National Bank as Administrative Agent. The New Credit Agreement
provided for a $25 million five year and six month term loan (Term Loan)
borrowed by the Company on June 11, 1997. The Term Loan is repayable in
quarterly installments on the 15th day of each September, December, March and
June commencing September 15, 1998. Total principal payments due in each future
fiscal year are as follows: 1998--$1,000,000; 1999--$4,250,000;
2000--$5,250,000;
F-13
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED)
2001--$6,250,000; 2002--$6,750,000 and; 2003--$1,500,000. The Term Loan may be
prepaid at any time and is subject to mandatory prepayments if the Company
generates Excess Cash Flow (as defined in the New Credit Agreement). The New
Credit Agreement also provides for a five year and six month revolving credit
facility in the amount of $20 million, of which up to $7.5 million may be
borrowed in British pounds, French francs or Deutsche marks. The Company has no
borrowings outstanding under the revolving credit facility. All borrowings under
the New Credit Agreement bear interest, at the option of the Company, at either
(i) the Base Rate (as defined in the New Credit Agreement) plus 1.5%, or (ii) at
the reserve adjusted Euro-Dollar Rate (as defined in the New Credit Agreement)
plus 2.50%, subject to reduction upon the achievement of certain performance
levels and/or credit ratios. The Term Loan currently bears interest at 8.1875%
through August 14, 1997, with interest payable at the end of each one-month
period. The New Credit Agreement is secured by all of the Company's assets in
the United States (approximately $52.5 million at June 30, 1997) and the pledge
of 100% of the stock of its subsidiaries in the United States and 65% of the
stock of its foreign subsidiaries. The New Credit Agreement requires the Company
to comply with various affirmative, negative, and financial covenants. The
Company was in compliance with all such covenants at June 30, 1997.
The Company incurred aggregate debt issuance costs of $4.3 million in
connection with the issuance of the Notes and with entering into the New Credit
Agreement. Such costs have been deferred and will be amortized over the term of
the related debt using the interest method.
7. EMPLOYEE RETIREMENT SAVINGS PLAN
The Company has a tax deferred retirement savings plan under Section 401(k)
of the Internal Revenue Code whereby U.S. employees may defer a portion of their
compensation through payroll deductions as contributions to the Plan. The
Company may match a portion of the savings contribution as prescribed in the
Plan. The Company's contributions may be made each year out of accumulated
profits in cash, and are at the discretion of the Board of Directors.
Contributions by the Company to the Plan were $211,000, $221,000 and $215,000
for the years ended September 30, 1994, 1995 and 1996, respectively, and
$170,000 and $213,000 for the nine months ended June 30, 1996 and 1997,
respectively.
8. LEASE COMMITMENTS
The Company rents certain office and plant facilities under operating leases
which expire at various dates through 2006, except for a land lease in the U.K.
extending to 2103. The leases generally provide that the Company pay the taxes,
insurance and maintenance expenses related to the leased property. Certain
leases include renewal options and/or options to purchase the leased property.
The Company also rents equipment and other facilities on a month-to-month basis.
Total rent expense was $1.2 million, $2.6 million and $2.6 million for the years
ended September 30, 1994, 1995 and 1996, respectively, and $2.0 million for each
of the nine month periods ended June 30, 1996 and 1997, respectively.
In 1991, the Company entered into a sale/leaseback arrangement for its San
Diego manufacturing facility with an affiliate of a major stockholder. The lease
runs through June 2006 with the minimum annual rental of $570,000, subject to
annual CPI adjustments. The Company's gain on the transaction was deferred and
is being amortized over the original ten-year lease term.
F-14
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
8. LEASE COMMITMENTS (CONTINUED)
At September 30, 1996, the annual future minimum lease payments under
noncancellable operating leases and the future minimum annual lease receipts
under noncancellable subleases are as follows:
<TABLE>
<CAPTION>
LEASE LEASE
PAYMENTS RECEIPTS
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1997................................................................... $ 2,160 $ 345
1998................................................................... 1,754 345
1999................................................................... 1,051 345
2000................................................................... 995 58
2001................................................................... 822 --
Later years............................................................ 3,704 --
----------- -----------
Total minimum lease payments........................................... $ 10,486 $ 1,093
----------- -----------
----------- -----------
</TABLE>
9. STOCKHOLDERS' EQUITY
Prior to June 11, 1997, the Company had two classes of Common Stock
outstanding, Common Stock and Class B Common Stock. The rights and preferences
of both classes of common stock were identical, except that holders of Common
Stock were entitled to one vote per share and holders of Class B Common Stock
were entitled to ten votes per share. The Class B Common Stock was convertible,
at the holder's option, into shares of Common Stock on a share for share basis.
Total common stock authorized and issued and outstanding in each period
presented in the accompanying consolidated financial statements included two
million shares of Class B Common Stock through June 11, 1997. In connection with
the Recapitalization Transactions (Note 3), all shares of Class B Common Stock
were repurchased by the Company and the Company's Certificate of Incorporation
was amended to eliminate the Class B Common Stock. The Company's Certificate of
Incorporation was also amended effective June 11, 1997 to effect a ten-for-one
stock split of its common stock, which was authorized by the Company's Board of
Directors on May 30, 1997. All share and per share amounts and stock option data
in the accompanying consolidated financial statements have been restated to
retroactively reflect the stock split.
In connection with Yokogawa's purchase of shares of the Company's Common
Stock (Note 4), the Company and its stockholders entered certain agreements with
Yokogawa which provided Yokogawa with certain rights of first refusal through
April 1999 if shares of the Company's Common Stock were offered for sale in
certain circumstances defined by the agreements. Yokogawa was also granted the
right to appoint one member to the Company's Board of Directors. In connection
with the Recapitalization Transactions (Note 3), all such preferential rights of
Yokogawa were terminated effective June 11, 1997.
In accordance with the Company's 1992 Nonqualified Stock Option Plan,
options to purchase an aggregate of up to one million shares of Common Stock may
be issued to employees at an exercise price equal to the fair value of the
shares on the date of grant. At September 30, 1994, 1995, 1996 and at June 30,
1997, options to purchase 560,000, 786,000, 843,000 and 322,400 common shares,
respectively, had been granted and were outstanding at exercise prices ranging
from $1.25 to $12.50 per share. Options to purchase an aggregate of 116,000
shares were exercisable at September 30, 1996 at an exercise price of $1.25 per
share and 139,150 shares were exercisable at June 30, 1997 at exercise prices
ranging from $1.25 to $12.50 per share. All options expire on the earlier of
April 28, 2002, or 90 days after termination of
F-15
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
employment. Prior to the Recapitilization Transactions (Note 3), options to
purchase 805,000 common shares had been issued and were outstanding. In
connection with the Recapitalization Transactions, the Company accelerated the
vesting of these outstanding options such that 75% of each option holders'
options became fully vested and the Company offered to make cash payments to
each option holder as compensation for the surrender of all or a portion of such
vested options in a per share amount equal to the price paid to the selling
stockholders in the Recapitalization Transactions. Such surrendering option
holders were also required to pay a pro rata portion of the expenses incurred by
the selling stockholders. Holders of vested options to purchase 472,100 common
shares elected to surrender such options in exchange for payments aggregating
approximately $6.8 million. The amount of such payments, and related employer
expenses of $237,000, were recorded as compensation expense in the accompanying
consolidated statement of income for the nine months ended June 30, 1997.
10. PROVISIONS FOR RESTRUCTURED OPERATIONS
In fiscal year 1996, the Company initiated a plan to restructure certain
corporate management functions, its European manufacturing, service and sales
activities and its San Diego manufacturing activities. The restructuring costs
primarily include expenses for employee severance and close down of certain
manufacturing operations. The restructuring plan is expected to be completed
during fiscal 1997. A provision for the restructuring of $1.8 million is
included in the accompanying consolidated statement of income for fiscal 1996
($188,000 for the nine months ended June 30, 1996).
F-16
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
11. INCOME TAXES
The provision for income taxes is comprised as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current.......................................................... $ -- $ 910 $ 2,677
Deferred......................................................... -- (910) (1,945)
--------- --------- ---------
-- -- 732
--------- --------- ---------
State:
Current.......................................................... 21 196 1,015
Deferred......................................................... -- (196) (498)
--------- --------- ---------
21 -- 517
--------- --------- ---------
Foreign:
Current.......................................................... 801 613 1,117
Deferred......................................................... -- 3 (1,401)
--------- --------- ---------
801 616 (284)
--------- --------- ---------
$ 822 $ 616 $ 965
--------- --------- ---------
--------- --------- ---------
</TABLE>
The current provisions for federal and state income tax are lower than the
amounts calculated using statutory rates, as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal income tax at statutory rate.......................... 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit................ 4.3 3.5 4.8
Foreign tax rate below federal statutory rate................. -- -- (1.4)
Benefit from foreign sales corporation........................ -- (4.1) (1.0)
Amortization of goodwill...................................... 2.4 2.5 0.8
Non-deductible expenses....................................... 0.3 0.5 0.3
Utilization of previously unbenefited loss carryforwards...... -- (3.0) --
----- ----- -----
41.0 33.4 37.5
Decrease in valuation allowance............................... (22.9) (16.7) (30.8)
----- ----- -----
Effective income tax rate..................................... 18.1% 16.7% 6.7%
----- ----- -----
----- ----- -----
</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 assets and liabilities as of September 30, 1996 and
1995 are set forth in the following table. A valuation allowance of $6.2 million
was recognized at September 30, 1995 as an offset to certain of the deferred tax
assets, as realization of such assets was
F-17
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
11. INCOME TAXES (CONTINUED)
uncertain. The valuation allowance was fully removed as of September 30, 1996,
since it is more likely than not that the deferred tax assets will be realized.
The significant components of deferred tax assets and liabilities at
September 30, result from:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventories........................................................... $ 1,127 $ 1,634
Accrued and unpaid expenses........................................... 897 1,521
Deferred income....................................................... 262 217
State taxes........................................................... -- 345
U.S. net operating loss and business credit carryforwards............. 1,832 --
Foreign net operating loss carryforwards.............................. 3,483 1,400
--------- ---------
Total deferred tax assets............................................... 7,601 5,117
Valuation allowance for deferred tax assets............................. (6,184) --
--------- ---------
1,417 5,117
Deferred tax liability--depreciation differences........................ (314) (171)
--------- ---------
Net deferred tax assets................................................. $ 1,103 $ 4,946
--------- ---------
--------- ---------
</TABLE>
As of September 30, 1996, the Company's French and German subsidiaries had
net operating loss carryforwards of approximately $2.3 million and $1.0 million,
respectively. The French carryforward will expire in 2000 if not previously
utilized and the German carryforward can be used indefinitely.
For the nine months ended June 30, 1996 and 1997, income taxes have been
provided based on the estimated annual effective rate applied to the pretax
income for the interim period.
F-18
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
12. GEOGRAPHIC INFORMATION
The Company operates in a single industry segment: the design, manufacture
and distribution of electronic test equipment and measurement tools. In the
schedule below, sales, income before provision for taxes and total assets are
reported based on the location of the Company's facilities. Intercompany
transfers are made at arm's length between the various geographic areas.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales:
United States:
Sales to unaffiliated domestic customers................. $ 42,981 $ 54,175 $ 62,069 $ 46,672 $ 44,925
Export sales............................................. 10,309 11,584 16,876 12,212 11,982
Interarea transfers...................................... 3,534 3,942 6,809 5,453 7,852
--------- --------- --------- --------- ---------
56,824 69,701 85,754 64,337 64,759
Europe:
Sales to unaffiliated customers.......................... 21,525 67,580 70,141 54,929 60,759
Interarea transfers...................................... 4,124 19,929 24,519 17,850 19,962
--------- --------- --------- --------- ---------
25,649 87,509 94,660 72,779 80,721
Asia:
Sales to unaffiliated customers.......................... -- 280 1,907 1,368 1,034
Interarea transfers...................................... -- 54 24 27 89
--------- --------- --------- --------- ---------
-- 334 1,931 1,395 1,123
Eliminations............................................... (7,658) (23,925) (31,352) (23,330) (27,903)
--------- --------- --------- --------- ---------
Consolidated sales......................................... $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income before provision for income taxes:
United States............................................ $ 2,613 $ 6,021 $ 17,711 $ 13,950 $ 10,144
Europe................................................... 3,053 (2,162) 3,033 2,986 1,958
Asia..................................................... -- (224) 724 697 (164)
Corporate expenses and eliminations........................ (1,134) 50 (7,028) (4,304) (4,759)
--------- --------- --------- --------- ---------
Consolidated income before provision for income taxes...... $ 4,532 $ 3,685 $ 14,440 $ 13,329 $ 7,179
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Assets:
United States............................................ $ 40,496 $ 51,609 $ 82,415 $ 71,770 $ 83,129
Europe................................................... 11,964 34,595 34,958 35,062 41,419
Asia..................................................... 176 935 1,258 1,288 1,463
Eliminations............................................. (17,931) (24,561) (49,779) (39,827) (46,048)
--------- --------- --------- --------- ---------
Consolidated total assets.................................. $ 34,705 $ 62,578 $ 68,852 $ 68,293 $ 79,963
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
F-19
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA
The Company's payment obligations under the Notes to be issued in the
Recapitalization Transactions are guaranteed by all of the Company's current and
future domestic subsidiaries (collectively, the "Subsidiary Guarantors"). Such
guarantees are full, unconditional and joint and several. Separate financial
statements of each of the Subsidiary Guarantors are not presented because the
Company's management has deemed that they would not be material to investors.
The following supplemental condensed consolidating financial data sets forth, on
an unconsolidated basis, balance sheets, statements of income and statements of
cash flows data for (i) the Company ("Wavetek Corporation"), (ii) the current
Subsidiary Guarantors and (iii) the Company's current foreign subsidiaries (the
"Foreign Subsidiaries"). The supplemental financial data reflects the
investments of Wavetek Corporation in the Subsidiary Guarantors and the Foreign
Subsidiaries using the equity method of accounting. Certain reclassifications
have been made to provide for uniform disclosure of all periods presented. The
reclassifications are not material.
F-20
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1995
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 2,256 $ 1,433 $ -- $ 3,689
Accounts receivable (less allowance for
doubtful accounts of $903)................ 822 10,209 18,289 (6,222) 23,098
Inventories................................. -- 7,829 10,835 (736) 17,928
Deferred income taxes....................... 187 308 -- -- 495
Other current assets........................ 46 288 1,158 -- 1,492
----------- ----------- ----------- ------------ -------------
Total current assets.......................... 1,055 20,890 31,715 (6,958) 46,702
Property and equipment, net................... 4,391 2,608 3,492 -- 10,491
Intangible assets, net........................ 3,757 576 138 (20) 4,451
Deferred income taxes......................... 876 49 -- (317) 608
Other assets.................................. 2,420 51 160 (2,305) 326
Investment in subsidiaries.................... 15,253 -- 25 (15,278) --
----------- ----------- ----------- ------------ -------------
Total assets.................................. $ 27,752 $ 24,174 $ 35,530 $ (24,878) $ 62,578
----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks...................... $ -- $ 4,533 $ 1,730 $ -- $ 6,263
Trade accounts payable...................... 974 7,239 10,297 (6,204) 12,306
Accrued compensation........................ 345 1,800 3,989 -- 6,134
Income taxes payable........................ -- 40 752 -- 792
Other current liabilities................... 2,694 1,119 4,765 (18) 8,560
Current maturities of long-term
obligations............................... 84 -- 2 -- 86
----------- ----------- ----------- ------------ -------------
Total current liabilities..................... 4,097 14,731 21,535 (6,222) 34,141
Long-term obligations, less current
maturities................................... 4,163 -- 6,477 (2,305) 8,335
Deferred income and other liabilities......... 76 945 3 (338) 686
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; authorized,
15,000 shares; issued and outstanding,
10,974 shares............................. 11 -- -- -- 11
Additional paid-in capital.................. 5,604 2,137 12,570 (14,707) 5,604
Retained earnings........................... 13,271 6,361 (5,585) (776) 13,271
Foreign currency translation adjustments.... 530 -- 530 (530) 530
----------- ----------- ----------- ------------ -------------
Total stockholders' equity.................... 19,416 8,498 7,515 (16,013) 19,416
----------- ----------- ----------- ------------ -------------
Total liabilities and stockholders' equity.... $ 27,752 $ 24,174 $ 35,530 $ (24,878) $ 62,578
----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ------------ -------------
</TABLE>
F-21
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1996
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 4,845 $ 1,281 $ -- $ 6,126
Accounts receivable (less allowance for
doubtful accounts of $2,023).............. 3,042 18,657 15,123 (15,956) 20,866
Inventories................................. (479) 6,277 14,496 (986) 19,308
Deferred income taxes....................... 2,660 1,845 -- -- 4,505
Other current assets........................ 6 148 1,034 -- 1,188
----------- ----------- ----------- ------------ -------------
Total current assets.......................... 5,229 31,772 31,934 (16,942) 51,993
Property and equipment, net................... 4,495 3,731 4,075 (107) 12,194
Intangible assets, net........................ 3,490 288 99 (10) 3,867
Deferred income taxes......................... 430 182 -- (171) 441
Other assets.................................. 281 196 83 (203) 357
Investment in subsidiaries.................... 32,492 -- 25 (32,517) --
----------- ----------- ----------- ------------ -------------
Total assets.................................. $ 46,417 $ 36,169 $ 36,216 $ (49,950) $ 68,852
----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks...................... $ -- $ -- $ 786 $ -- $ 786
Trade accounts payable...................... 6,168 7,027 14,701 (15,889) 12,007
Accrued compensation........................ 1,454 1,827 4,187 -- 7,468
Income taxes payable........................ -- 460 967 -- 1,427
Other current liabilities................... 1,883 1,884 5,047 (67) 8,747
Current maturities of long-term
obligations............................... 93 -- 2 -- 95
----------- ----------- ----------- ------------ -------------
Total current liabilities..................... 9,598 11,198 25,690 (15,956) 30,530
Long-term obligations, less current
maturities................................... 4,069 -- 1,207 (203) 5,073
Deferred income and other liabilities......... 62 625 45 (171) 561
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; authorized,
15,000 shares; issued and outstanding,
10,974 shares............................. 11 -- -- -- 11
Additional paid-in capital.................. 5,637 2,137 12,468 (14,605) 5,637
Retained earnings........................... 26,746 22,209 (3,488) (18,721) 26,746
Foreign currency translation adjustments.... 294 -- 294 (294) 294
----------- ----------- ----------- ------------ -------------
Total stockholders' equity.................... 32,688 24,346 9,274 (33,620) 32,688
----------- ----------- ----------- ------------ -------------
Total liabilities and stockholders' equity.... $ 46,417 $ 36,169 $ 36,216 $ (49,950) $ 68,852
----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ------------ -------------
</TABLE>
F-22
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF JUNE 30, 1997
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 3,542 $ 517 $ -- $ 4,059
Short-term investments, available for sale.. -- 3,000 -- -- 3,000
Accounts receivable (less allowance for
doubtful accounts of $2,054).............. (91) 17,181 21,968 (13,778) 25,280
Inventories................................. (479) 6,516 13,532 (1,367) 18,202
Deferred income taxes....................... 2,879 1,595 -- -- 4,474
Other current assets........................ 312 189 1,725 -- 2,226
----------- ----------- ----------- ------------ ------------
Total current assets.......................... 2,621 32,023 37,742 (15,145) 57,241
Property and equipment, net................... 5,445 4,426 4,946 (44) 14,773
Deferred debt issuance costs, net............. 4,293 -- -- -- 4,293
Intangible assets, net........................ 3,290 72 65 (3) 3,424
Deferred income taxes......................... (6) 43 -- -- 37
Other assets.................................. 230 46 104 (185) 195
Investment in subsidiaries.................... 30,646 -- 25 (30,671) --
----------- ----------- ----------- ------------ ------------
Total assets.................................. $ 46,519 $ 36,610 $ 42,882 (46,048) $ 79,963
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable to banks...................... $ -- $ -- $ 3,377 $ -- $ 3,377
Trade accounts payable...................... 2,872 10,031 16,711 (13,780) 15,834
Accrued compensation........................ 470 1,677 5,015 -- 7,162
Income taxes payable........................ (1,559) 2,008 1,572 -- 2,021
Other current liabilities................... 3,574 1,764 3,757 -- 9,095
Current maturities of long-term
obligations............................... 100 -- 888 -- 988
----------- ----------- ----------- ------------ ------------
Total current liabilities..................... 5,457 15,480 31,320 (13,780) 38,477
Long-term obligations, less current
maturities................................... 113,995 -- -- -- 113,995
Deferred income and other liabilities......... 36 393 216 (185) 460
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, par value $.01; authorized,
15,000 shares; issued and outstanding,
4,885 shares.............................. 49 -- -- -- 49
Additional paid-in capital.................. 43,748 2,137 15,064 (17,201) 43,748
Retained earnings (accumulated deficit)..... (116,660) 18,600 (3,612) (14,988) (116,660)
Foreign currency translation adjustments.... (106) -- (106) 106 (106)
----------- ----------- ----------- ------------ ------------
Total stockholders' equity (deficit).......... (72,969) 20,737 11,346 (32,083) (72,969)
----------- ----------- ----------- ------------ ------------
Total liabilities and stockholders' equity
(deficit).................................... $ 46,519 $ 36,610 $ 42,882 $ (46,048) $ 79,963
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-23
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Sales......................................... $ -- $ 56,824 $ 25,649 $ (7,658) $ 74,815
Cost of goods sold............................ 11 33,711 15,386 (7,735) 41,373
----------- ----------- ----------- ------------- ------------
Gross margin.................................. (11) 23,113 10,263 77 33,442
Operating expenses:
Marketing and selling....................... -- 11,577 4,852 -- 16,429
Research and development.................... -- 4,413 1,012 -- 5,425
General and administrative.................. 941 3,905 1,222 (11) 6,057
----------- ----------- ----------- ------------- ------------
941 19,895 7,086 (11) 27,911
----------- ----------- ----------- ------------- ------------
Operating income.............................. (952) 3,218 3,177 88 5,531
Non-operating income (expense):
Interest income............................. 300 45 46 (358) 33
Interest expense............................ (377) (613) (13) 358 (645)
Equity in net income of subsidiaries........ 4,937 -- -- (4,937) --
Other, net.................................. (198) (37) (158) 6 (387)
----------- ----------- ----------- ------------- ------------
4,662 (605) (125) (4,931) (999)
----------- ----------- ----------- ------------- ------------
Income before provision for income taxes...... 3,710 2,613 3,052 (4,843) 4,532
Provision for income taxes.................... -- 21 801 -- 822
----------- ----------- ----------- ------------- ------------
Net income.................................... $ 3,710 $ 2,592 $ 2,251 $ (4,843) $ 3,710
----------- ----------- ----------- ------------- ------------
----------- ----------- ----------- ------------- ------------
</TABLE>
F-24
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales......................................... $ -- $ 69,701 $ 87,843 $ (23,925) $ 133,619
Cost of goods sold............................ (301) 40,090 56,741 (23,881) 72,649
----------- ----------- ----------- ------------ ------------
Gross margin.................................. 301 29,611 31,102 (44) 60,970
Operating expenses:
Marketing and selling....................... (56) 14,092 18,550 -- 32,586
Research and development.................... (43) 4,193 7,946 -- 12,096
General and administrative.................. 2,066 3,192 4,143 (10) 9,391
----------- ----------- ----------- ------------ ------------
1,967 21,477 30,639 (10) 54,073
----------- ----------- ----------- ------------ ------------
Operating income.............................. (1,666) 8,134 463 (34) 6,897
Non-operating income (expense):
Interest income............................. 147 11 191 (259) 90
Interest expense............................ (495) (232) (722) 259 (1,190)
Loss on sale and leaseback financing........ -- (1,824) -- -- (1,824)
Equity in net income of subsidiaries........ 1,137 -- -- (1,137) --
Other, net.................................. 2,159 (68) (2,318) (61) (288)
----------- ----------- ----------- ------------ ------------
2,948 (2,113) (2,849) (1,198) (3,212)
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes...... 1,282 6,021 (2,386) (1,232) 3,685
Provision for income taxes.................... (1,837) 1,597 856 -- 616
----------- ----------- ----------- ------------ ------------
Net income.................................... $ 3,119 $ 4,424 $ (3,242) $ (1,232) $ 3,069
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-25
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales......................................... $ -- $ 85,754 $ 96,592 $ (31,353) $ 150,993
Cost of goods sold............................ 616 42,141 60,774 (31,167) 72,364
----------- ----------- ----------- ------------ ------------
Gross margin.................................. (616) 43,613 35,818 (186) 78,629
Operating expenses:
Marketing and selling....................... 959 16,215 19,023 -- 36,197
Research and development.................... (52) 5,451 7,518 -- 12,917
General and administrative.................. 3,374 4,323 3,927 (12) 11,612
Provision for restructuring operations...... 1,832 -- -- -- 1,832
----------- ----------- ----------- ------------ ------------
6,113 25,989 30,468 (12) 62,558
----------- ----------- ----------- ------------ ------------
Operating income.............................. (6,729) 17,624 5,350 (174) 16,071
Non-operating income (expense):
Interest income............................. 142 76 83 (134) 167
Interest expense............................ (388) (77) (431) 134 (762)
Equity in income of subsidiaries............ 17,952 -- -- (17,952) --
Other, net.................................. 483 88 (1,245) (362) (1,036)
----------- ----------- ----------- ------------ ------------
18,189 87 (1,593) (18,314) (1,631)
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes...... 11,460 17,711 3,757 (18,488) 14,440
Provision for income taxes.................... (2,015) 1,863 1,117 -- 965
----------- ----------- ----------- ------------ ------------
Net income.................................... $ 13,475 $ 15,848 $ 2,640 $ (18,488) $ 13,475
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-26
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales......................................... $ -- $ 64,337 $ 74,174 $ (23,330) $ 115,181
Cost of goods sold............................ 232 32,104 46,651 (23,208) 55,779
----------- ----------- ----------- ------------ ------------
Gross margin.................................. (232) 32,233 27,523 (122) 59,402
Operating expenses:
Marketing and selling....................... 722 11,948 14,139 -- 26,809
Research and development.................... (42) 3,856 5,602 -- 9,416
General and administrative.................. 3,067 2,653 2,944 (9) 8,655
Provision for restructuring operations...... 188 -- -- -- 188
----------- ----------- ----------- ------------ ------------
3,935 18,457 22,685 (9) 45,068
----------- ----------- ----------- ------------ ------------
Operating income.............................. (4,167) 13,776 4,838 (113) 14,334
Non-operating income (expense):
Interest income............................. 71 38 54 (64) 99
Interest expense............................ (291) (77) (312) 64 (616)
Equity in net income of subsidiaries........ 13,236 -- -- (13,236) --
Other, net.................................. 558 213 (897) (362) (488)
----------- ----------- ----------- ------------ ------------
13,574 174 (1,155) (13,598) (1,005)
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes...... 9,407 13,950 3,683 (13,711) 13,329
Provision for income taxes.................... (3,029) 3,088 834 -- 893
----------- ----------- ----------- ------------ ------------
Net income.................................... $ 12,436 $ 10,862 $ 2,849 $ (13,711) $ 12,436
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-27
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales......................................... $ -- $ 64,759 $ 81,844 $ (27,903) $ 118,700
Cost of goods sold............................ (244) 29,351 53,956 (27,584) 55,479
------ ----------- ----------- ------------ ------------
Gross margin.................................. 244 35,408 27,888 (319) 63,221
Operating expenses:
Marketing and selling....................... 700 13,159 14,054 -- 27,913
Research and development.................... (36) 7,323 4,348 -- 11,635
General and administrative.................. 1,661 2,813 3,411 (7) 7,878
Stock option compensation related to
recapitalization.......................... 1,926 2,318 2,817 -- 7,061
------ ----------- ----------- ------------ ------------
4,251 25,613 24,630 (7) 54,487
------ ----------- ----------- ------------ ------------
Operating income.............................. (4,007) 9,795 3,258 (312) 8,734
Non-operating income (expense):
Interest income............................. 76 221 32 (75) 254
Interest expense............................ (861) -- (162) 75 (948)
Equity in net income of subsidiaries........ 7,259 -- -- (7,259) --
Other, net.................................. 345 128 (1,334) -- (861)
------ ----------- ----------- ------------ ------------
6,819 349 (1,464) (7,259) (1,555)
------ ----------- ----------- ------------ ------------
Income before provision for income taxes...... 2,812 10,144 1,794 (7,571) 7,179
Provision for income taxes.................... (1,639) 3,753 614 -- 2,728
------ ----------- ----------- ------------ ------------
Net income.................................... $ 4,451 $ 6,391 $ 1,180 $ (7,571) $ 4,451
------ ----------- ----------- ------------ ------------
------ ----------- ----------- ------------ ------------
</TABLE>
F-28
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................... $ (760) $ 4,734 $ 2,473 $ -- $ 6,447
INVESTING ACTIVITIES
Proceeds from sale of business................ 946 -- -- -- 946
Purchase of property and equipment............ (14) (1,038) (280) -- (1,332)
Other investing activities.................... 19 172 248 -- 439
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) investing
activities................................... 951 (866) (32) -- 53
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term obligations........................ -- 25,475 295 -- 25,770
Principal payments on revolving lines of
credit and long-term obligations............. (450) (25,075) (12) -- (25,537)
Return of capital to stockholders............. (6,958) -- -- -- (6,958)
Return of capital from subsidiary............. 3,000 (3,000) -- -- --
Proceeds of loans from stockholders........... 860 4,000 -- -- 4,860
Repayment of loans from stockholders.......... (500) (4,000) -- -- (4,500)
Loans from subsidiary to Wavetek
Corporation.................................. 3,836 (3,836) -- -- --
Other financing activities.................... -- -- (2) -- (2)
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities................................... (212) (6,436) 281 -- (6,367)
Effect of exchange rate changes on cash and
cash equivalents............................. -- -- 161 -- 161
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. (21) (2,568) 2,883 -- 294
Cash and cash equivalents at beginning of
year......................................... 3 2,886 624 -- 3,513
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of
year......................................... $ (18) $ 318 $ 3,507 $ -- $ 3,807
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-29
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities..... $ 2,248 $ 6,675 $ 3,625 $ -- $ 12,548
INVESTING ACTIVITIES
Purchase of business, net of seller
financing.................................... (2,057) (1,114) (14,514) -- (17,685)
Purchase of property and equipment............ (132) (1,547) (1,241) -- (2,920)
Other investing activities.................... (89) 30 281 -- 222
----------- ----------- ----------- ------------ ------------
Net cash used in investing activities......... (2,278) (2,631) (15,474) -- (20,383)
FINANCING ACTIVITIES
Issuance of common shares for cash............ 7,595 -- -- -- 7,595
Repurchase of common shares for cash.......... (3,200) -- -- -- (3,200)
Proceeds from sale and leaseback financing.... -- 4,321 -- -- 4,321
Proceeds from revolving lines of credit and
long-term obligations........................ -- 24,428 7,027 -- 31,455
Principal payments on revolving lines of
credit and long-term obligations............. (71) (29,395) (2,663) -- (32,129)
Return of capital to stockholders.............
Dividends from subsidiaries to Wavetek
Corporation.................................. 7,497 (4,000) (3,497) -- --
Proceeds of loans from stockholders...........
Repayment of loans from stockholders.......... (360) -- -- -- (360)
Loans from Wavetek Corporation to
subsidiaries................................. (2,305) -- 2,305 -- --
Capital contributions from Wavetek Corporation
to subsidiaries.............................. (6,568) -- 6,568 -- --
Repayment of loans from subsidiaries to
Wavetek Corporation.......................... (2,540) 2,540 -- -- --
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities................................... 48 (2,106) 9,740 -- 7,682
Effect of exchange rate changes on cash and
cash equivalents............................. -- -- 35 -- 35
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. 18 1,938 (2,074) -- (118)
Cash and cash equivalents at beginning of
year......................................... (18) 318 3,507 -- 3,807
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of
year......................................... $ -- $ 2,256 $ 1,433 $ -- $ 3,689
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-30
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities..... $ 1,285 $ 9,252 $ 4,539 $ -- $ 15,076
INVESTING ACTIVITIES
Proceeds from sale of business................ 93 310 (65) -- 338
Purchase of property and equipment............ (236) (2,631) (1,677) -- (4,544)
Other investing activities.................... 107 191 (42) -- 256
----------- ----------- ----------- ------------ ------------
Net cash used in investing activities......... (36) (2,130) (1,784) -- (3,950)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term obligations........................ -- 11,713 3,219 -- 14,932
Principal payments on revolving lines of
credit and long-term obligations............. (85) (16,246) (7,244) -- (23,575)
Dividends from subsidiaries to Wavetek
Corporation.................................. 553 -- (553) -- --
Loans from Wavetek Corporation to
subsidiaries................................. (3,819) -- 3,819 -- --
Repayment of loans from Wavetek Corporation to
subsidiaries................................. 2,102 -- (2,102) -- --
----------- ----------- ----------- ------------ ------------
Net cash used in financing activities......... (1,249) (4,533) (2,861) -- (8,643)
Effect of exchange rate changes on cash and
cash equivalents............................. -- -- (46) -- (46)
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. -- 2,589 (152) -- 2,437
Cash and cash equivalents at beginning of
year......................................... -- 2,256 1,433 -- 3,689
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of
year......................................... $ -- $ 4,845 $ 1,281 $ -- $ 6,126
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-31
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................... $ 612 $ 4,843 $ 4,976 $ -- $ 10,431
INVESTING ACTIVITIES
Proceeds from sale of business................ -- 310 28 -- 338
Purchase of property and equipment............ (713) (1,522) (972) -- (3,207)
Other investing activities.................... 14 216 42 -- 272
----------- ----------- ----------- ------------ ------------
Net cash used in investing activities......... (699) (996) (902) -- (2,597)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term obligations........................ -- 11,713 2,611 -- 14,324
Principal payments on revolving lines of
credit and long-term obligations............. (63) (16,246) (5,493) -- (21,802)
Loans from Waveteck Corporation to
subsidiaries (2,505) -- 2,505 -- --
Repayment of loans from Wavetek Corporation to
subsidiaries................................. 2,102 -- (2,102) -- --
Dividends from subsidiary to Wavetek
Corporation.................................. 553 -- (553) -- --
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities................................... 87 (4,533) (3,032) -- (7,478)
Effect of exchange rate changes on cash and
cash equivalents............................. -- -- (124) -- (124)
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. -- (686) 918 -- 232
Cash and cash equivalents at beginning of
period....................................... -- 2,256 1,433 -- 3,689
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of period.... $ -- $ 1,570 $ 2,351 $ -- $ 3,921
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-32
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WAVETEK SUBSIDIARY FOREIGN
CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................... $ (7,307) $ 13,102 $ 1,236 -- $ 7,031
INVESTING ACTIVITIES
Purchase of short-term investments............ -- (3,000) -- -- (3,000)
Purchase of property and equipment............ (1,179) (1,565) (2,040) -- (4,784)
Other investing activities.................... 25 160 37 -- 222
----------- ----------- ----------- ------------ ------------
Net cash used in investing activities......... (1,154) (4,405) (2,003) -- (7,562)
FINANCING ACTIVITIES
Issuance of common shares for cash............ 42,856 -- -- -- 42,856
Repurchase of common shares and stock options
for cash..................................... (152,564) -- -- -- (152,564)
Proceeds from revolving lines of credit and
long-term obligations........................ 110,000 -- 4,144 -- 114,144
Principal payments on revolving lines of
credit and long-term obligations............. (68) -- (1,421) -- (1,489)
Debt issuance costs........................... (4,326) -- -- -- (4,326)
Dividends from subsidiaries to Wavetek
Corporation.................................. 11,304 (10,000) (1,304) -- --
Capital contributions from Wavetek Corporation
to subsidiaries.............................. (2,578) -- 2,578 -- --
Repayment of loans from Wavetek Corporation to
subsidiaries................................. 3,837 -- (3,837) -- --
----------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities................................... 8,461 (10,000) 160 -- (1,379)
Effect of exchange rate changes on cash and
cash equivalents............................. -- -- (157) -- (157)
----------- ----------- ----------- ------------ ------------
Increase (decrease) in cash and cash
equivalents.................................. -- (1,303) (764) -- (2,067)
Cash and cash equivalents at beginning of
period....................................... -- 4,845 1,281 -- 6,126
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of period.... $ -- $ 3,542 $ 517 $ -- $ 4,059
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-33
<PAGE>
WAVETEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997
AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
14. LEGAL CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. It is management's opinion that the likely
outcome of any such proceedings and claims would not have a material adverse
effect on the Company's future results of operations or financial position.
F-34
<PAGE>
WAVETEK CORPORATION
All tendered Old Notes, executed Letters of Transmittal, and other related
documents should be directed to the Exchange Agent. Requests for assistance and
for additional copies of the Prospectus, the Letter of Transmittal and other
related documents should be directed to the Exchange Agent.
The Exchange Agent
for the Exchange Offer is
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL:
<S> <C> <C>
The Bank of New York Confirm: (212) 815-5789 The Bank of New York
101 Barclay Street, 7E Facsimile: (212) 815-6339 101 Barclay Street
New York, NY 10286 Corporate Trust Services Window
Attn: Shilpa Privedi Ground Level
Reorganization Section New York, NY 10286
Attn: Shilpa Privedi
Reorganization Section
</TABLE>
<PAGE>
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
PROSPECTUS
, 1997
$85,000,000
[LOGO]
WAVETEK CORPORATION
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
The 10 1/8% Senior Subordinated Notes due 2007 (the "New Notes" or the
"Notes") mature on June 15, 2007. Interest on the Notes will be payable
semi-annually on June 15 and December 15 of each year, commencing on December
15, 1997. The Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after June 15, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined), if any, to the date of redemption. However, during the first three
years after the Issue Date (as defined), the Company may redeem up to an
aggregate of 33 1/3% of the aggregate principal amount of Notes originally
issued in the Offering with the proceeds of one or more Public Equity Offerings
(as defined) at a redemption price of 110.125% of the principal amount thereof,
in each case plus accrued and unpaid interest and Liquidated Damages, if any, to
the redemption date; PROVIDED, HOWEVER, that at least 66 2/3% of the aggregate
principal amount of Notes originally issued remains outstanding immediately
after such redemption. Upon the occurrence of a Change of Control (as defined),
holders of the Notes will have the right to require the Company to purchase all
or any part of their Notes at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase. See "Description of Notes."
The Notes are subordinated in right of payment to all existing and future
Senior Debt (as defined) of the Company, including borrowings under the New
Credit Agreement (as defined). The Notes are guaranteed (the "Subsidiary
Guarantees") by the Subsidiary Guarantors (as defined). The Subsidiary
Guarantees are subordinated in right of payment to all existing and future
Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit
Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New
Credit Agreement are effectively subordinated to the indebtedness of the
Company's foreign subsidiaries (as defined). The Indenture permits the Company
and its Subsidiaries to incur additional Indebtedness, including Senior Debt,
subject to certain limitations, and prohibits the incurrence of any Indebtedness
by the Company and the Subsidiary Guarantors that is senior to the Notes or the
Subsidiary Guarantees, as the case may be, and subordinated to Senior Debt of
the Company or Senior Debt of the Subsidiary Guarantors, as the case may be. See
"Description of Notes."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN
INVESTMENT IN THE NOTES.
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.
This Prospectus has been prepared for and is to be used by Donaldson, Lufkin
& Jenrette Securities Corporation in connection with offers and sales of the New
Notes related to market-making transactions, at prevailing market prices, at
prices related thereto or at negotiated prices. The Company will not receive any
of the proceeds of such sales. Donaldson, Lufkin & Jenrette Securities
Corporation may act as principal or agent in such transactions. The closing of
the Company's exchange offer resulting in the issue of the New Notes occurred on
, 1997. See "Plan of Distribution."
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
PLAN OF DISTRIBUTION
This Prospectus may be used by DLJ in connection with offers and sales of
the New Notes related to market-making transactions. DLJ may act as principal or
agent in such transactions, including as agent of the New Notes for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when they act as agent for both. Such sales will be
made at prevailing market prices at the time of sale, at prices related thereto
or at negotiated prices.
For a description of certain relationship and transactions between DLJ and
its affiliates and the Company, see "Management" and "Ownership of Capital
Stock."
DLJ has advised the Company that it currently intends to make a market in
the New Notes. However, DLJ is not obligated to do so and any market-making may
be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. There can be no assurance that an active trading market will
develop or be sustained. See "Risk Factors -- Absence of Public Market for the
Notes."
DLJ may not confirm sales to any accounts over which it exercises
discretionary authority without the prior specific written approval by the
customer.
The Company has agreed to indemnify DLJ against certain liabilities
including liabilities under the Securities Act.
<PAGE>
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS)
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.......................... 2
Summary........................................ 3
Risk Factors................................... 13
The Recapitalization Transactions.............. 19
Use of Proceeds................................ 19
The Exchange Offer............................. 19
Unaudited Pro Forma Consolidated Financial
Data......................................... 28
Selected Consolidated Financial Data........... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 36
Business....................................... 43
Management..................................... 57
Ownership of Capital Stock..................... 62
Certain Relationships and Related
Transactions................................. 64
Description of Notes........................... 65
Description of Other Indebtedness.............. 90
Validity of Notes.............................. 92
Independent Auditors........................... 92
Plan of Distribution........................... 92
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
WAVETEK CORPORATION
$85,000,000
10 1/8% SENIOR SUBORDINATED NOTES
DUE 2007
-------------------------------
PROSPECTUS
-------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law (the "DGCL") authorizes corporations to
limit or eliminate the personal liability of directors to the corporation and
its stockholders for monetary damages in connection with the breach of a
director's fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors must exercise an informed business
judgment based on all material information reasonably available to them. Absent
the limitation authorized by the DGCL, directors could be accountable to
corporations and their stockholders for monetary damages for conduct that does
not satisfy such duty of care. Although the DGCL does not change a director's
duty of care, it enables corporations to limit available relief to equitable
remedies such as injunction or rescission.
The Company's Certificate of Incorporation contains a provision permitted
under the Delaware General Corporation Law (the "DGCL") eliminating each
director's personal liability for monetary damages for breach of fiduciary duty
as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the DGCL as currently in effect at the
time. The Company's Bylaws authorize the Company to indemnify its present and
former directors, officers and employees against expenses, judgments, fines and
amounts paid in settlement if such person is made a party, or is threatened to
be made a party, to a legal proceeding by reason of the fact that such person is
or was a director, officer, employee or agent of the Company, or was serving in
such position at another company at the request of the Company. Such
indemnification is mandatory in certain circumstances and permissive in others,
subject to authorization by the Company's Board of Directors. In addition, the
Bylaws authorize the Company to advance litigation expenses to such person prior
to the final disposition of the legal proceeding.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of Torrey Investments Inc.
3.2 Certificate of Amendment to Certificate of Incorporation of Torrey Investments Inc. dated June 25,
1991.
3.3 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. dated January 27,
1993.
3.4 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. September 21,
1995.
3.5 Certificate of Ownership and Merger of Wavetek Corporation into Torrey Investments Inc. dated
September 21, 1995 (changing name of Torrey Investments Inc. to Wavetek Corporation).
3.6 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 9, 1997.
3.7 By-laws of Wavetek Corporation.
3.8 Certificate of Merger (restating the Certificate of Incorporation of Wavetek Corporation) of Torrey
Wavetek Acquisition Corporation into Wavetek Corporation dated June 28, 1991.
3.9 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 28, 1991
(changing the name of Wavetek Corporation to Wavetek U.S. Inc.).
3.10 By-laws of Wavetek U.S. Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
4.1 Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S. Inc. and The Bank of
New York, as Trustee.
4.2 Form of Notes (see Exhibit 4.1).
4.3 Form of Subsidiary Guarantee (see Exhibit 4.1).
4.4 A/B Exchange Registration Rights Agreement, dated as of June 11, 1997, between Wavetek Corporation
and Donaldson, Lufkin and Jenrette Securities Corporation.
5.1 Opinion of Sullivan & Cromwell regarding the validity of the securities being registered.
8.1 Opinion of Sullivan & Cromwell regarding certain federal income tax matters with respect to the
securities being registered.
10.1 Credit Agreement, dated as of June 11, 1997, among Wavetek Corporation, DLJ Capital Funding, Inc., as
Syndication Agent, Fleet National Bank, as Administrative Agent, and the lenders named therein.
10.2 Stockholders Agreement, dated as of June 11, 1997.
10.3 Stock Registration Rights Agreement, dated as of June 11, 1997.
12.1 Schedule Re: Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Sullivan & Cromwell (included in its opinions filed as Exhibits 5.1 and 8.1 to this
Registration Statement).
24.1 Powers of Attorney (set forth on the signature pages to this Registration Statement).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, etc.
99.4 Form of Letter to Clients and instructions thereto.
</TABLE>
ITEM 22. UNDERTAKING.
Each of the undersigned Registrants hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 plan's 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.
(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(d) 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.
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 provisions referred to in Item 20, 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 Act
and is, therefore, unenforceable. In the event 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 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, each of the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on this 28th day of July, 1997.
WAVETEK CORPORATION
By: /s/ TERENCE J. GOODING
-----------------------------------
WAVETEK U.S. INC.
By: /s/ TERENCE J. GOODING
-----------------------------------
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Terence J. Gooding and Vickie L. Capps, 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,
and 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 attorney-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 fully to all intents and purposes as he
might or could do in person, hereby notifying 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ------------------------------------ ----------------------
<C> <S> <C>
/s/ TERENCE J. GOODING Chairman of the Board, Chief July 28, 1997
---------------------------------------- Executive Officer of Wavetek
Terence J. Gooding Corporation; Chairman of the Board
of Wavetek, U.S. Inc.
/s/ DEREK T. MORIKAWA President, Chief Operating Officer July 28, 1997
---------------------------------------- and Director of Wavetek Corporation
Derek T. Morikawa
/s/ BEN J. CONSTANTINI Executive Vice President, Sales and July 28, 1997
---------------------------------------- Director of Wavetek Corporation
Ben J. Constantini
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- ------------------------------------ ----------------------
<C> <S> <C>
/s/ VICKIE L. CAPPS Treasurer, Secretary, Vice President July 28, 1997
---------------------------------------- and Chief Financial Officer
Vickie L. Capps (Principal Financial and Accounting
Officer) of Wavetek Corporation and
Wavetek U.S. Inc.
/s/ KENNETH BAKER Director of Wavetek Corporation July 28, 1997
----------------------------------------
Kenneth Baker
/s/ KENNETH D. MOELIS Director of Wavetek Corporation July 28, 1997
----------------------------------------
Kenneth D. Moelis
/s/ PETER J. NOLAN Director of Wavetek Corporation July 28, 1997
----------------------------------------
Peter J. Nolan
/s/ MALCOLM R. BATES Director of Wavetek Corporation July 28, 1997
----------------------------------------
Malcolm R. Bates
/s/ DAVID B. WILSON Director of Wavetek Corporation July 28, 1997
----------------------------------------
David B. Wilson
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of Torrey Investments Inc.
3.2 Certificate of Amendment to Certificate of Incorporation of Torrey Investments Inc. dated June 25,
1991.
3.3 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. dated January 27,
1993.
3.4 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. September 21,
1995.
3.5 Certificate of Ownership and Merger of Wavetek Corporation into Torrey Investments Inc. dated
September 21, 1995 (changing name of Torrey Investments Inc. to Wavetek Corporation).
3.6 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 9, 1997.
3.7 By-laws of Wavetek Corporation
3.8 Certificate of Merger (restating the Certificate of Incoporation of Wavetek Corporation) of Torrey
Wavetek Acquisition Corporation into Wavetek Corporation dated June 28, 1991.
3.9 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 28, 1991
(changing the name of Wavetek Corporation to Wavetek U.S. Inc.).
3.10 By-laws of Wavetek U.S. Inc.
4.1 Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S. Inc. and The Bank of
New York.
4.2 Form of Notes (see Exhibit 4.1).
4.3 Form of Subsidiary Guarantee (see Exhibit 4.1).
4.4 A/B Exchange Registration Rights Agreement, dated as of June 11, 1997, between Wavetek Corporation
and Donaldson, Lufkin and Jenrette Securities Corporation.
5.1 Opinion of Sullivan & Cromwell regarding the validity of the securities being registered.
8.1 Opinion of Sullivan & Cromwell regarding certain federal income tax matters with respect to the
securities being registered.
10.1 Credit Agreement, dated as of June 11, 1997, among Wavetek Corporation, DLJ Capital Funding, Inc., as
Syndication Agent, Fleet National Bank, as Administrative Agent, and the lenders named therein.
10.2 Stockholders Agreement, dated as of June 11, 1997.
10.3 Stock Registration Rights Agreement, dated as of June 11, 1997.
12.1 Schedule Re: Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Sullivan & Cromwell (included in its opinions filed as Exhibits 5.1 and 8.1 to this
Registration Statement).
24.1 Powers of Attorney (set forth on the signature pages to this Registration Statement).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, etc.
99.4 Form of Letter to Clients and instructions thereto.
</TABLE>
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TORREY INVESTMENTS INC.
FIRST. The name of the corporation is Torrey Investments Inc.
SECOND. The address of the corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 1,000 shares of Common Stock, and the par value of each of
such shares is $.01.
FIFTH. The name and mailing address of the incorporator is Richard R.
Howe, 125 Broad Street, New York, New York 10004.
SIXTH. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal by-laws of the corporation.
SEVENTH. Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the corporation.
<PAGE>
EIGHTH. Any director or the entire board of directors may be removed,
with or without cause, by the holders of a majority of the shares at the time
entitled to vote at an election of directors, whether or not the board of
directors is classified as provided in subsection (d) of Section 141 of Title 8
of the Delaware Code.
NINTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as currently in effect or as the same may hereafter be amended. No amendment,
modification or repeal of this Article NINTH shall adversely affect any right or
protection of a director that exists at the time of such amendment, modification
or repeal.
IN WITNESS WHEREOF, I have signed this certificate of incorporation
this 25th day of January, 1991.
/s/ Richard R. Howe
-------------------------------
Richard R. Howe
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TORREY INVESTMENTS INC.
Torrey Investments, Inc., a Delaware corporation, hereby certifies as
follows:
FIRST. The Board of Directors of said corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Article Fourth
of the certificate of incorporation of said corporation to increase the total
number of shares which the corporation shall have authority to issue, to create
a new class of capital stock of the corporation to be known as Class B Common
Stock and to set forth the powers, preferences and rights of the Common Stock
and the Class B Common Stock of the corporation, and the qualifications,
limitations or restrictions thereof, so that, as amended, said Article shall
read as follows:
"FOURTH. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,100 shares, of which 1,000
shares of the par value of $.01 per share shall be designated as "Common Stock"
and 100 shares of the par value of $.01 per share shall be designated as
"Class B Common Stock." The powers, preferences and rights of the Common Stock
and the Class B Common Stock, and the qualifications, limitations or
restrictions thereof, shall be identical in all respects, except as otherwise
required by law and except as follows:
(a) Except as otherwise required by law, the holders of the Common
Stock shall be entitled to one (1) vote per share and the holders of the
Class B Com-
<PAGE>
mon Stock shall be entitled to ten (10) votes per share on all matters on
which stockholders are entitled to vote. Except as otherwise set forth
herein the Common Stock and the Class B Common Stock shall vote together as
a single class on all matters on which stockholders are entitled to vote.
(b) The Common Stock and the Class B Common Stock shall each be
entitled to vote separately as a class with respect to (i) amendments
of this certificate of incorporation authorizing the corporation to
issue additional shares of Common Stock or Class B Common Stock and
(ii) other amendments of this certificate of incorporation that alter
or change the powers, preferences or rights, or the qualifications,
limitations or restrictions thereof, of their respective class of
stock so as to affect them adversely and (iii) such other matters as
may require class votes under the General Corporation Law of Delaware.
(c) The holders of the Common Stock and the Class B Common Stock
shall be entitled to share equally, on a per share basis, in all
dividends declared from time to time by the Board of Directors of the
corporation and in all distributions to stockholders upon any
liquidation, dissolution or winding up of the corporation.
(d) Each holder of a share of Class B Common Stock shall have the
right at any time, or from time to time, to convert such share into
one fully paid and nonassessable share of Common Stock. In order to
exercise such conversion privilege, such holder shall surrender the
certificate or certificates representing the shares of Class B Common
Stock to be converted during usual business hours to the corporation
at its principal office or at any office or agency of the corpora-
-2-
<PAGE>
tion maintained for the transfer of the Common Stock together with a
written notice of the election of such holder to convert the shares
represented by such certificate or certificates or any portion thereof
specified in such notice into Common Stock and stating the name(s) and
address(es) in which the certificate(s) for shares of Common Stock
issuable upon such conversion shall be registered. As promptly as
practicable thereafter, the corporation shall issue and deliver to or
upon the order of such holder a certificate or certificates for the
number of shares of Common Stock issuable upon such conversion. In
case any certificate for shares of Class. Common Stock shall be
surrendered for conversion of only a part of the shares represented
thereby, the corporation shall deliver to such holder a certificate or
certificates for the number of shares of Class B Common Stock
represented by such surrendered certificate which are not being
converted. Upon any conversion of shares of Class B Common Stock into
shares of Common Stock, any dividends or other distributions payable
to holders of records of shares of Class B Common Stock prior to the
date of surrender of such certificate or certificates shall remain
payable to such surrendering holder, and any dividends or other
distributions payable to holders of record of shares of Common Stock
prior to the date of surrender of such certificate or certificates
shall remain payable to such holders.
(e) No holder of any share of Class B Common Stock may transfer,
and the corporation shall not register the transfer of, any share of
Class B Common Stock, whether by sale, assignment, gift, bequest,
appointment or otherwise. In the event of any purported or attempted
transfer of any share of Class B Common
-3-
<PAGE>
Stock or upon the death or adjudication of bankruptcy or incompetency of
the holder of any share of Class B Common Stock, such share shall be deemed
to have been converted into a share of Common Stock as of the date of such
death or adjudication. There shall be noted conspicuously on the face of
each certificate representing shares of Class B Common Stock that transfer
and registration of transfer thereof are restricted as provided in this
certificate of incorporation.
(f) Shares of Class B Common Stock converted into Common Stock as
provided herein shall resume the status of authorized but unissued shares
of Class B Common Stock but shall not thereafter be issued except upon the
affirmative vote or consent of the holders of a majority of the shares of
Common Stock at the time outstanding."
SECOND. In lieu of a vote of stockholders, written consent to the
foregoing amendment had been given by the holders of all of the outstanding
stock entitled vote to thereon in accordance with the provisions of Section 228
of the General Coporation Law of Delaware, and such amendment has been duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, Torrey Investments Inc. has caused this
certificate to be signed by Terence J. Gooding, its President, and attested by
Shirlee A. Ewell, its Secretary, on the 25th day of June, 1991.
TORREY INVESTMENTS INC.
Attest: By /s/ Terence J. Gooding
--------------------------
Terence J. Gooding
By /s/ Shirlee A. Ewell
----------------------------
Shirlee A. Ewell
-4-
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TORREY INVESTMENTS INC.
Torrey Investments Inc., a Delaware corporation, hereby certifies as
follows:
FIRST. The Board of Directors of said corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Article Fourth
of the certificate of incorporation of said corporation to increase the total
number of shares which the corporation shall have authority to issue from 1,100
shares, of which 1,000 shares of the par value of $.01 per share are designated
as "Common Stock" and 100 shares of the par value of $.01 per share are
designated as "Class B Common Stock," to 11,000 shares, of which 10,000 shares
of the par value of $.01 per share shall be designated as "Common Stock" and
1,00 shares of the par value of $.01 per share shall be designated as "Class B
Common Stock," and to change paragraph (c) thereof to provide that dividends or
distributions payable in stock of the corporation shall be distributed only in
the same class of stock as that held by the stockholder, so that, as amended,
the first paragraph of said Article shall read as follows:
<PAGE>
"FOURTH. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 11,000 shares, of which 10,000
shares of the par value of $.01 per share shall be designated as "Common
Stock" and 1,000 shares of the par value of $.01 per share shall be
designated as "Class B Common Stock." The powers, preferences and rights
of the Common Stock and the Class B Common Stock, and the qualifications,
limitations or restrictions thereof, shall be identical in all respects,
except as otherwise required by law and except as follows:"
and paragraph (c) of said Article shall read as follows:
"(c) The holders of the Common Stock and the Class B Common Stock
shall be entitled to share equally, on a per share basis, in all dividends
declared from time to time by the Board of Directors of the corporation and
in all distributions to stockholders upon any liquidation, dissolution or
winding up of the corporation, provided that such dividends or
distributions are payable in cash or property other than shares of stock of
the corporation. In the event of any dividend or distribution payable in
shares of stock of the corporation, only shares of Com- mon Stock shall be
distributed with respect to the Common Stock and only shares of Class B
Common Stock shall be distributed with respect to the Class B Common
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<PAGE>
Stock, in each case on an equal share-for-share basis as to all outstanding
shares of each such class of stock."
SECOND. The foregoing amendment was duly adopted by the favorable
vote of the holders of a majority of the outstanding shares of stock entitled to
vote thereon and a majority of the outstanding shares of stock of each class
entitled to vote thereon as a class in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Torrey Investments Inc. has caused this
certificate to be signed by Terence J. Gooding, its President, and attested by
Shirlee A. Ewell, its Secretary, on the 27th day of January, 1993.
TORREY INVESTMENTS, INC.
By /s/ Terence J. Gooding
------------------------------
Terence J. Gooding
Attest:
By /s/ Shirlee A. Ewell
-------------------------------
Shirlee A. Ewell
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TORREY INVESTMENTS INC.
Torrey Investments Inc., a corporation incorporated on the 28th day of
January, 1991, pursuant to the provisions of the General Corporation Law of the
State of Delaware:
FIRST. The Board of Directors of said corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Article Fourth
of the Certificate of Incorporation of said corporation to increase the total
number of shares which the corporation shall have the authority to issue from
11,000 shares, of which 10,000 shares of the par value of $.01 per share are
designated as "Common Stock" and 1,000 shares of par value of $.01 per share
shall be designated as "Class B Common Stock," so that as amended, the first
paragraph of said Article shall read as follows:
"FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is 1,500,000
shares, of which 1,300,000 shares of the par value of $.01 per share
shall be designated as "Common Stock" and 200,000 shares of the par
value of $.01 per share shall be designated as "Class B Common Stock."
The powers, preferences and rights of the Common Stock and the Class B
Common Stock, and the qualifications, limitations or restrictions
thereof, shall be identical in all respects, except as otherwise
required by law and except as follows:"
SECOND. The foregoing amendment was duly adopted pursuant to a
written consent by the holder of a majority of the voting power of the
outstanding shares of stock entitled to vote thereon and a majority of the
voting rights of the outstanding shares of stock of each class entitled to vote
thereon as a class in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Torrey Investments Inc. has caused this
certificate to be signed by Terence J. Gooding, its President, and attested by
Vickie L. Capps, its Secretary, this 21st day of September, 1995.
<PAGE>
TORREY INVESTMENTS INC.
By: /s/ Terence J. Gooding
-------------------------------------
President
Attest: /s/ Vickie L. Capps
-------------------------------------
Secretary
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<PAGE>
CERTIFICATE OF OWNERSHIP
AND MERGER OF
WAVETEK CORPORATION
INTO
TORREY INVESTMENTS INC.
(Pursuant to Section 253 of the General Corporation Law of Delaware)
Torrey Investments Inc., a corporation incorporated on the 28th day of
January, 1991, pursuant to the provisions of the General Corporation Law of the
State of Delaware:
DOES HEREBY CERTIFY that this corporation owns 100% of the capital
stock of Wavetek Corporation, incorporated on the 12th day of June, 1991,
pursuant to the provisions of the General Corporation Law of the State of
Delaware, and that this corporation, by a resolution of its Board of Directors
duly adopted by unanimous consent on the 19th day of September, 1995, determined
to and did merge into itself said Wavetek Corporation, which resolution is in
the following words to wit:
WHEREAS this corporation lawfully owns 100% of the outstanding stock
of Wavetek Corporation, a corporation organized and existing under the
laws of the State of Delaware, and
WHEREAS this corporation desires to merge into itself the said Wavetek
Corporation, and to be possessed of all the estate, property, rights,
privileges and franchises of said corporation,
NOW, THEREFORE, BE IT RESOLVED, that this corporation merge into
itself said Wavetek Corporation and assume all of its liabilities and
obligations, with this corporation being the surviving corporation,
and
FURTHER RESOLVED, that the president or a vice-president, and the
secretary or assistant secretary of this corporation be and they
hereby are directed to make and execute, under the corporate seal of
this corporation, a certificate of ownership setting forth a copy of
the resolution to merge said Wavetek Corporation and assume its
liabilities and obligations, and the date of adoption thereof, and to
file the same in the office of the Secretary
<PAGE>
of the State of Delaware, and a certified copy thereof in the office of the
Recorder of Deeds of Newcastle County; and
FURTHER RESOLVED, that the officers of this corporation be and they
hereby are authorized and directed to do all acts and things
whatsoever, whether within or without the State of Delaware, which may
be in any way necessary or proper to effect said merger; and
FURTHER RESOLVED, that the Board of Directors of this corporation
declare it advisable to amend Article First of the Certificate of
Incorporation of said corporation so that as amended, said Article
shall read as follows:
"FIRST. The name of the corporation is Wavetek Corporation."
IN WITNESS WHEREOF, said Torrey Investments Inc. has caused its
corporate seal to be affixed and this certificate to be signed by Terence J.
Gooding, its President and attested by Vickie L. Capps, its Secretary, this 21st
day of September, 1995.
TORREY INVESTMENTS INC.
By: /s/ Terence J. Gooding
-------------------------------
President
Attest: /s/ Vickie L. Capps
-------------------------------
Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WAVETEK CORPORATION
Wavetek Corporation, a Delaware corporation (the "Company"), hereby
certifies as follows:
FIRST. The Board of Directors of the Company duly adopted a resolution
setting forth and declaring advisable the amendment of Article Fourth of the
Certificate of Incorporation of the Company to increase the total number of
shares which the Company shall have authority to issue, to eliminate the two
classes of common stock and to effect a ten-for-one stock split of common stock,
so that, as amended, said Article shall read as follows:
"FOURTH. The total number of shares which the corporation shall have the
authority to issue is 15,000,000 shares of Common Stock, par value $.01 per
share. Upon the amendment of this Article Fourth, each outstanding share
of Common Stock shall be subdivided into ten shares of Common Stock."
SECOND. In lieu of a vote of stockholders, written consent to the
foregoing amendment has been given by the holders of a majority of the
outstanding stock entitled to vote thereon in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware (the
"DGCL"); written notice will be given to those stockholders who have not
consented in writing as provided in said Section 228; and such amendment has
been duly adopted in accordance with the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, Wavetek Corporation has caused this certificate to
be signed by Terence J. Gooding, its chairman, as attested by Vickie L. Capps,
its Secretary, on this 9th day of June, 1997.
By: /s/ Terence J. Gooding
----------------------
Terence J. Gooding
Attest:
By: /s/ Vickie L. Capps
-------------------
Vickie L. Capps
<PAGE>
BY-LAWS
OF
TORREY INVESTMENTS INC.
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place either
within or without the State of Delaware as may be designated by the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders may
be called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the
<PAGE>
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting.
Section 1.5. QUORUM. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. In the absence of a quorum of the holders of any class of
stock entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.4 of these by-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence of
the President by a Vice President, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary and Assistant Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary an any Assistant Secretary the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. VOTING; PROXIES. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
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, regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corpora-
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<PAGE>
tion generally. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing a later
date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. In
all other matters, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
certificate of incorporation or these by-laws.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty nor less
than ten days before the date of such meeting. 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 day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting 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.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate
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<PAGE>
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or 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. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action . If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 shall also 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.
Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the certificate of incorporation or by law, any action
required by law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be take at any annual or special
meeting of such stockholders, may be taken without a
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<PAGE>
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 and shall be delivered to the
Corporation by delivery to (a) its registered office in the State of Delaware by
hand or by certified mail or registered mail, return receipt requested, (b) its
principal place of business, or (c) an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this by-law to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to (a) its registered office
in the State of Delaware by hand or by certified or registered mail, return
receipt requested, (b) its principal place of business, or (c) an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. 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.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of one or
more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL;
VACANCIES. Each director shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Board of Directors or
to the President or the Secretary of the Corporation. Such resignation shall
take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any director or the entire Board of Directors may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of directors. Unless otherwise provided in the certificate
of incorporation or these by-laws, vacancies and newly created directorships
resulting from any increase in the authorized number of direc-
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<PAGE>
tors elected by all of the stockholders having the right to vote as a single
class or from any other cause may be filled by a majority of the directors then
in office, although less than a quorum, or by the sole remaining director.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
PERMITTED. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of
the Board of Directors one-third of the entire Board shall constitute a quorum
for the transaction of business. The vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
unless the certificate of incorporation or these by-laws shall require a vote of
a greater number. In case at any meeting of the Board a quorum shall not be
present, the members of the Board present may adjourn the meeting from time to
time until a quorum shall be present.
Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in their absence
by a chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, shall act as secretary of the meeting, but in
the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
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<PAGE>
Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the certificate of incorporation or these by-laws, 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 of all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the certificate of incorporation or these by-laws, the Board of Directors
shall have the authority to fix the compensation of directors.
ARTICLE III
COMMITTEES
Section 3.1. 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. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors or in these by-laws,
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 it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a
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<PAGE>
dissolution, removing or indemnifying directors or amending these by-laws; and,
unless the resolution, these by-laws or the certificate of incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
OFFICERS
Section 4.1. OFFICERS; ELECTION. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the same
person unless the certificate of incorporation or these by-laws otherwise
provide.
Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein, and unless otherwise specified therein no acceptance of
such resignation shall be necessary to make it effective. The Board may remove
any officer with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any
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<PAGE>
office of the Corporation by death, resignation, removal or otherwise may be
filled by the Board at any regular or special meeting.
Section 4.3. POWERS AND DUTIES. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES. 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 of Directors, if any,
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 of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. 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 such person were such officer, transfer agent or registrar at
the date of issue.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES, ISSUANCE
OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative, to
give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2. SEAL. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS
AND COMMITTEES. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
The Corporation shall indemnify to the full extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses,
including attorneys' fees, incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director,
officer or employee as provided above. No amendment of this by-law shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment. For purposes of this by-law, the term "Corporation"
shall include any predecessor of the Corporation and any
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constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the Corporation" shall include service as a
director, officer or employee of the Corporation which imposes duties on, or
involves services by, such director, officer or employee with respect to an
employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan shall be deemed to
be indemnifiable expenses; and action by a person with respect to an employee
benefit plan which such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be action not
opposed to the best interests of the Corporation.
Section 6.5. INTERESTED DIRECTORS; QUORUM. 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 committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, if: (1) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board 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 (2) the material facts as to his or her
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 (3) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board, 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.
Section 6.6. FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
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Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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EXHIBIT 3.8
CERTIFICATE OF MERGER
OF
TORREY WAVETEK ACQUISITION CORPORATION
(a Delaware corporation)
INTO
WAVETEK CORPORATION
(a Delaware corporation)
Wavetek Corporation hereby certifies as follows:
FIRST. The name and state of incorporation of each of the constituent
corporations are Torrey Wavetek Acquisition Corporation, a Delaware corporation,
and Wavetek Corporation, a Delaware corporation.
SECOND. An agreement of merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with Section 251 of the General Corporation Law of the State of Delaware.
THIRD. The name of the surviving corporation is Wavetek Corporation.
FOURTH. The certificate of incorporation of the surviving corporation
shall be amended upon the filing of this certificate of merger to read in its
entirety as set forth on Exhibit A attached hereto.
FIFTH. The executed agreement of merger is on file at the principal
place of business of the surviving corporation, the address of which is 9145
Balboa Avenue, San Diego, California 92123.
<PAGE>
SIXTH. A copy of the agreement of merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
IN WITNESS WHEREOF, the undersigned has executed this certificate of
merger as of June 28, 1991.
WAVETEK CORPORATION
By: /s/ C. Frederick Sehnert
-------------------------
C. Frederick Sehnert,
President
Attest:
/s/ Sandra M. Walker
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Sandra M. Walker,
Secretary
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EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
WAVETEK CORPORATION
FIRST. The name of the corporation is Wavetek Corporation.
SECOND. The address of the corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 100 shares of Common Stock, and the par value of each of
such shares is $1.00.
FIFTH. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal by-laws of the corporation.
SIXTH. Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the corporation.
SEVENTH. Any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares at
the time entitled to vote at an election of directors, whether or not the board
of directors is classified as provided in subsection (d) of Section 141 of Title
8 of the Delaware Code.
EIGHTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability
or limitation thereof is not permitted under the Delaware Gen-eral
Corporation Law as currently in effect or as the same may hereafter be
amended. No amendment, modification or repeal of this Article EIGHTH shall
adversely affect any right or protection of a director that exists at the
time of such amendment, modification or repeal.
<PAGE>
EXHIBIT 3.9
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WAVETEK CORPORATION
Wavetek Corporation, a Delaware corporation, hereby certifies as
follows:
FIRST. The Board of Directors of said corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Article
First of the certificate of incorporation of said corporation so that, as
amended, said Article shall read as follows:
"FIRST. The name of the corporation is Wavetek U.S. Inc."
SECOND. In lieu of a vote of stockholders, written consent to the
foregoing amendment has been given by the holder of all of the outstanding
stock entitled to vote thereon in accordance with the provisions of Section
228 of the General Corporation Law of Delaware, and such amendment has been
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, Wavetek Corporation has caused this certificate to
be signed by Terence J. Gooding, its President, and attested by Shirlee A.
Ewell, its Assistant Secretary, on the 28th day of June, 1991.
WAVETEK CORPORATION
Attest: By /s/ Terence J. Gooding
-----------------------------------
Terence J. Gooding
By /s/ Shirlee A. Ewell
-------------------------------
Shirlee A. Ewell
<PAGE>
EXHIBIT 3.10
BY-LAWS
OF
WAVETEK U.S. INC.
(FORMERLY NAMED WAVETEK CORPORATION)
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place either
within or without the State of Delaware as may be designated by the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders may
be called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
<PAGE>
Section 1.5. QUORUM. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. In the absence of a quorum of the holders of any class of
stock entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.4 of these by-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence of
the President by a Vice President, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary and Assistant Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary an any Assistant Secretary the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. VOTING; PROXIES. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
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, regardless
of whether the interest with which it is coupled is
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an interest in the stock itself or an interest in the Corporation generally. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of all classes of stock entitled to vote thereon
present in person or represented by proxy at such meeting shall so determine.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. In all other matters, unless otherwise provided by law
or by the certificate of incorporation or these by-laws, the affirmative vote of
the holders of a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter shall be the act
of the stockholders. Where a separate vote by class or classes is required, the
affirmative vote of the holders of a majority of the shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes, except as otherwise provided by law or by the
certificate of incorporation or these by-laws.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Boardof Directors, and which record date shall not be more than sixty nor less
than ten days before the date of such meeting. 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 day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting 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.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board
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of Directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or 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. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action . If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder 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 shall also be
produced and kept at the time and place of the meeting during the
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whole time thereof and may be inspected by any stockholder who is present.
Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the certificate of incorporation or by law, any action
required by law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be take at any annual or special
meeting of such 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 and shall be delivered to the Corporation by delivery to
(a) its registered office in the State of Delaware by hand or by certified mail
or registered mail, return receipt requested, (b) its principal place of
business, or (c) an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Every
written consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the corporate
action referred to therein unless, within sixty days of the earliest dated
consent delivered in the manner required by this by-law to the Corporation,
written consents signed by a sufficient number of holders to take action are
delivered to the Corporation by delivery to (a) its registered office in the
State of Delaware by hand or by certified or registered mail, return receipt
requested, (b) its principal place of business, or (c) an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. 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.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of one or
more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL;
VACANCIES. Each director shall hold office until his
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or her successor is elected and qualified or until his or her successor is
elected and qualified or until his or her earlier resignation or removal.
Any director may resign at any time upon written notice to the Board of
Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be
necessary to make it effective. Any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors. Unless
otherwise provided in the certificate of incorporation or these by-laws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class or from any other cause may be filled by a
majority of the directors then in office, although less than a quorum, or by
the sole remaining director.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE
PERMITTED. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of
the Board of Directors one-third of the entire Board shall constitute a quorum
for the transaction of business. The vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
unless the certificate of incorporation or these by-laws shall require a vote of
a greater number. In case at any meeting of the Board a quorum shall not be
present, the
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members of the Board present may adjourn the meeting from time to time until a
quorum shall be present.
Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in their absence
by a chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, shall act as secretary of the meeting, but in
the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the certificate of incorporation or these by-laws, 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 of all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the certificate of incorporation or these by-laws, the Board of Directors
shall have the authority to fix the compensation of directors.
ARTICLE III
COMMITTEES
Section 3.1. 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. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors or in these by-laws,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business
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and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the resolution,
these by-laws or the certificate of incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership and merger.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
OFFICERS
Section 4.1. OFFICERS; ELECTION. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents,
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one or more Assistant Vice Presidents, one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers and such other officers as the
Board may deem desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any number of
offices may be held by the same person unless the certificate of incorporation
or these by-laws otherwise provide.
Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the
time specified therein, and unless otherwise specified therein no acceptance of
such resignation shall be necessary to make it effective. The Board may remove
any officer with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled by the Board at any
regular or special meeting.
Section 4.3. POWERS AND DUTIES. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES. 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 of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the
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<PAGE>
Corporation, representing the number of shares of stock in the Corporation owned
by such holder. If such certificate is manually signed by one officer or
manually countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be a facsimile. 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 such person were such officer, transfer agent or
registrar at the date of issue.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES, ISSUANCE
OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal representative, to
give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
ARTICLE VI
MISCELLANEOUS
Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2. SEAL. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS
AND COMMITTEES. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be trans-
-10-
<PAGE>
acted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified
in any written waiver of notice unless so required by the certificate of
incorporation or these by-laws.
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
The Corporation shall indemnify to the full extent permitted by law any person
made or threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses,
including attorneys' fees, incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director,
officer or employee as provided above. No amendment of this by-law shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment. For purposes of this by-law, the term "Corporation"
shall include any predecessor of the Corporation and any constituent corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprise" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director, officer
or employee of the Corporation which imposes duties on, or involves services by,
such director, officer or employee with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to an employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
Section 6.5. INTERESTED DIRECTORS; QUORUM. 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
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<PAGE>
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 committee
thereof which authorizes the contract or transaction, or solely because his or
her or their votes are counted for such purpose, if: (1) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board 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 (2) the material facts as to his or her
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 (3) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified, by the Board, 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.
Section 6.6. FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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<PAGE>
WAVETEK CORPORATION
AND
WAVETEK U.S. INC.
AS GUARANTOR
$85,000,000
10 1/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2007
_____________
INDENTURE
DATED AS OF JUNE 11, 1997
_____________
THE BANK OF NEW YORK
AS TRUSTEE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 PAGE
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.03 Incorporation by Reference of Trust Indenture Act. . . . . . . . . . 17
Section 1.04 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . 20
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . 21
Section 2.04 Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . . . . 21
Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . 22
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
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.02 Selection of Notes to Be Redeemed. . . . . . . . . . . . . . . . . . 34
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . 36
Section 3.05 Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . 36
Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.07 Optional Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.08 Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.02 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . 38
Section 4.03 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.04 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.05 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . 39
Section 4.06 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.07 Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.08 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . 43
Section 4.10 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.11 Dividend and Other Payment Restrictions Affecting Subsidiaries . . . 46
i
<PAGE>
PAGE
Section 4.12 Limitation on Layering Debt. . . . . . . . . . . . . . . . . . . . . 47
Section 4.13 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . 47
Section 4.14 Foreign Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.15 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.16 Additional Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 49
ARTICLE 5
SUCCESSORS
Section 5.01 Limitations on Merger, Consolidation or Sale of
Substantially All Assets . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.02 Successor Corporation Substituted. . . . . . . . . . . . . . . . . . 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.04 Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.05 Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.06 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . 54
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . 54
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 54
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . 56
Section 7.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.02 Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . 58
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 7.06 Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . 59
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . 60
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.09 Successor Trustee by Merger, etc.. . . . . . . . . . . . . . . . . . 62
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . 62
Section 7.11 Preferential Collection of Claims Against the Company. . . . . . . . 62
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . 62
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . 63
Section 8.03 Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . 64
Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . 66
ii
<PAGE>
PAGE
Section 8.06 Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . 67
Section 8.07 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . 68
Section 9.02 With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . 71
Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . 71
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01 Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.02 Execution and Delivery of Subsidiary Guarantees. . . . . . . . . . . 73
Section 10.03 Subsidiary Guarantors May Consolidate, etc., on Certain
Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 10.04 Releases Following Sale of Assets. . . . . . . . . . . . . . . . . . 75
Section 10.05 Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . 75
Section 10.06 Application of Certain Terms and Provisions to the
Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.07 Release of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 76
Section 10.08 Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . 76
ARTICLE 11
SUBORDINATION
Section 11.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . 77
Section 11.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . 77
Section 11.03 Default on Designated Senior Debt. . . . . . . . . . . . . . . . . . 78
Section 11.04 Acceleration of Notes. . . . . . . . . . . . . . . . . . . . . . . . 79
Section 11.05 When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . 79
Section 11.06 Notice by Company. . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.07 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.08 Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 11.09 Subordination May Not Be Impaired by Company . . . . . . . . . . . . 80
Section 11.10 Distribution or Notice to Representative . . . . . . . . . . . . . . 81
Section 11.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . 82
Section 11.12 Authorization to Effect Subordination. . . . . . . . . . . . . . . . 82
Section 11.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . 83
Section 12.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.03 Communication by Holders with Other Holders. . . . . . . . . . . . . 84
Section 12.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . 84
Section 12.05 Statements Required in Certificate or Opinion. . . . . . . . . . . . 84
Section 12.06 Rules by Trustee and Agents. . . . . . . . . . . . . . . . . . . . . 85
iii
<PAGE>
PAGE
Section 12.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.08 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . 85
Section 12.09 Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.11 No Adverse Interpretation of Other Agreements. . . . . . . . . . . . 86
Section 12.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.14 Counterpart Originals. . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.15 Table of Contents, Headings, etc.. . . . . . . . . . . . . . . . . . 86
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
EXHIBITS
Exhibit A-1 Form of Note
Exhibit A-2 Form of Regulation S Temporary Note
Exhibit B-1 Form of Certificate for Exchange or Registration of
Transfer of Rule 144A Global Note to Regulation S Global
Note
Exhibit B-2 Form of Certificate for Exchange or Registration of
Transfer From Regulation S Global Note to Rule 144A Global
Note
Exhibit B-3 Form of Certificate for Exchange or Registration of
Transfer of Certificated Notes
Exhibit B-4 Form of Certificate for Exchange or Registration of
Transfer From Rule 144A Global Note or Regulation S
Permanent Global Note to Certificated Note
Exhibit B-5 Form of Certificate for Exchange or Registration of
Transfer From Certificated Note to Rule 144A Global Note or
Regulation S Permanent Global Note
</TABLE>
iv
<PAGE>
INDENTURE dated as of June 11, 1997, between Wavetek Corporation, a
Delaware corporation (the "Company"), Wavetek U.S. Inc., a Delaware
corporation, as guarantor, and The Bank of New York, a New York corporation,
as trustee ("Trustee").
Each party agrees as follows for the benefit of each other and for the
equal and ratable benefit of the Holders of the 10 1/8% Series A Senior
Subordinated Notes due 2007 (the "Series A Notes") and the 10 1/8% Series B
Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with
the Series A Notes, the "Notes") of the Company:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS
"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, and in the case of the Company and its
Subsidiaries, shall include Yokogawa until such time as Yokogawa has
beneficial ownership of less than five percent of the Company's Capital
Stock. 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.
"AGENT MEMBERS" means any member of, or participant in, the Depositary.
"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange
of beneficial interests in a Global Note, the rules and procedures of the
Depositary that are applicable to such transfer or exchange.
<PAGE>
2
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of a sale and leaseback)
other than sales of Cash Equivalents and inventory in the ordinary course of
business (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 4.06 hereof
and/or the provisions of Section 5.01 hereof and not by the provisions of
Section 4.07), and (ii) the issue or sale by the Company or 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 (a) that have a fair market value in excess of
$2,000,000 or (b) for net proceeds in excess of $2,000,000. Notwithstanding
the foregoing: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another
Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly
Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, and
(iii) a Restricted Payment that is permitted by Section 4.08 hereof will not
be deemed to be Asset Sales.
"AUTHENTICATION ORDER" means an Officers' Certificate ordering the
Trustee to authenticate Notes.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors of the Company.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, (i) 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, or (ii) so long as the Master Lease, dated as of
October 21, 1994, as amended, with respect to property in Indianapolis,
Indiana, is not accounted for as a capital lease, the amount of the liability
with respect thereto recorded on the Company's balance sheet.
"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.
<PAGE>
3
"CASH EQUIVALENTS" means (i) United States dollars or foreign currency that
is readily exchangeable into United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than 12
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of 12 months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding 12 months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500,000,000 and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, and (v) commercial paper
having the highest rating obtainable from Moody's Investors Service, Inc. or
Standard & Poor's Corporation and in each case maturing within 12 months
after the date of acquisition.
"CERTIFICATED NOTES" means Notes that are in the form of the Notes
attached hereto as Exhibit A-1, that do not include the information called
for by footnotes 1 and 2 thereof.
"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 Principals or their Related Parties (as defined
below), (ii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 50% of the Voting Stock of the Company (measured by
voting power rather than number of shares), (iii) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors, or (iv) the Company consolidates with, or merges with
or into, any Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to 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 the majority of the
members of the Board of Directors of such Person are Continuing Directors.
<PAGE>
4
"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 or provision, including any
provision for restructuring operations, 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
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,
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, minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP; PROVIDED that
Consolidated Net Income shall exclude the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes on the
income or profits of, and the depreciation and amortization and other
non-cash charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination
to be dividended to the Company by such Subsidiary either (i) without prior
governmental approval or (ii) with governmental approval that has been
obtained or that could readily and reasonably be obtained, and without direct
or indirect restriction 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
and excluding any one-time charge or expense incurred in order to consummate
the Recapitalization Transactions; 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
<PAGE>
5
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 (unless such
governmental approval could be readily and reasonably 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 and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the Issue Date
in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount
and expense and unamortized deferred charges, excluding goodwill and other
purchased intangibles, as of such date, all of the foregoing determined 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 on the Issue Date or (ii) was nominated for election or elected
to such Board of Directors pursuant to the Stockholders Agreement or with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 12.02 or such other address as the Trustee may
give notice to the Company.
"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.
<PAGE>
6
"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, until a successor shall have been
appointed and become such Depositary pursuant to the applicable provision of
this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
New Credit Agreement and (ii) any other Senior Debt permitted under this
Indenture the principal amount of which is $25,000,000 or more and that has
been designated by the Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature; PROVIDED, that
Capital Stock issued to employees pursuant to agreements providing that the
employee may require the Company to repurchase such Capital Stock in certain
circumstances shall not be deemed to be Disqualified Stock if such agreements
provide that the repurchase rights are subject to the limitations on such
repurchases set forth in Section 4.08.
"DOLLARS" and "$" means lawful money or currency of the United States of
America.
"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).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE OFFER" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Series B Notes for Series A
Notes.
"EXISTING INDEBTEDNESS" means up to $7,000,000 in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Agreement) in existence on the Issue Date
after the Recapitalization Transactions, until such amounts are repaid.
<PAGE>
7
"FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense 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 any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations 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) and (ii) the consolidated interest expense of such Person and
its Subsidiaries that was capitalized during such period, and (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) all dividend payments, whether or
not in cash, 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 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 for such
period to the Fixed Charges of such Person for such period. In the event
that the Company or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
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 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 (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or
<PAGE>
8
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.
"FOREIGN SUBSIDIARY" means, with respect to any person, any Subsidiary of
such person which is incorporated or otherwise organized under the laws of
any jurisdiction other than the United States of America, any state thereof
or the District of Columbia and substantially all of whose consolidated
assets are located outside the United States.
"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 Issue Date.
"GLOBAL NOTES" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note and the Rule
144A Global Note.
"GOODING" means Terence J. Gooding.
"GOVERNMENT SECURITIES" means direct obligations of the United States of
America, or any agency or instrumentality thereof for the payment of which
the full faith and credit of the United States of America is pledged.
"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.
"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, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or (iii) agreements or arrangements designed to protect such Person
against fluctuations in foreign currency exchange rates in the conduct of its
operations.
"HOLDER" means a Person in whose name a Note is registered.
<PAGE>
9
"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.
"INDENTURE" means this Indenture as amended or supplemented from time to
time.
"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 4.08.
"ISSUE DATE" means June 11, 1997, the date on which the Series A Notes
are originally issued.
"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, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
<PAGE>
10
"LIQUIDATED DAMAGES" means all of the liquidated damages owing pursuant
to Section 5 of 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 (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 (including, without
limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such 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 repay
Indebtedness secured by such assets (other than pursuant to the New Credit
Agreement) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as of
June 11, 1997, by and among the Company and DLJ Capital Funding, Inc., and
the banks named therein, for $45,000,000 aggregate principal amount of
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case
as amended, modified, extended, renewed, refunded, replaced or refinanced
from time to time.
"NOTE CUSTODIAN" means the Trustee, as custodian with respect to the
Global Notes, or any successor entity thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, costs, expenses, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICER" means the Chief Executive Officer, the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice President of the Company.
<PAGE>
11
"OFFICER'S CERTIFICATE" means a certificate signed by an Officer, whom
must be the principal executive officer, principal financial officer or
principal accounting officer of the Company.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. Except with respect to any opinion
delivered pursuant to Article 8, the counsel may be an employee of the
Company. The counsel may be counsel to the Company.
"PERMITTED INVESTMENTS" means: (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company and that is engaged in the test
instrumentation industry or a business reasonably related thereto; (b) any
Investment in Cash Equivalents, to the extent that such Investment is not
made for speculative investment purposes; (c) any Investment by the Company
or any Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company
that is a Subsidiary Guarantor and that is engaged in the test
instrumentation industry or a business reasonably related thereto 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 Wholly Owned Subsidiary of the Company that is a Subsidiary
Guarantor and that is engaged in the test instrumentation industry or a
business reasonably related thereto; (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 4.07; (e) any acquisition of
assets in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; and (f) 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 (f) that are at the time outstanding, not to exceed $5,000,000.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or
unsecured debt securities that (i) are subordinated to all Senior Debt (and
any debt securities issued in exchange for Senior Debt) on terms at least as
favorable to the Senior Debt as those contained in Article 11 hereof, (ii)
may be guaranteed by the Subsidiary Guarantor on terms at least as favorable
to the Senior Debt as those contained in the Subsidiary Guarantees, and (iii)
have a final maturity and weighted average life to maturity which is the same
as or greater than, the Notes.
"PERMITTED LIENS" means: (i) Liens securing Senior Debt or Senior Debt of
Subsidiary Guarantors that was permitted by the terms hereof to be incurred;
(ii) Liens in favor of the Company or any Subsidiary; (iii) Liens on property
of a Person existing at the time such Person is merged into or consolidated
with the Company or any Subsidiary of the Company; PROVIDED that such Liens
were in existence prior to the
<PAGE>
12
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course
of business; (vi) Liens existing on the Issue Date; (vii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (ix)
of the second paragraph of Section 4.09 covering only the assets acquired
with such Indebtedness and accessions, modifications, products and proceeds
thereof; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
PROVIDED that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor; and (ix) 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 $5,000,000 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 the Company or such Subsidiary.
"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, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries; 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, renewed, replaced, defeased or refunded
(plus the amount of premiums, prepayments, penalties, reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date equal to 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, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, 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, 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, renewed, replaced, defeased or refunded.
<PAGE>
13
"PERSON" means any individual, corporation, limited liability company,
partnership, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture.
"PRINCIPALS" means Gooding, DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Diversified Partners, L.P., UK Investment Plan 1997
Partners, DLJ First ESC L.L.C., DLJ Offshore Partners II, C.V, DLJ EAB
Partners, L.P., DLJ Millennium Partners, L.P. and Green Equity Investors II,
L.P.
"PUBLIC EQUITY OFFERING" means an initial registered public offering of
the Capital Stock of the Company, and any subsequent registered primary
offerings of Capital Stock of the Company.
"REGISTRATION RIGHTS AGREEMENT" means the A/B Exchange Registration
Rights Agreement, dated as of the Issue Date, 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 Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"REGULATION S PERMANENT GLOBAL NOTE" means a permanent global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 2 to the form of the Note attached hereto as Exhibit
A-1, and that is deposited with and registered in the name of the Depositary,
representing the Notes sold in reliance on Regulation S.
"REGULATION S TEMPORARY GLOBAL NOTE" means a single temporary global note
in the form of the Note attached hereto as Exhibit A-2 that is deposited with
and registered in the name of the Depositary, representing Notes sold in
reliance on Regulation S.
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) or trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons
referred to in the immediately preceding clause (A).
<PAGE>
14
"REPRESENTATIVE" means (a) the administrative agent under the New Credit
Agreement or (b) the indenture trustee or other trustee, agent or
representative for any other Senior Debt.
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means any
officer within the Corporate Trust Office (or any successor group of the
Trustee) assigned by the Trustee to administer the Indenture in its corporate
trust department.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"RULE 144A GLOBAL NOTE" means a permanent global note that contains the
paragraph referred to in footnote 1 and the additional schedule referred to
in footnote 2 to the form of the Note attached hereto as Exhibit A-1, and
that is deposited with and registered in the name of the Depositary,
representing Notes sold in reliance on Rule 144A.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SENIOR DEBT" means (i) all Obligations (including without limitation
interest accruing after a filing of a petition in bankruptcy whether or not
such interest is an allowable claim in such proceeding) of the Company under
the New Credit Agreement, and (ii) any other Indebtedness permitted to be
incurred by the Company under the terms hereof, unless the instrument under
which such Indebtedness is incurred expressly provides that such Guarantee is
on a parity with or subordinated in right of payment to the Subsidiary
<PAGE>
15
the instrument under which such Indebtedness is incurred expressly provides
that such Guarantee is on a parity with or subordinated in right of payment to
the Subsidiary Guarantees. Notwithstanding anything to the contrary in the
foregoing, Senior Debt of the Subsidiary Guarantors will not include (v) any
liability under the Master Lease, dated as of October 21, 1994, as amended,
with respect to property in Indianapolis, Indiana, (w) any liability for
federal, state, local or other taxes owed or owing by the Subsidiary Guarantor,
(x) any Indebtedness of any of the Subsidiary Guarantors to the Company, any of
their Subsidiaries or other Affiliates thereof, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of this Indenture.
"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 hereof.
"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.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of
June 11, 1997 by and among certain holders of Capital Stock of the Company.
"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 Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by 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).
"SUBSIDIARY GUARANTEES" means the guarantees executed by the
Subsidiary Guarantors, substantially in the form of the guarantee attached to
Exhibit A hereto.
"SUBSIDIARY GUARANTORS" means each of (i) Wavetek U.S. Inc., a
Delaware corporation and (ii) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions hereof, and their respective
successors and assigns.
<PAGE>
16
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TRANSFER RESTRICTED SECURITIES" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"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.
"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 and one
or more Wholly Owned Subsidiaries of such Person.
"YOKOGAWA" means Yokogawa Electric Corporation, a corporation
organized under the laws of Japan.
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
Defined in
Term Section
---- ----------
<S> <C>
"Accredited Investor".................... 2.01
"Affiliate Transaction".................. 4.12
"Asset Sale Offer"....................... 4.07
"Asset Sale Offer Period"................ 4.07
"Asset Sale Offer Purchase Date"......... 4.07
"Bankruptcy Law"......................... 6.01
<PAGE>
17
"Benefitted Party"....................... 10.01
"Change of Control Offer"................ 4.06
"Change Of Control Offer Period"......... 4.06
"Change of Control Payment".............. 4.06
"Change of Control Purchase Date"........ 4.06
"Custodian".............................. 6.01
"DTC".................................... 2.03
"Event of Default"....................... 6.01
"Legal Holiday".......................... 12.07
"Paying Agent"........................... 2.03
"Payment Blockage Notice"................ 11.03
"QIB".................................... 2.01
"Registrar".............................. 2.03
"Restricted Payments".................... 4.08
"Transfer Restricted Security"........... 2.06
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company or any successor obligor
upon the Notes.
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:
<PAGE>
18
(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; and
(5) provisions apply to successive events and
transactions.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING
The Notes and Subsidiary Guarantees and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1, which is part
of this Indenture. 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 issued initially 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 and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
(a) RULE 144A GLOBAL NOTES. Notes offered and sold within the United
States to qualified institutional buyers as defined in Rule 144A ("QIBs") in
reliance on Rule 144A shall be issued initially in the form of Rule 144A Global
Notes, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Depositary at its New York office, and registered
in the name of the Depositary or a nominee of the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Rule 144A Global Notes may from time to time
be increased or decreased by adjustments made on the records of the Trustee and
the Depositary or its nominee as hereinafter provided.
(b) REGULATION S GLOBAL NOTES. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Note, which shall be deposited on behalf of the purchasers
of the Notes represented
<PAGE>
19
thereby with the Trustee, at its New York office, as custodian for the
Depositary, and registered in the name of the Depositary or the nominee of the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The "40-day
restricted period" (as defined in Regulation S) shall beterminated upon the
receipt by the Trustee of (i) a written certificate from the Depositary
certifying that it has received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein pursuant to another exemption from
registration under the Securities Act and who will take delivery of a
beneficial ownership interest in a Rule 144A Global Note, all as contemplated
by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the
Company. Following the termination of the 40-day restricted period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes may from time to time
be increased or decreased by adjustments made on the records of the Trustee and
the Depositary or its nominee, as the case may be, in connection with transfers
of interest as hereinafter provided.
(c) GLOBAL NOTES IN GENERAL. 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 amount of outstanding Notes from time to time
endorsed thereon and that the aggregate 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 amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the
Depositary or to a successor of the Depositary or its nominee.
(d) BOOK-ENTRY PROVISIONS. This Section 2.01(d) shall apply only to Rule
144A Global Notes and the Regulation S Permanent Global Notes deposited with or
on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(d) and Section 2.02, authenticate and deliver the Global Notes
that (i) shall be registered in the name of the Depositary or the nominee of
the Depositary and (ii) shall
<PAGE>
20
be delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Agent Members shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the
Trustee as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of an owner of a beneficial interest in any Global Note.
(e) CERTIFICATED NOTES. Notes issued to accredited investors as defined
in Rule 501(a)(1), (2), (3), (4) or (7) under the Securities Act ("Accredited
Investors") who are not QIBs and other Notes not issued as interests in the
Global Notes will be issued in certificated form substantially in the form of
Exhibit A-1 attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto).
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
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.
The Trustee shall, upon delivery of 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
<PAGE>
21
authentication by such agent. An authenticating agent has the same rights as
an Agent to deal with the Company or an Affiliate of the Company.
Neither the Company nor the Trustee shall have any responsibility for any
defect in the CUSIP number that appears on any Note, check, advice of payment
or redemption notice, and any such document may contain a statement to the
effect that CUSIP numbers have been assigned by an independent service for
convenience of reference and that neither the Company nor the Trustee shall be
liable for any inaccuracy in such numbers.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain in the Borough of Manhattan, the City of New
York, State of New York, and in such other locations as it shall determine, (i)
an office or agency where Notes may be presented for registration of transfer
or for exchange ("Registrar") and (ii) 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 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 Note Custodian with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and Paying
Agent with respect to the Certificated 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, if any, interest and Liquidated Damages, if any, on the
Notes, and shall 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
<PAGE>
22
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.
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. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.06. Transfers of beneficial interests in the Global
Notes to Persons required to take delivery thereof in the form of an interest
in another Global Note shall be permitted as follows:
(i) RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE. If, at any
time, an owner of a beneficial interest in a Rule 144A Global Note
deposited with the Depositary (or the Trustee as custodian for the
Depositary) wishes to transfer its interest in such Rule 144A
Global Note to a Person who is required or permitted to take
delivery thereof in the form of an interest in a Regulation S
Global Note, such owner shall, subject to the Applicable
Procedures, exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Regulation S Global Note as
provided in this Section 2.06(a)(i). Upon receipt by the Trustee
of (1) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Trustee
to credit or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the beneficial
interest in the Rule 144A Global Note to be exchanged, (2) a
<PAGE>
23
written order given in accordance with the Applicable Procedures
containing information regarding the participant account of the
Depositary to be credited with such increase and (3) a certificate
in the form of Exhibit B-1 hereto given by the owner of such
beneficial interest stating that the transfer of such interest has
been made in compliance with the transfer restrictions applicable
to the Global Notes and pursuant to and in accordance with Rule
903 or Rule 904 of Regulation S, then the Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of the applicable Rule 144A
Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Regulation S Global
Note by the principal amount at maturity of the beneficial
interest in the Rule 144A Global Note to be exchanged, to credit
or cause to be credited to the account of the Person specified in
such instructions a beneficial interest in the Regulation S Global
Note equal to the reduction in the aggregate principal amount at
maturity of the Rule 144A Global Note, and to debit, or cause to
be debited, from the account of the Person making such exchange or
transfer the beneficial interest in the Rule 144A Global Note that
is being exchanged or transferred.
(ii) REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE. If, at any
time, an owner of a beneficial interest in a Regulation S Global Note
deposited with the Depositary (or with the Trustee as custodian for the
Depositary) wishes to transfer its interest in such Regulation S Global
Note to a Person who is required or permitted to take delivery thereof
in the form of an interest in a Rule 144A Global Note, such owner
shall, subject to the Applicable Procedures, exchange or cause the
exchange of such interest for an equivalent beneficial interest in a
Rule 144A Global Note as provided in this Section 2.06(a)(ii). Upon
receipt by the Trustee of (1) written instructions from the Depositary,
directing the Trustee, as Registrar, to credit or cause to be credited
a beneficial interest in the Rule 144A Global Note equal to the
beneficial interest in the Regulation S Global Note to be exchanged,
such instructions to contain information regarding the participant
account with the Depositary to be credited with such increase, (2)
a written order given in accordance with the Applicable Procedures
containing information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit B-2 attached
hereto given by the owner of such beneficial interest stating (A) if
the transfer is pursuant to Rule 144A, that the Person transferring
such interest in a Regulation S Global Note reasonably believes that
the Person acquiring such interest in a Rule 144A Global Note is a QIB
and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities
laws of any state of the United States, (B) that the transfer complies
with the requirements of Rule 144 under the Securities Act and any
applicable blue sky
<PAGE>
24
or securities laws of any state of the United States or (C) if the
transfer is pursuant to any other exemption from the registration
requirements of the Securities Act, that the transfer of such
interest has been made in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in
accordance with the requirements of the exemption claimed, such
statement to be supported by an Opinion of Counsel from the
transferee or the transferor in form reasonably acceptable to the
Company and to the Registrar, then the Trustee, as Registrar,
shall instruct the Depositary to reduce or cause to be reduced the
aggregate principal amount at maturity of such Regulation S Global
Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Rule 144A Global
Note by the principal amount at maturity of the beneficial
interest in the Regulation S Global Note to be exchanged, and the
Trustee, as Registrar, shall instruct the Depositary, concurrently
with such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial
interest in the applicable Rule 144A Global Note equal to the
reduction in the aggregate principal amount at maturity of such
Regulation S Global Note and to debit or cause to be debited from
the account of the Person making such transfer the beneficial
interest in the Regulation S Global Note that is being transferred.
(b) TRANSFER AND EXCHANGE OF CERTIFICATED NOTES. When Certificated
Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Certificated Notes; or
(y) to exchange such Certificated Notes for an equal principal
amount of Certificated Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested;
PROVIDED, HOWEVER, that the Certificated Notes presented or surrendered for
register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar duly executed by such
Holder or by his attorney, duly authorized in writing; and
(ii) in the case of a Certificated Note that is a Transfer
Restricted Security, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of such
Holder,
<PAGE>
25
without transfer, or such Transfer Restricted Security is
being transferred to the Company, a certification to that effect
from such Holder (in substantially the form of Exhibit B-3 hereto);
(B) if such Transfer Restricted Security is being transferred
to a QIB in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that effect
from such Holder (in substantially the form of Exhibit B-3 hereto);
or
(C) if such Transfer Restricted Security is being transferred
in reliance on any other exemption from the registration requirements
of the Securities Act (including Rule 904 thereunder), a
certification to that effect from such Holder (in substantially the
form of Exhibit B-3 hereto) and an Opinion of Counsel from such
Holder or the transferee reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in compliance with
the Securities Act.
(c) TRANSFER OF A BENEFICIAL INTEREST IN A RULE 144A GLOBAL NOTE OR
REGULATION S PERMANENT GLOBAL NOTE FOR A CERTIFICATED NOTE
(i) Any Person having a beneficial interest in a Rule 144A Global
Note or Regulation S Permanent Global Note may upon request, subject to
the Applicable Procedures, exchange such beneficial interest for a
Certificated Note. Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depositary,
from the Depositary or its nominee on behalf of any Person having a
beneficial interest in a Rule 144A Global Note or Regulation S
Permanent Global Note, and, in the case of a Transfer Restricted
Security, the following additional information and documents (all of
which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B-4 hereto);
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with
Rule 144 under the Securities Act or pursuant to an effective
registration statement under the
<PAGE>
26
Securities Act, a certification to that effect from the transferor
(in substantially the form of Exhibit B-4 hereto); or
(C) if such beneficial interest is being transferred in
reliance on any other exemption from the registration
requirements of the Securities Act (including Rule 904
thereunder), a certification to that effect from the transferor
(in substantially the form of Exhibit B-4 hereto) and an Opinion
of Counsel from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the effect that
such transfer is in compliance with the Securities Act,
in which case the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and procedures
existing between the Depositary and the Note Custodian, cause the aggregate
principal amount of Rule 144A Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced accordingly and, following such
reduction, the Company shall execute and the Trustee shall authenticate and
deliver to the transferee a Certificated Note in the appropriate principal
amount.
(ii) Certificated Notes issued in exchange for a beneficial
interest in a Rule 144A Global Note or Regulation S Permanent Global
Note, as applicable, pursuant to this Section 2.06(c) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Certificated Notes to the Persons in whose names such
Notes are so registered. Following any such issuance of Certificated
Notes, the Trustee, as Registrar, shall instruct the Depositary to
reduce or cause to be reduced the aggregate principal amount at maturity
of the applicable Global Note to reflect the transfer.
(d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Note
may not be transferred as a whole except by the Depositary to a nominee of
the Depositary, or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
(e) TRANSFER AND EXCHANGE OF A CERTIFICATED NOTE FOR A BENEFICIAL
INTEREST IN A GLOBAL NOTE. Holders of Certificated Notes may offer, resell,
pledge or otherwise transfer such Notes only pursuant to an effective
registration statement under the Securities Act, inside the United States to
a QIB in a transaction meeting the requirements of Rule 144A, in a
transaction meeting the requirements of Rule 144 under the Securities
<PAGE>
27
Act, outside the United States in a transaction meeting the requirements of
Rule 904 under the Securities Act or to the Company, in each case in compliance
with any applicable securities laws of any State of the United States or any
other applicable jurisdiction.
When Certificated Notes are presented by a Holder to the Registrar with
a request (x) to register the transfer of the Certificated Notes or (y) to
exchange such Certificated Notes for an equal principal amount of
Certificated Notes of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested if its requirements
for such transactions are met; PROVIDED, HOWEVER, that the Certificated Notes
presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such
Holder or by his attorney, duly authorized in writing, which
instructions, if applicable, shall direct the Trustee (A) to cancel any
Certificated Note being exchanged for another Certificated Note or a
beneficial interest in a Global Note in accordance with Section 2.11
hereof, and (B) to make, or to direct the Registrar to make, an
endorsement on the appropriate Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by such Global Note;
and
(ii) such request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Certificated Note is being delivered to the
Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification to that effect from
such Holder (in substantially the form of Exhibit B-5 hereto); or
(B) if such Certificated Note is being transferred to a QIB in
accordance with Rule 144A, pursuant to Rule 144 under the
Securities Act or pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act or pursuant to
an effective registration statement under the Securities Act, a
certification to that effect from such Holder (in substantially the
form of Exhibit B-5 hereto).
(f) AUTHENTICATION OF CERTIFICATED NOTES IN ABSENCE OF
DEPOSITARY. If at any time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Notes
<PAGE>
28
and a successor Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company delivers to the Trustee an Officers' Certificate
notifying the Trustee that it elects to cause the issuance of
Certificated Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, authenticate and
deliver, Certificated Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) LEGENDS
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Note certificate evidencing Global Notes and
Certificated Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the
following form (each a "Transfer Restricted Security"):
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH
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29
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND, IN THE CASE OF CLAUSE (b), (c) or (d), BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Certificated Note, the Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Certificated
Note that does not bear the legend set forth in (i) above and
rescind any restriction on the transfer of such Transfer
Restricted Security upon receipt of a certification from the
transferring Holder substantially in the form of Exhibit B-3
hereto; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer Restricted Security
shall not be required to bear the legend set forth in (i) above,
but shall continue to be subject to the provisions of Section
2.06(a) and (b) hereof; PROVIDED, HOWEVER, that with respect to
any request for an exchange of a Transfer Restricted Security that
is represented by a Global Note for a Certificated Note that does
not bear the legend set forth in (i) above, which request is made
in reliance upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in the form of
Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
in reliance on any exemption from the registration requirements of the
Securities
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30
Act (other than exemptions pursuant to Rule 144A or Rule 144 under the
Securities Act) in which the Holder or the transferee provides an
Opinion of Counsel to the Company and the Registrar in form and
substance reasonably acceptable to the Company and the Registrar (which
Opinion of Counsel shall also state that the transfer restrictions
contained in the legend are no longer applicable):
(A) in the case of any Transfer Restricted Security that is a
Certificated Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Certificated Note
that does not bear the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.06(a) and (b) hereof.
(iv) Notwithstanding the foregoing, upon consummation 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 hereof, the Trustee shall authenticate Series B Notes in
exchange for Series A Notes accepted for exchange in the Exchange Offer,
which Series B Notes shall not bear the legend set forth in (i) above, and
the Registrar shall rescind any restriction on the transfer of such
Series B Notes, in each case unless the Holder of such Series A Notes is
either (A) a broker-dealer, (B) a Person participating in the distribution
of the Series A Notes or (C) a Person who is an affiliate (as defined in
Rule 144A) of the Company.
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in Global Notes have been exchanged for Certificated
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned
to or retained and cancelled 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 an interest in another Global Note or for
Certificated Notes, redeemed, repurchased or cancelled, 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 the Note
Custodian, at the direction of the Trustee, to reflect such reduction.
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31
(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 Certificated Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder 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 3.07, 4.06, 4.07 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.
(iv) All Certificated Notes and Global Notes issued upon any
registration of transfer or exchange of Certificated Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Certificated
Notes or Global 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 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; or
(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 and Liquidated
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32
Damages, if any, on such Notes, and neither the Trustee, any Agent nor
the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Certificated Notes and Global
Notes in accordance with the provisions of Section 2.02 hereof.
The Registrar may conclusively rely on inf ormation set forth in a
certificate substantially in the form of Exhibit B-1, B-2, B-3, B-4 or B-5
hereto, and other certificates and opinions received pursuant to this Section
2.06 and, in the absence of receipt of such a certificate or opinion, shall not
be deemed to have knowledge of a transfer of an interest in a Global Security
absent actual knowledge of such transfer.
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 the written
order of the Company signed by two Officers of the Company, 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 the
Holder 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 cancelled 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 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.
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.
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33
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 the principal amount of any Notes due and 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 Certificated Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. 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 Certificated 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 return
cancelled Notes to the Company (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all cancelled 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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34
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
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 45
days but not more than 60 days before a redemption date (unless a shorter
notice shall be satisfactory to the Trustee), an Officers' Certificate setting
forth the Section of this Indenture pursuant to which the redemption shall
occur, the redemption date, the principal amount of Notes to be redeemed and
the redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes to be redeemed 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, by lot or by such
other method as the Trustee shall deem fair and appropriate. In the event of
partial redemption by lot, the Trustee shall make the selection not less than
30 nor more than 60 days prior to the redemption date 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 portion of the principal amount thereof to be redeemed. Notes
and portions of them selected to be redeemed shall be in principal amounts of
$1,000 or whole multiples of $1,000;
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35
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.
SECTION 3.03 NOTICE OF REDEMPTION
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail, 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:
(1) the redemption date;
(2) the redemption price;
(3) 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 will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) 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;
(7) the paragraph of the Notes pursuant to which the Notes called
for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense.
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36
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed, Notes called for redemption become
irrevocably due and payable on the redemption date at the price set forth in
the Note.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of and accrued interest and Liquidated Damages, if any, on all Notes to be
redeemed on that date. The Trustee or the Paying Agent shall 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 and Liquidated Damages, if any, on all Notes to be redeemed.
Interest on the Notes to be redeemed will cease to accrue on the
applicable redemption date, whether or not such Notes are presented for
payment, if the Company makes the redemption payment. 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 will 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 8.06 shall apply to any Notes not redeemed within 2 years from
the redemption date.
SECTION 3.06 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the Holder at the expense of the Company
a new Note equal in principal amount to the unredeemed portion of the Note
surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the
Company's option prior to June 15, 2002. Thereafter, the Notes will be subject
to redemption at any time at the option of the Company, 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, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on June 15 of the
years indicated below:
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37
YEAR PERCENTAGE
2002 ........................................... 105.063%
2003 ........................................... 103.375%
2004 ........................................... 101.688%
2005 and thereafter ............................ 100.000%
Notwithstanding the foregoing, during the first three years after
the Issue Date, the Company may on any one or more occasions redeem up to an
aggregate 33 1/3% of the principal amount of Notes originally issued at a
redemption price of 110.125% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the redemption date,
with the net cash proceeds of one or more Public Equity Offerings; PROVIDED
that at least 66 2/3% of the aggregate principal amount of Notes originally
issued remains outstanding immediately after such redemption; and PROVIDED,
FURTHER, that such redemption shall occur within 60 days of the date of the
closing of such Public Equity Offering.
Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION
The Company shall have no mandatory redemption or sinking fund obligations
with respect to the Notes.
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 and Liquidated Damages, if any, on the Notes on the dates and
in the manner provided in the Notes. Principal, premium, if any, and interest
and Liquidated Damages, if any, shall be considered paid on the date due if the
Paying Agent (other than the Company or a Subsidiary), holds at least one
Business Day before that date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal,
premium, if any, and interest and Liquidated Damages, if any, then due. Such
Paying Agent shall return to the Company, no later than five Business Days
following the due date for payment, any money (including accrued interest, if
any) that exceeds such amount of principal, premium, if any, and interest and
Liquidated Damages, if any, required for payment on the Notes.
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38
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the 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 (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 Registrar)
where Notes may be surrendered for registration of transfer or 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 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 120 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 each has kept, observed, performed and fulfilled in all
respects its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge each
has kept, observed, performed and fulfilled each and every covenant contained
in this Indenture and is not in any respect in default in the performance or
observance of any of the terms, provisions and conditions hereof or thereof
(or, if such Default or Event of Default shall have occurred, describing all
such Defaults or Events
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39
of Default of which he may have knowledge and what action each is taking or
proposes to take with respect thereto).
(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of (i) any Default or
Event of Default or (ii) any event of default under any other mortgage,
indenture or instrument as that term is used in Section 6.01(vi) which permits
an acceleration that could become an Event of Default, an Officers' Certificate
specifying such Default, Event of Default or event of default and what action
the Company is taking or proposes to take with respect thereto.
SECTION 4.04 TAXES
The Company shall, and shall cause each of its Subsidiaries to, pay prior
to delinquency all material taxes, assessments, and governmental levies except
as contested in good faith and by appropriate proceedings.
SECTION 4.05 STAY, EXTENSION AND USURY LAWS
The Company 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, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it 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 4.06 CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's 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, if any, to the date of
purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to the Trustee and each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes 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"), pursuant to
the procedures required by this Indenture and described in such notice. The
Company shall comply with the
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40
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 Notes as a result of a
Change of Control.
(b) On the Change of Control Payment Date, the Company shall, 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 shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each 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 shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes under the terms of any Senior Debt, then prior
to the mailing of the notice to Holders pursuant to Section 4.06(a), but in any
event within ten days following any Change of Control, the Company shall obtain
the requisite consents, if any, under all agreements governing such Senior Debt
to the purchase of Notes pursuant to a Change of Control Offer or repay any
Senior Debt prohibiting such purchase of Notes.
(d) 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 Indenture applicable to a Change of Control Offer made by the
Company, including any requirement to repay in full any Senior Debt or obtain
the consents of any of the Company's lenders to such Change of Control Offer,
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
(e) The Change of Control provisions described above will be applicable
whether or not any other provisions of this Indenture are applicable.
SECTION 4.07 ASSET SALES
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
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41
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 cash; PROVIDED 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), shall be deemed to be cash for purposes of
this provision.
Within 12 months after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
permanently Senior Debt or Senior Debt of the Subsidiary Guarantors, or (b) to
the acquisition of an interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, in the
test instrumentation industry or a business reasonably related thereto.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving indebtedness under the New Credit Agreement or
otherwise 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 $5,000,000, the Company shall be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to 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, if any, to the date of
purchase, in accordance with the procedures set forth in this Indenture. 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 offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.08 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 payment in connection with
any merger or consolidation involving the Company) or to the direct or indirect
holders of the Company's or any of its
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42
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of
the Company or any direct or indirect parent of the Company or other
Affiliate 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 principal at Stated Maturity; 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 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 Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, 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
Section 4.09; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses
(ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum 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 Issue Date 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 net cash proceeds received by
the Company from the issue or sale since the Issue Date 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 Issue Date is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A)
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43
the cash return of capital with respect to such Restricted Investment
(less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment.
The foregoing provisions shall 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
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 or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; and (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 pursuant to any management equity
subscription agreement or stock option agreement; PROVIDED that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $1,000,000 in any twelve-month period and $5,000,000
in total and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction.
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. 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 this Section 4.08 were computed, together with a copy
of any fairness opinion required hereby.
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 that
the Company shall not issue any Disqualified Stock and shall not permit any of
its Subsidiaries to issue any shares of
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44
preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified 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 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 Section 4.09 shall not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) under the New Credit Agreement and the
incurrence by the Subsidiary Guarantors of Guarantees thereof; PROVIDED
that the aggregate principal amount of all Indebtedness outstanding
under the New Credit Agreement after giving effect to such incurrence
does not exceed $45,000,000 less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently repay any such
Indebtedness or, in the case of any such revolving Indebtedness,
permanently reduce commitments therefor pursuant to Section 4.07 above;
(ii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding or that are incurred by the Company or any of its
Subsidiaries to protect against currency exchange rate risk in the
conduct of its operations;
(iii) the incurrence by the Foreign Subsidiaries of Indebtedness in
an aggregate amount that, when combined with Existing Indebtedness of
such Foreign Subsidiaries (other than Indebtedness described in clause
(iv) below), does not exceed $6,500,000 and the incurrence by the
Company of Guarantees of such Indebtedness;
(iv) the incurrence by the Foreign Subsidiaries of Indebtedness in
connection with the issuance of completion bonds, performance guaranties
or letters of credit, and the incurrence by the Company of Guarantees
thereof (with such bonds, guaranties or letters of credit being deemed
to have a principal amount equal to the maximum potential liability of
the Foreign Subsidiaries
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45
thereunder) in an aggregate amount that, when combined with such
Existing Indebtedness of such Foreign Subsidiaries (other than
Indebtedness described in clause (iii) above), does not exceed
$4,000,000;
(v) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(vi) the incurrence by the Company of Indebtedness represented by
the Notes and the incurrence by the Subsidiary Guarantors of
Indebtedness represented by the Subsidiary Guarantees;
(vii) 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 that was
permitted by this Indenture to be incurred;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; 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 if a Subsidiary Guarantor 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
Subsidiary Guarantees 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 Wholly Owned Subsidiary and (B) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of the Subsidiary
Guarantors 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 improvements of property used in the business of
the Company or such Subsidiary Guarantors, in an aggregate principal
amount not to exceed $5,000,000 at any time outstanding; and
(x) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness
incurred to refund,
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46
refinance or replace any other Indebtedness incurred pursuant to this
clause (x), not to exceed $15,000,000.
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 (x) 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
shall be treated as having been incurred pursuant to only one of such clauses
or pursuant to the first paragraph hereof. Any Indebtedness that may be
incurred pursuant to this covenant may be incurred under the New Credit
Agreement.
SECTION 4.10 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 on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.
SECTION 4.11 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
Issue Date, (b) the New Credit Agreement as in effect as of the Issue Date,
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
in the aggregate with respect to such dividend and other payment restrictions
than those contained in the New Credit Agreement as in effect on the Issue
Date, (c) this Indenture, the Notes and the Subsidiary Guarantees, (d)
applicable law, (e) any instrument regarding the sale, lease or purchase of
any asset or 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 Indebtedness was incurred in
connection with or in contemplation of such
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47
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, 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 licenses or leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations
or Capital Lease 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, or (h) Permitted Refinancing Indebtedness,
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive in the aggregate
than those contained in the agreements governing the Indebtedness being
refinanced.
SECTION 4.12 LIMITATION ON LAYERING DEBT
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes. In addition, the Subsidiary Guarantors shall not
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of the Subsidiary Guarantor and senior in any respect in right of
payment to the Subsidiary Guarantees.
SECTION 4.13 TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, 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 transaction, 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 at least as favorable as
those that could reasonably be expected to be obtained by the Company or the
relevant Subsidiary 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
$1,000,000, 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 and (b) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5,000,000, an opinion as to
the fairness to the Company of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm
of
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national standing; PROVIDED that the following shall not be deemed to be
Affiliate Transactions: (s) transactions pursuant to the Distribution
Agreement, dated April 23, 1996, and the Technical Collaboration Agreement,
dated as of April 23, 1996, each between the Company or one of its
Subsidiaries and Yokogawa, to the extent that such transactions are on terms
that are at least as favorable as those that could reasonably be expected to
be obtained by the Company or the relevant Subsidiary in a comparable
transaction by the Company or such Subsidiary with an unrelated Person; (t)
lease payments, renewals and extensions under the lease agreement, dated June
29, 1996, between the Company and Toyon Investments, a corporation controlled
by Gooding, to the extent that aggregate annual lease payments do not exceed
$585,000 per year plus annual consumer price index adjustments not to exceed
three percent per annum; (u) any payments or transactions made in accordance
with, or that are authorized under, the Stockholders Agreement, including the
engagement or appointment of Donaldson, Lufkin & Jenrette Securities
Corporation as underwriter in connection with an initial public offering; (v)
the engagement or appointment by the Company of Donaldson, Lufkin & Jenrette
Securities
Corporation as its financial advisor, investment banking firm or arranger
with respect to the New Credit Agreement, to the extent that the fees and
expenses under such engagement are reasonable and customary for such
engagements; (w) the exercise by Gooding of his option to purchase the
Company's executive offices at 11995 El Camino Real, San Diego, California
including all the leasehold improvements and fixed assets therein pursuant to
the terms set forth in the resolution of the Company adopted on September 19,
1995; (x) any employment agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary; (y) transactions between or among
the Company and/or its Subsidiaries; and (z) Restricted Payments that are
permitted by the provisions of Section 4.08 hereof.
SECTION 4.14 FOREIGN SUBSIDIARIES
100% of the Capital Stock of all Foreign Subsidiaries must be owned
directly or indirectly by the Company and the Company shall not allow its
Foreign Subsidiaries to acquire or create any Subsidiaries.
SECTION 4.15 REPORTS
Whether or not required by the rules and regulations of the Securities
and Exchange Commission (the "Commission"), so long as any Notes are
outstanding, the Company shall 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 Commission 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"
and, with respect to the annual information only, a report thereon by the
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49
Company's certified independent auditors 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 addition, whether or not
required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for
public availability (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 Company has agreed that, for so
long as any Notes remain outstanding, it shall furnish to the Holders and to
prospective purchasers designated by such Holders, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Subsidiaries shall acquire or create
another Subsidiary (other than a Foreign Subsidiary) after the Issue Date,
then such newly acquired or created Subsidiary shall execute a Subsidiary
Guarantee and deliver an opinion of counsel, in accordance with the terms of
Article 10 hereof.
ARTICLE 5
SUCCESSORS
SECTION 5.01 LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY
ALL ASSETS
The Company may 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 corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia; (ii) the entity or Person formed by or surviving
any such consolidation or merger (if other than the Company) or the entity or
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 and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; 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 entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment,
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50
transfer, lease, conveyance or other disposition shall have been made (A)
will have Consolidated Net Worth immediately after the transaction equal to
or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, 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 Section 4.09 above.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture if applicable comply with this Indenture. The Trustee
shall be entitled to conclusively rely upon such Officers' Certificate and
Opinion of Counsel.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such
sale, 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
Company shall not be released or discharged from the obligation to pay the
principal of or interest on the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "Event of Default" occurs if: (i) default for 30 days in the payment
when due of interest on, or Liquidated Damages with respect to, the Notes
(whether or not prohibited by Article 11 hereof); (ii) default in payment
when due of the principal of or premium, if any, on the Notes (whether or not
prohibited by Article 11 hereof); (iii) failure by the Company to comply with
the provisions of Section 4.06, 4.07, 4.08 or 4.09; (iv) failure by the
Company for 60 days after notice to comply with any of its other agreements
in this Indenture or the Notes; (v) except as permitted by this Indenture,
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51
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 Subsidiary Guarantor, or any Person acing on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; (vi) 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 Issue Date, which default (a) is caused by a failure to pay
principal when due at final stated maturity (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7,500,000 or more; (vii) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of
$7,500,000, which judgments are not paid, discharged or stayed for a period
of 60 days; (viii) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law (a) commences a
voluntary case, (b) consents to the entry of an order for relief against it
in an involuntary case, (c) consents to the appointment of a Custodian of it
or for all or substantially all of its property, (d) makes a general
assignment for the benefit of its creditors, or (e) generally is unable to
pay its debts as the same become due; or (ix) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that (a) is
for relief against the Company or any of its Significant Subsidiaries in an
involuntary case, (b) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of their property,
or (c) orders the liquidation of the Company or any of its Significant
Subsidiaries, and the order or decree remains unstayed and in effect for 60
days.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
SECTION 6.02 ACCELERATION
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 by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that
it is a notice of acceleration (the "Acceleration Notice"), and the same (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the New Credit Agreement, shall become immediately due and
payable upon the first to occur of an acceleration under the New Credit
Agreement or five Business Days after receipt by the Company and the
Representative
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52
under the New Credit Agreement of such Acceleration Notice but only if such
Event of Default is then continuing. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce this Indenture or the
Notes except as provided herein. 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. 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 (vi) of the preceding paragraph, the declaration of acceleration of
the Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (vi) have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction, and (ii)
all existing Events of Default, except nonpayment of principal or interest or
Liquidated Damages on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived. 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 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 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, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to June 15,
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 June 15, 2002, then the initial premium
specified Section 3.07 hereof shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
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 or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
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
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53
Trustee or any Holder 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
(1) Holders of a majority in aggregate principal amount of the Notes
then outstanding by written notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default
and its consequences under this Indenture (except a continuing Default or
Event of Default in the payment of interest or premium or Liquidated Damages
on, or the principal of, any Note held by a non-consenting Holder). 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.
(2) The Trustee may, without the consent of any Holders of the Notes,
waive any Event of Default that relates to untimely or incomplete reports or
information if the legal rights of the Holders would not be materially
adversely affected thereby and may waive any other defaults the effect of
which would not materially adversely affect the rights of the Holders under
this Indenture.
SECTION 6.05 CONTROL BY MAJORITY
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders, or that may involve the
Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) 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;
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54
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
aggregate principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder
or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or adversely affected without
the consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(i) or (ii) 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 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 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
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55
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 which the Holders of the Notes 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 thereof, 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, 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 for amounts due and unpaid on the Notes for
principal, premium, 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 interest, respectively;
Third: without duplication, to Holders of Notes for any other
Obligations owing to the Holders of Notes under the Notes or this Indenture;
and
Fourth: 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.
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56
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 pursuant to Section 6.07, 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
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of their
own affairs.
(2) Except during the continuance of an Event of Default:
(a) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(b) 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. In the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematic calculations or other facts stated therein).
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(3) 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:
(a) This paragraph does not limit the effect of paragraph (2) of
this Section.
(b) 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.
(c) 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.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) 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.
(7) All indemnifications and releases from liability granted herein to
the Trustee shall extend to the directors, officers, employees and agents of
the Trustee and to the Paying Agent and Registrar.
SECTION 7.02 RIGHTS OF TRUSTEE
(1) 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, but
the Trustee may, in its discretion, make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
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(2) Before the Trustee acts or refrains from acting, 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 of its selection and the 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 in good faith and in reliance thereon.
(3) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(6) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty unless so specified herein.
(7) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof unless written notice of any event which is in fact such a
Default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes and this Indenture.
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 an Affiliate
with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights. However, the Trustee is subject to Sections 7.10
and 7.11. Subject to the provisions of Section 310(b) of the TIA, the Trustee
shall be permitted to engage in transactions with the Company and its
Subsidiaries other than those contemplated by this Indenture.
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
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upon the Company or upon the Company's written direction under any provision
hereof. The Trustee 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
The Trustee shall not be deemed to have notice of a Default or an Event
of Default unless (i) the Trustee has received written notice thereof from
the Company or any Holder or (ii) a Responsible Officer of the Trustee shall
have actual knowledge thereof. Except as otherwise expressly provided
herein, the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein, or of any of the documents executed in connection with the
Notes, or as to the existence of a Default or Event of Default hereunder.
Subject to Section 6.04(2), if a Default or Event of Default occurs and
is continuing and if it is known to a Responsible Officer of the Trustee, the
Trustee shall mail to Holders a notice of the Default or Event of Default
within 90 days after it obtains knowledge of the existence of such Event of
Default. Except in the case of a Default or Event of Default in payment of
principal, premium 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 Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS
Within 60 days after each September 30 beginning with the September 30
following the Issue Date, the Trustee shall mail to Holders 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). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a copy
of each report at the time of its mailing to Holders shall be filed with the
SEC and each stock exchange on which the Notes are listed. The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
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SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation, as the Company and the Trustee shall from time to time agree,
for its acceptance of this Indenture 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. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee or any predecessor Trustee and
their agents, employees, officers and directors against any and all losses,
liabilities, expenses or taxes (other than taxes based upon, measured by or
determined by the income of the Trustee) incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent that such loss, damage,
claim, liability or expense is due to its own 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. 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 Company need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through its own negligence or bad faith.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
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.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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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 at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee
if:
(1) the Trustee fails to comply with Section 7.10;
(2) 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;
(3) a Custodian or public officer takes charge of the Trustee or
its property; or
(4) 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.
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 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 who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder 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. 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. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08,
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the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
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.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States
of America or of any state thereof authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
Federal or state authority and shall have (or in the case of a corporation
included in a bank holding company system, the related bank holding company
shall have) a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE 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, with respect
to the Notes, elect to have either Section 8.02 or 8.03 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
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SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.01 of the option applicable
to this Section 8.02 and subject to the satisfaction of the conditions
contained in Section 8.04 hereof, the Company shall 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, such Legal Defeasance means that (i) 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 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 Trustee,
on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), and (ii) the Subsidiary Guarantors shall
each be released from the Subsidiary Guarantee, except for the following
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, and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Notes when such payments are due, (b) the
Company's obligations with respect to such Notes under Sections 2.03, 2.05,
2.06, 2.07, 2.10 and 4.02, (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 with
respect to the Notes.
SECTION 8.03 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.01 of the option applicable
to this Section 8.03 and subject to satisfaction of the conditions contained
in Section 8.04 hereof, the Company shall be released from its obligations
under the covenants contained in Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and Article Five with respect to the
outstanding Notes on and after the date the conditions set forth below 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, such 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,
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64
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(iii) or (iv), 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 of the option applicable to this
Section 8.03, Sections 6.01(iii) through 6.01(vii) 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 Section 8.03 to the outstanding Notes and Subsidiary
Guarantees:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the
provisions of this Article Eight applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (a) cash in U.S. Dollars in an amount, or
(b) non-callable Government Securities which through the scheduled
payment of principal and interest and Liquidated Damages, if any, in
respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, cash in U.S. Dollars in
an amount, or (c) a combination thereof, in such amounts, as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest and Liquidated Damages, if any, on the
outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes
are being defeased to maturity or to a particular redemption date of such
principal or installment of principal, premium, if any, or interest;
PROVIDED that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such non-callable Government Securities to
said payments with respect to the Notes;
(2) In the case of an election under Section 8.02, either
(i) (A) the Notes will become due and payable at their stated maturity
within one year after the date of such election pursuant to Section 8.02
or, within one year after the date of such election, the Notes will be
redeemable at the option of the Company and will be redeemed by the
Company pursuant to irrevocable instructions issued to the Trustee at the
time of such election for the giving of a notice of redemption by the
Trustee for such redemption and (B) the Company shall have
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delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee to the effect 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 in the same amount, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred or (ii) the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States reasonably
satisfactory 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 hereof, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion 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 has not occurred;
(3) In the case of an election under Section 8.03, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably satisfactory to the Trustee to the effect 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 in the same amount, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) No Default or Event of Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or, in so far as Section 6.01(viii) or (ix) is
concerned, at any time in the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not
be deemed satisfied until the expiration of such period);
(5) Such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party, including the New Credit
Agreement, or by which the Company or any of its Subsidiaries is bound;
(6) In the case of an election under either Section 8.02 or 8.03,
the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election
under Section 8.02 or
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8.03 was not made by the Company with the intent of preferring the
Holders over other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
others; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.02 or the Covenant Defeasance under
Section 8.03 (as the case may be) have been complied with as contemplated
by this Section 8.04.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.06, all money and 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 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 Government Securities
deposited pursuant to Section 8.04 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 Government Securities held by it as
provided in Section 8.04 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(1)), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
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SECTION 8.06 REPAYMENT TO THE 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 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; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause
to be published once, in The Wall Street Journal (national edition), notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 8.07 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United States
Dollars or Government Securities in accordance with Section 8.02 or 8.03, 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 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, 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 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 and provided further that if such order
or judgment is issued in connection with the insolvency, receivership or
other similar occurrence with respect to the Trustee, upon the reinstatement
of such obligations the Company shall be released from its obligations under
Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and
4.15 and Article 5.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes 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;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes in the case of a merger or consolidation
pursuant to Article Five hereof;
(d) to provide for additional Subsidiary Guarantors as set forth in
Section 4.16;
(e) 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; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental
indenture, and upon receipt by the Trustee of the documents described in
Section 9.06 hereof, the Trustee shall join with the Company in the execution
of any supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to
enter into such supplemental indenture which affects its own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS
The Company and the Trustee may amend or supplement this Indenture or
the Notes with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (including consents obtained
in connection with a tender
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offer or exchange offer for the Notes) and any existing Default (including,
without limitation, an acceleration of the Notes) or compliance with any
provision of this Indenture or the Notes may be waived with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
Upon the request of the Company, accompanied by a resolution of its
Board of Directors authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to
the Trustee of the consent of the Holders as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.06 hereof, the Trustee
shall join with the Company in the execution of such supplemental indenture
unless such supplemental indenture 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
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After a supplement, amendment or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Note affected
thereby a notice briefly describing the supplement, amendment 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 supplemental
indenture, amendment or waiver. Subject to Sections 6.04(1) and 6.07 hereof,
the Holders of a majority in principal amount of the Notes then outstanding
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, a supplement, amendment or waiver under this Section
may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Note or alter the provisions with respect to redemption of the Notes
other than pursuant to Sections 4.06 and 4.07 hereof;
(3) reduce the rate of or change the time for payment of interest,
including default interest, or Liquidated Damages on any Note;
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(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest or Liquidated Damages on any Note
(except a recision of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Note;
(6) make any change in Section 6.04(1) or 6.07 hereof or in this
sentence of this Section 9.02 or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest or
Liquidated Damages on the Notes;
(7) waive a redemption payment with respect to any Note (other than
a payment required by the provisions of Sections 4.06 or 4.07 hereof); or
(8) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until a supplement, amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder 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 or subsequent Holder may revoke the consent as to
its Note if the Trustee receives written notice of revocation before the date
the waiver or amendment becomes effective. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.05,
or (ii) such other date as the Company shall designate.
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SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about a supplement,
amendment or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the supplement, amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such supplement, amendment or waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment or supplemental indenture, the Trustee shall be entitled to
receive, if requested, an indemnity reasonably satisfactory to it and to
receive and, subject to Section 7.01, shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that such amendment or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that
it will be valid and binding upon the Company in accordance with its terms.
The Company may not sign an amendment or supplemental indenture until the
Board of Directors approves it.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01 SUBSIDIARY GUARANTEES
Subject to the provisions of this Article 10, each Subsidiary Guarantor,
jointly and severally, hereby unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, that: (a) the principal of, and premium, if any, and
interest on the Notes shall be duly and punctually paid in full when due,
whether at maturity, by acceleration or otherwise, and interest on overdue
principal, and premium, if any, and (to the extent permitted by law) interest
on any interest, if any, on the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder or under the Notes (including
fees, expenses or other) shall be promptly paid in full or performed, all in
accordance with the terms hereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same
shall be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated
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maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Subsidiary Guarantor shall
be obligated to pay, or to perform or to cause the performance of, the same
immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under this Subsidiary Guarantee, and shall
entitle the Trustee or the Holders of Notes to accelerate the obligations of
each Subsidiary Guarantor hereunder in the same manner and to the same extent
as the obligations of the Company. Each Subsidiary Guarantor hereby agrees
that its 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 thereof, the entry 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 Subsidiary Guarantor hereby waives and relinquishes: (a)
any right to require the Trustee, the Holders or the Company (each, a
"Benefitted Party") to proceed against the Company, the Subsidiaries or any
other Person or to proceed against or exhaust any security held by a
Benefitted Party at any time or to pursue any other remedy in any secured
party's power before proceeding against the Subsidiary Guarantors; (b) any
defense that may arise by reason of the incapacity, lack of authority, death
or disability of any other Person or Persons or the failure of a Benefitted
Party to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other Person or Persons; (c)
demand, protest and notice of any kind (except as expressly required by this
Indenture), including but not limited to notice of the existence, creation or
incurring of any new or additional Indebtedness or obligation or of any
action or non-action on the part of the Subsidiary Guarantors, the Company,
the Subsidiaries, any Benefitted Party, any creditor of the Subsidiary
Guarantors, the Company or the Subsidiaries or on the part of any other
Person whomsoever in connection with any obligations the performance of which
are hereby guaranteed; (d) any defense based upon an election of remedies by
a Benefitted Party, including but not limited to an election to proceed
against the Subsidiary Guarantors for reimbursement; (e) 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; (f) any defense arising because of a Benefitted
Party's election, in any proceeding instituted under the Bankruptcy Law, of
the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any
defense based on any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code. The Subsidiary Guarantors hereby covenant that
the Subsidiary Guarantees shall not be discharged except by payment in full
of all principal, premium, if any, and interest on the Notes and all other
costs provided for under this Indenture, or as provided in Section 8.02.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or the Subsidiary Guarantors, or any trustee or
similar official acting
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73
in relation to either the Company or the Subsidiary Guarantors, any amount
paid by the Company or the Subsidiary Guarantors to the Trustee or such
Holder, the Subsidiary Guarantees, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each of the Subsidiary
Guarantors 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 Subsidiary
Guarantor agrees that, as between it, on the one hand, and the Holders of
Notes 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 hereof, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any 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 such Subsidiary Guarantor for the purpose
of the Subsidiary Guarantee.
SECTION 10.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
To evidence the Subsidiary Guarantees set forth in Section 10.01 hereof,
each of the Subsidiary Guarantors agrees that a notation of the Subsidiary
Guarantees substantially in the form included in Exhibit A-1 hereto shall be
endorsed on each Note authenticated and delivered by the Trustee and that
this Indenture shall be executed on behalf of the Subsidiary Guarantors by
the President or one of the Vice Presidents of the Subsidiary Guarantors,
under a facsimile of its seal reproduced on this Indenture and attested to by
an Officer other than the Officer executing this Indenture.
Each of the Subsidiary Guarantors agree that the Subsidiary Guarantees
set forth in this Article 10 will remain in full force and effect and apply
to all the Notes notwithstanding any failure to endorse on each Note a
notation of the Subsidiary Guarantees.
If an Officer whose facsimile signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note on which the
Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees
set forth in this Indenture on behalf of the Subsidiary Guarantors.
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SECTION 10.03 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Notes shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor, or shall prevent the transfer of all
or substantially all of the assets of a Subsidiary Guarantor to the Company
or another Subsidiary Guarantor. Upon any such consolidation, merger,
transfer or sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall
no longer have any force or effect.
(b) Except as provided in Section 10.03(a), or a transaction referred
to in Section 10.04, no Subsidiary Guarantor shall, in a single transaction
or series of related transactions, consolidate or merge with or into (whether
or not such Subsidiary Guarantor is the surviving corporation) another
corporation, Person or entity other than the Company or another Subsidiary
Guarantor unless (i) subject to the provisions of Section 10.04 hereof, the
entity or Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor under its Guarantee and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (ii)
immediately after such transaction no Default or Event of Default exists;
(iii) the Company shall, 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 Section 4.09; and (iv) such Subsidiary Guarantor shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
addressed to the Trustee, each stating that such consolidation or merger and
such supplemental indenture, if any, comply with this Indenture and that such
supplemental indenture is enforceable. In case of any such consolidation or
merger and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to
the Trustee, of the Subsidiary Guarantees endorsed upon the Notes and the due
and punctual performance of all of the covenants and conditions of this
Indenture to be performed by such Guarantor, such successor corporation shall
succeed to and be substituted for such Subsidiary Guarantor with the same
effect as if it had been named herein as a Subsidiary Guarantor. Such
successor corporation thereupon may cause to be signed any or all of the
Subsidiary 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 Subsidiary Guarantees so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Subsidiary Guarantees had been issued at
the date of the execution hereof. The requirements of clause (iii) of this
Section 10.03(b) shall not apply in the case of a consolidation or merger
with or into the Company or any other Subsidiary Guarantor.
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(c) The Trustee, subject to the provisions of Section 10.04 hereof,
shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption of Obligations, comply with the
provisions of this Section 10.03. Such Officers' Certificate and Opinion of
Counsel shall comply with the provisions of Section 12.05.
SECTION 10.04 RELEASES FOLLOWING SALE OF ASSETS
In the event of a sale or other disposition of all or substantially all
of the assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, which sale or other disposition otherwise complies with
the terms of this Indenture, then such Subsidiary 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 Subsidiary Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Subsidiary Guarantor) shall be
released from and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds from such sale or other disposition are
treated in accordance with the provisions of Section 4.07 hereof. Upon
delivery by the Company to the Trustee of an Officer's Certificate and
Opinion of Counsel, to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of this Indenture,
including without limitation Section 4.07 hereof, the Trustee shall execute
any documents reasonably required in order to evidence the release of any
such Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee. Any Subsidiary Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the full amount of principal
of and interest on the Notes and for the other obligations of any Subsidiary
Guarantor under this Indenture as provided in this Article 10.
SECTION 10.05 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the
guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee
not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law. To effectuate the
foregoing intention, the Holders and such Subsidiary Guarantor hereby
irrevocably agree that the obligations of such Subsidiary Guarantor under
this Article 10 shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by
or on behalf of any other Subsidiary Guarantor in respect of the obligations
of such other Subsidiary Guarantor under this Article 10, result in the
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obligations of such Subsidiary Guarantor under the Subsidiary Guarantee of
such Subsidiary Guarantor not constituting a fraudulent transfer or
conveyance.
SECTION 10.06 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE SUBSIDIARY
GUARANTORS
(a) For purposes of any provision of this Indenture which provides for
the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.01 shall
apply to such Subsidiary Guarantor as if references therein to the Company
were references to such Subsidiary Guarantor.
(b) Any request, direction, order or demand which by any provision of
this Indenture is to be made by any Guarantor, shall be sufficient if
evidenced as described in Section 12.02 as if references therein to the
Company were references to such Subsidiary Guarantor.
(c) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders
of Notes to or on any Subsidiary Guarantor may be given or served as
described in Section 12.02 as if references therein to the Company were
references to such Subsidiary Guarantor.
(d) Upon any demand, request or application by any Subsidiary Guarantor
to the Trustee to take any action under this Indenture, such Subsidiary
Guarantor shall furnish to the Trustee such certificates and opinions as are
required in Section 12.04 hereof as if all references therein to the Company
were references to such Subsidiary Guarantor.
SECTION 10.07 RELEASE OF SUBSIDIARY GUARANTEES
Concurrently with the defeasance of the Notes under Section 8.02 hereof,
the Subsidiary Guarantors shall be released from all of their obligations
under the Subsidiary Guarantees and this Article 10.
SECTION 10.08 SUBORDINATION OF SUBSIDIARY GUARANTEES
The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee pursuant to this Article 10 is subordinated in right of payment to
the prior payment in full in cash of all Senior Debt of such Subsidiary
Guarantor on the same basis as the Notes are subordinated to Senior Debt of
the Company. For the purposes of the foregoing sentence, the Trustee and the
Holders shall have the right to receive and/or retain payments by any of the
Subsidiary Guarantors only at such times as they may receive
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and/or retain payments in respect of Notes pursuant to this Indenture,
including Article 11 hereof. In the event that the Trustee receives any
Subsidiary Guarantor payment at a time when the Trustee has actual knowledge
that such payment is prohibited by the foregoing sentence, such Subsidiary
Guarantor payment shall be paid over and delivered to the holders of the
Senior Debt of such Subsidiary Guarantor remaining unpaid, to the extent
necessary to pay in full all such Senior Debt. In the event that a Holder
receives any Subsidiary Guarantor payment at a time when such payment is
prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall
be paid over and delivered to the holders of the Senior Debt of such
Subsidiary Guarantor remaining unpaid, to the extent necessary to pay in full
all such Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and shall
be bound by the provisions of this Section 10.08, (b) authorizes and directs
the Trustee on the Holder's behalf to take such action as may be necessary
and appropriate to effectuate the subordination so provided, and (c) appoints
the Trustee as the Holder's attorney-in-fact for any and all such purposes.
ARTICLE 11
SUBORDINATION
SECTION 11.01 AGREEMENT TO SUBORDINATE
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Note (including but not limited to Liquidated
Damages) is subordinated in right of payment, to the extent and in the manner
provided in this Article, to the prior payment in full in cash of all Senior
Debt (whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any payment or distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to
receive payment in full in cash of all Obligations due in
respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified
in the applicable Senior Debt whether or not allowable as
a claim in any such
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proceeding) before Holders shall be entitled to receive
any payment with respect to the Notes (except that Holders
may receive (i) Permitted Junior Securities and (ii)
payments and other distributions made from any defeasance
trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt
(as provided in subsection (1) above) are paid in full in
cash, any distribution to which Holders would be entitled
but for this Article shall be made to holders of Senior Debt
(except that Holders may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01
hereof), as their interests may appear.
SECTION 11.03 DEFAULT ON DESIGNATED SENIOR DEBT
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes (other than
(i) Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Debt have been
paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs
and is continuing; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that then
permits holders of the Designated Senior Debt to accelerate
its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a Person who may
give it pursuant to Section 11.11 hereof. If the Trustee
receives any such Payment Blockage Notice, no subsequent
Payment Blockage Notice shall be effective for purposes of
this Section unless and until (i) at least 360 days shall
have elapsed since the delivery of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
The Company may and shall resume payments on and
distributions in respect of the Notes them upon the earlier of:
(1) in the case of a Default referred to in Section
11.03(i) hereof, upon the date which the default is cured or
waived, or
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79
(2) in the case of a default referred to in Section
11.03(ii) hereof, 179 days pass after notice is received,
unless a Payment Default on any Designated Senior Debt then
exists.
SECTION 11.04. ACCELERATION OF NOTES
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER
In the event that the Trustee receives any payment or distribution of
any Obligations with respect to the Notes at a time when the Trustee has
actual knowledge that such payment is prohibited by Section 11.03 hereof,
such payment or distribution shall be held by the Trustee in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or
their Representative under the indenture or other agreement (if any) pursuant
to which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to
Senior Debt remaining unpaid to the extent necessary to pay such Obligations
in full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt.
In the event that a Holder receives any payment or distribution of any
Obligations with respect to the Notes at a time when such payment is
prohibited by Section 11.03 hereof, such payment or distribution shall be
paid forthwith over and delivered, upon written request, to, the holders of
Senior Debt as their interests may appear or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to
the extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 11, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any
holders of Senior Debt shall be entitled by virtue of this Article 11, except
if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
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SECTION 11.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article.
SECTION 11.07. SUBROGATION
After all Senior Debt is paid in full in cash and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the
payment of Senior Debt. A distribution made under this Article 11 to holders
of Senior Debt that otherwise would have been made to Holders is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 11.08. RELATIVE RIGHTS
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional,
to pay principal of and interest on the Notes in accordance with
their terms;
(2) affect the relative rights of Holders and creditors of
the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event
of Default.
SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the
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81
Company or any Holder or by the failure of the Company or any Holder to
comply with this Indenture.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 11 or the obligations hereunder of the
Holders to the holders of Senior Debt, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time or
payment of, or renew or alter, Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; PROVIDED,
HOWEVER, that any such alteration shall not (i) increase the amount of Senior
Debt outstanding in a manner prohibited by this Indenture or (ii) otherwise
violate Section 4.09 hereof; (b) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt; (c)
release any Person in any manner for the collection of Senior Debt; PROVIDED,
HOWEVER, that any such sale, exchange, release or other transaction shall not
violate Section 4.13 hereof; and (d) exercise or refrain from exercising any
rights against the Company or any other Person; PROVIDED, HOWEVER, that in no
event shall any such actions limit the right of the Holder to take any action
to accelerate the maturity of the Notes in accordance with the provisions set
forth in Article 6 or to pursue any rights or remedies against the parties to
this Indenture under this Indenture or under applicable laws if the taking of
such action does not otherwise violate the terms of this Article 11.
SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 11, the Trustee and the Holders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 11. Notwithstanding the foregoing, with
respect only to Obligations under the New Credit Agreement, the Trustee and
the Holders shall be entitled to rely only upon the order or decree made by
any court of competent jurisdiction or upon a certificate of a Representative
for the purpose of ascertaining the matters described in the preceding
sentence.
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82
SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT
Notwithstanding the provisions of this Article 11 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may
continue to make payments on the Notes, unless the Trustee shall have
received at its Corporate Trust Office at least five Business Days prior to
the date of such payment written notice of facts that would cause the payment
of any Obligations with respect to the Notes to violate this Article. Only
the Company or a Representative may give the notice. Nothing in this Article
11 shall impair the claims of, or payments to, the Trustee under or pursuant
to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof
of claim or proof of debt in the form required in any proceeding referred to
in Section 6.09 hereof at least 30 days before the expiration of the time to
file such claim, a Representative of Designated Senior Debt is hereby
authorized to file an appropriate claim for and on behalf of the Holders of
the Notes.
SECTION 11.13. AMENDMENTS
The provisions of this Article 11 or any related definitions shall not
be amended or modified in a manner adverse to the holders of Senior Debt
without the written consent of the holders of all Designated Senior Debt.
<PAGE>
83
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 duties imposed by TIA Section
318(c) shall control.
SECTION 12.02 NOTICES
Any notice or communication by the Company, any Subsidiary Guarantor or
the Trustee to the other is duly given if in writing and delivered in Person
or mailed by first-class mail, telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Company or a Subsidiary Guarantor:
Wavetek Corporation
11995 El Camino Real, Suite 301
San Diego, CA 92130
Attention: Chief Financial Officer
Telecopier No.: (619) 793-2310
If to the Trustee:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Telecopier No.: (212) 815-5915
The Company or the Trustee by notice to the other 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 days after being deposited in the mail, postage
prepaid, if mailed; 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.
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84
Any notice or communication to a Holder shall be mailed by first-class
mail 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 WITH OTHER HOLDERS
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:
(1) 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 complied
with; and
(2) 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 complied with.
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 include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
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85
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such Person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been complied
with.
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 LEGAL HOLIDAYS
A "Legal Holiday" is 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
or obligated 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 for the intervening period.
SECTION 12.08 NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for
any obligations of the Company or any Subsidiary Guarantor under the Notes,
this Indenture or any Subsidiary Guarantee or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder
of Notes 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 12.09 DUPLICATE ORIGINALS
The parties may sign any number of copies of this Indenture. One signed
copy is enough to prove this Indenture.
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86
SECTION 12.10 GOVERNING LAW
The internal law of the State of New York shall govern and be used to
construe this Indenture and the Notes (without regard to conflicts of law
provisions). Each party hereto irrevocably submits itself to the
non-exclusive jurisdiction of the state and federal courts of New York for
purposes of this Indenture and agrees and consents that service of process
may be made upon it in any legal proceeding relating to this Indenture by any
means allowed under federal or New York law. The parties hereto hereby waive
and agree not to assert, by way of motion, as a defense or otherwise, that
any such proceeding is brought in an inconvenient forum or that the venue
thereof is improper.
SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 12.12 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 successor.
SECTION 12.13 SEVERABILITY
In case any provision in this Indenture or 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 12.14 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 12.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
SIGNATURES
WAVETEK CORPORATION
By: /s/ Terence J. Gooding
-----------------------------
Name:
Title:
WAVETEK U.S. INC.
By: /s/ Terence J. Gooding
-----------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/ Mary Jane Morrissey
-----------------------------
Name: Mary Jane Morrissey
Title: Vice President
<PAGE>
Exhibit A-1
(Face of Security)
___10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2007
No. $__________
WAVETEK CORPORATION
promises to pay to _______________________________________
or registered assigns, the principal sum of
___________________
Dollars on June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1997
Record Dates: June 1 and December 1 (whether or not a
Business Day)
WAVETEK CORPORATION
By:
Name:
Title:
By:
Name:
Title:
TRUSTEE CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Notes
referred to in the within-mentioned
Indenture
THE BANK OF NEW YORK,
as Trustee
By:
(Authorized Signature)
A1-1
<PAGE>
(Back of Security)
10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2007
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary
or any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.](1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE
(b), (c) or (d), BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
- -----------------------
(1.) This paragraph should be included only if the Note is issued in global
form.
A1-2
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Wavetek Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
the rate and in the manner specified below and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. Interest on the Notes will accrue at the rate of
10 1/8% per annum and will be payable semi-annually in arrears on June 15 and
December 15, commencing on December 15, 1997, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"), to Holders of record on the immediately preceding June 1 and December
1, respectively.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. Interest on the Notes will accrue from the most recent date
to which interest has been paid or duly provided for or, if no interest has
been paid or duly provided for, from the date of original issuance of the
Notes. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the applicable interest rate on the Notes plus one percent; it
shall pay interest on overdue installments of interest (without regard to
applicable grace periods) at the same rate, to the extent lawful, (i) if
payment is made during the period of five Business Days following the date on
which such interest was due, to the Persons who were to receive payment on
the date such interest was due or (ii) if payment is made after such period,
to the Persons who are Holders on a subsequent special record date, which
date shall be at the earliest practicable date but in all events at least
five Business Days prior to the payment date.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons
who are registered Holders of Notes at the close of business on the record
date next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date.
Principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes shall be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York, or at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; PROVIDED that all payments with
respect to Notes the Holders of which have given wire transfer instructions
to the Company and the Trustee shall be required to be made by wire transfer
of immediately available funds to the accounts specified by the Holders
thereof. The Company shall pay principal, premium, if any, and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially the Trustee under the
Indenture will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of June 11, 1997 ("Indenture") among the Company, the Subsidiary
Guarantors and the
A1-3
<PAGE>
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 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The terms of
the Indenture shall govern any inconsistencies between the Indenture and the
Notes. Terms not otherwise defined herein shall have the meanings assigned
in the Indenture. The Notes are general unsecured obligations of the Company
limited to $85,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to
June 15, 2002. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, 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, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on June 15 of the years
indicated below:
YEAR PERCENTAGE
2002.................................... 105.063%
2003.................................... 103.375%
2004.................................... 101.688%
2005 and thereafter..................... 100.000%
Notwithstanding the foregoing, during the first three
years after the Issue Date, the Company may on any one or more
occasions redeem up to an aggregate 33 1/3% of the principal amount
of Notes originally issued in the Offering at a redemption price
of 110.125% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to the redemption
date, with the net cash proceeds of one or more Public Equity
Offerings; PROVIDED that at least 66 2/3% of the aggregate principal
amount of Notes originally issued remains outstanding immediately
after such redemption; and PROVIDED, FURTHER, that such
redemption shall occur within 60 days of the date of the closing
of such Public Equity Offering.
6. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase. Holders of Notes that are subject to an offer
to purchase will receive an offer to purchase from the Company prior to any
related purchase date, and may elect to have such Notes
A1-4
<PAGE>
purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) If the Company consummates any Asset Sale, the Company shall be
required, under certain circumstances, to apply the Excess Proceeds thereof
to an offer to all Holders of Notes to purchase the maximum principal amount
of Notes that may be purchased out of the Excess Proceeds at an offer price
in cash equal to 100% of the principal amount of the Notes plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. Holders of Notes
that are subject to an offer to purchase will 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 Holder to
Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face
denominations of $1,000 and integral multiples of $1,000. The Notes may be
transferred and 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. Also, it need not (i) register the transfer
of or exchange any Notes during any period (a) beginning at the opening of
business on a Business Day 15 days before the day of any selection of Notes
for redemption and ending at the close of business on the day of selection or
(b) beginning at the opening of business on a Business Day 15 days before an
interest payment date and ending on the close of business on such interest
payment date or (ii) register the transfer or exchange of any Note selected
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
9. SUBORDINATION. The Notes are subordinated in right of payment, to
the extent and in the manner provided in Article 11 of the Indenture, to the
prior payment in full of all Senior Debt. The Company agrees, and each
Holder by accepting a Note consents and agrees, to the subordination provided
in the Indenture and authorizes the Trustee to give it effect.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for
registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the Person in whose name this Note is registered
as its absolute owner for the purpose of receiving payment of principal of
and interest on this Note and for all other purposes whatsoever, whether or
not this Note is overdue, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary. The registered holder of a Note
shall be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Notes and the Subsidiary Guarantees may be amended or
supplemented with the written consent of the Holders of at least a majority
in principal amount of the then outstanding Notes, and any existing Default
(except a Default or Event of Default relating to the payment of principal,
premium or interest) or compliance with any provision of the Indenture or the
Notes may be waived with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Notes. Without
A1-5
<PAGE>
the consent of any Holder, the Indenture or the Notes 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 obligations to Holders of the
Notes in case of a merger or consolidation, to provide for additional
Subsidiary Guarantors, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not materially
adversely affect the legal rights of any such Holder under the Indenture, or
to comply with the requirements of the Securities and Exchange Commission in
order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
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 (whether or not prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of the
principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company
to comply with the provisions of Section 4.06, 4.07, 4.08 or 4.09 of the
Indenture; (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (v) 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 Subsidiary Guarantor, or any
Person acing on behalf of any Subsidiary Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; (vi) 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 Issue Date, which default (a)
is caused by a failure to pay principal when due at final stated maturity (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $7,500,000 or more; (vii) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating
in excess of $7,500,000, which judgments are not paid, discharged or stayed
for a period of 60 days; or (viii) certain events of bankruptcy or insolvency
with respect to the Company or any Significant Subsidiary. 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 immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any Subsidiary, 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. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. 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, premium or interest) if it determines that withholding notice is
in their interest. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Company
is required upon becoming
A1-6
<PAGE>
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 THE COMPANY. Subject to the provisions of
the Indenture, 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 an
Affiliate with the same rights it would have if it were not Trustee. Subject
to the provisions of Section 310(b) of the Trust Indenture Act, the Trustee
shall be permitted to engage in transactions with the Company and its
Subsidiaries other than those contemplated by the Indenture.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator, or stockholder of the Company or any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Notes, the Indenture or any Subsidiary
Guarantee or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes, 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 TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transferred Restricted Securities shall have all the rights set
forth in the Registration Rights Agreement dated as of the date of the
Indenture, between the Company and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the 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.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Wavetek Corporation
11995 El Camino Real
Suite 301
San Diego, CA 92130
Attention: Chief Financial Officer
Telecopier No.: (619) 793-2310
A1-7
<PAGE>
SUBSIDIARY GUARANTEE
The Subsidiary Guarantors listed below (hereinafter referred to as the
"Subsidiary Guarantors," which term includes any successors or assigns under
the Indenture (the "Indenture") and any additional Subsidiary Guarantors),
have irrevocably and unconditionally guaranteed (i) the due and punctual
payment of the principal of, premium, if any, and interest on the 10 1/8%
Senior Subordinated Notes due January 15, 2007 (the "Notes") of Wavetek
Corporation, a Delaware corporation (the "Company"), whether at stated
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal, and premium if any, and (to the extent
permitted by law) interest on any interest, if any, on the Notes, and the due
and punctual performance of all other obligations of the Company, to the
Holders or the Trustee all in accordance with the terms set forth in Article
10 of the Indenture, (ii) in case of any extension of time of payment or
renewal of any Notes or any such other obligations, that the 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, and (iii) the payment of any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director, employee or incorporator, as such,
past, present or future of each Subsidiary Guarantor shall have any liability
by reason of his or its status as such stockholder, officer, director,
employee or incorporator for any obligations of any Subsidiary Guarantor
under the Notes, the Indenture or its Subsidiary Guarantee or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
This is a continuing Guarantee and shall remain in full force and effect
and shall be binding upon each Subsidiary Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations
under the Notes and Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders, and, in the event of
any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges herein conferred upon that party shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
A1-8
<PAGE>
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
WAVETEK U.S. INC.
By:------------------------
Name:
Title:
A1-9
<PAGE>
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________________________________________________________
agent 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.**
- ------------------------------
** Signature(s) must be guaranteed by an eligible guarantor institution
(banks, stock brockers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program) pursuant to
Securities and Exchange Commission Rule 17 Ad-15
A1-10
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have all or any part of this Note purchased
by the Company pursuant to Section 4.06 or 4.07 of the Indenture, check the
box below:
/ / Section 4.06 / / Section 4.07
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.06 or 4.07 of the Indenture, state the amount
you elect to have purchased (if all, write "ALL"): $___________
Date:_____________________ Your Signature:-------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:_______________
Signature Guarantee.*
- ------------------------------
* Signature(s) must be guaranteed by an eligible guarantor institution
(banks, stock brockers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program) pursuant to
Securities and Exchange Commission Rule 17 Ad-15.
A1-11
<PAGE>
SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTES(2)
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of Signature of
Principal Amount of Principal Amount of this Global Note authorized officer of
this Global Note this Global Note following such decrease Trustee or Note
(or increase) Custodian
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------------------------
(2) TO BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM.
A1-12
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Security)
10 1/8% Series A Senior Subordinated Notes due 2007
No. $
----------
WAVETEK CORPORATION
promises to pay to
---------------------------------------
or registered assigns, the principal sum of
-------------------
Dollars on June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing December 15, 1997
Record Dates: June 1 and December 15 (whether or not a Business Day)
WAVETEK CORPORATION
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
TRUSTEE CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Notes
referred to in the within-mentioned
Indenture
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------
(Authorized Signature)
A2-1
<PAGE>
(Back of Security)
10 1/8% Series A Senior Subordinated Notes due 2007
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary
or any such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND,
IN THE CASE OF CLAUSE (b), (c) OR (d), BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST THEREON.
Subject to the provisions hereof, Wavetek Corporation, a Delaware
corporation (the "Company"), promises to pay to ______ the principal sum of
_____________ UNITED STATES DOLLARS (U.S. $ _________) on June 15, 2007, and
to pay interest on the principal amount of this Note at the rate of
A2-2
<PAGE>
10 1/8% per annum. Interest on the Notes will be payable semi-annually in
arrears on June 15 and December 15, commencing on December 15, 1997, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest will be computed on the basis of a
360-day year of twelve 30-day months. Interest on the Notes will accrue from
the most recent date to which interest has been paid or duly provided for or,
if no interest has been paid or duly provided for, from the date of original
issuance of this Note.
This Regulation S Temporary Global Note is issued in respect of an issue of
10 1/8% Senior Subordinated Notes due 2007 (the "Notes") of the Company, limited
to the aggregate principal amount of U.S. $85,000,000 issued pursuant to an
Indenture (the "Indenture") dated as of June 11, 1997, among the Company, the
Subsidiary Guarantors and The Bank of New York, as trustee (the "Trustee"), and
is governed by the terms and conditions of the Indenture, which terms and
conditions are incorporated herein by reference and, except as otherwise
provided herein, shall be binding on the Company and the Holder hereof as if
fully set forth herein. Unless the context otherwise requires, the terms used
herein shall have the meanings specified in the Indenture.
Until this Regulation S Temporary Global Note is exchanged for Regulation S
Permanent Global Notes, the Holder hereof shall not be entitled to receive
payments of interest hereon; until so exchanged in full, this Regulation S
Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.
This Regulation S Temporary Global Note is exchangeable in whole or in part
for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of all interest in this Regulation S Temporary Global Note for one or
more Regulation S Permanent Global Notes or Rule 144A Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
This Regulation S Temporary Global Note shall not become valid or obligatory
until the certificate of authentication hereon shall have been duly manually
signed by the Trustee in accordance with the Indenture. This Regulation S
Temporary Global Note shall be governed by and construed in accordance with the
laws of the State of the New York. All references to "$," "Dollars," "dollars"
or "U.S. $" are to such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and private debts
therein.
A2-3
<PAGE>
SCHEDULE OF EXCHANGES FOR GLOBAL NOTES
The following exchanges of a part of this Regulation S Temporary Global Note
for other Global Notes have been made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of this Signature of
Principal Amount of Principal Amount of Global Note authorized officer of
this Global Note this Global Note following such decrease Trustee or Note
(or increase) Custodian
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-4
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.06(a)(i) of the Indenture)
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation
Reference is hereby made to the Indenture, dated as of June 11, 1997 (the
"Indenture"), among Wavetek Corporation, as issuer (the "Company"), the
Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $______ principal amount of Notes which are
evidenced by one or more Rule 144A Global Notes (CUSIP No. 944020AA4) and held
with the Depositary in the name of ___________________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person who will take delivery thereof in the form of
an equal principal amount of Notes evidenced by one or more Regulation S Global
Notes (CUSIP No. USU94214AA89), which amount, immediately after such transfer,
is to be held with the Depositary.
In connection with such request and in respect of such Notes, the Transferor
hereby certifies that such transfer has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with Rule 903 or Rule 904 under the United States Securities Act of
1933, as amended (the "Securities Act"), and accordingly the Transferor hereby
further certifies that:
(1) The offer of the Notes was not made to a person in the United States;
(2) either:
(a) at the time the buy order was originated, the transferee was outside the
United States or the Transferor and any person acting on its behalf
reasonably believed and believes that the transferee was outside the
United States; or
(b) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
person acting on its behalf knows that the transaction was prearranged
with a buyer in the United States;
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 904(b) of Regulation S;
(4) the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act; and
B1-1
<PAGE>
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with the Depositary.
Upon giving effect to this request to exchange a beneficial interest in a
Rule 144A Global Note for a beneficial interest in a Regulation S Global Note,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act and, if such transfer occurs prior to the end of the 40-day
restricted period associated with the initial offering of Notes, the additional
restrictions applicable to transfers of interest in the Regulation S Temporary
Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
------------------------------
[Insert Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
---------------------, -----
cc: Wavetek Corporation
B1-2
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(a)(ii) of the Indenture)
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation
Reference is hereby made to the Indenture, dated as of June 11, 1997 (the
"Indenture"), among Wavetek Corporation, as issuer (the "Company"), the
Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $______ principal amount of Notes which are evidenced
by one or more Regulation S Global Notes (CUSIP No. USU94214AA89) and held with
the Depositary in the name of ____________________________(the "Transferor").
The Transferor has requested a transfer of such beneficial interest in the Notes
to a Person who will take delivery thereof in the form of an equal principal
amount of Notes evidenced by one or more Rule 144A Global Notes (CUSIP No.
944020AA4), to be held with the Depositary.
In connection with such request and in respect of such Notes, the Transferor
hereby certifies that:
[CHECK ONE]
/ /such transfer is being effected pursuant to and in accordance with
---
Rule 144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the Notes for its own account,
or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A;
or
/ /such transfer is being effected pursuant to and in accordance with
---
Rule 144 under the Securities Act;
or
/ /such transfer is being effected pursuant to an effective registration
---
statement under the Securities Act;
B2-1
<PAGE>
or
/ /such transfer is being effected pursuant to an exemption from the
---
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which
the Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and such Notes are being transferred in compliance with any applicable blue sky
securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Notes for a beneficial interest in Rule 144A Global Notes,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Rule 144A Global Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
------------------------------
[Insert Name of Transferor]
By:
---------------------------------
Name:
Title:
Dated:
--------------, ----
cc: Wavetek Corporation
B2-2
<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED NOTES
(Pursuant to Section 2.06(b) of the Indenture)
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation
Reference is hereby made to the Indenture, dated as of June 11, 1997 (the
"Indenture"), among Wavetek Corporation, as issuer (the "Company"), the
Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ /the Surrendered Notes are being acquired for the Transferor's own
---
account, without transfer;
or
/ /the Surrendered Notes are being transferred to the Company;
---
or
/ /the Surrendered Notes are being transferred pursuant to and in
---
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are being transferred
to a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
or
/ /the Surrendered Notes are being transferred in a transaction permitted
---
by Rule 144 under the Securities Act;
or
B3-1
<PAGE>
/ /the Surrendered Notes are being transferred pursuant to an effective
---
registration statement under the Securities Act;
or
/ /such transfer is being effected pursuant to an exemption from the
---
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
------------------------------
[Insert Name of Transferor]
By:
-----------------------------------
Name:
Title:
Dated:
--------------, -----
cc: Wavetek Corporation
B3-2
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE
TO CERTIFICATED NOTE
(Pursuant to Section 2.06(c) of the Indenture)
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation
Reference is hereby made to the Indenture, dated as of June 11, 1997 (the
"Indenture"), among Wavetek Corporation, as issuer (the "Company"), the
Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
This letter relates to $______ principal amount of Notes which are evidenced
by one or more [Rule 144A Global Notes (CUSIP No. 944020AA4)] [Regulation S
Permanent Global Note (CUSIP No. USU94214AA89)] and held with the Depositary in
the name of ___________________________ (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Notes to a Person who
will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Certificated Notes (CUSIP No. 944020AB2), which Notes,
immediately after such transfer, are to be delivered to the transferor at the
address set forth below.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ /the Surrendered Notes are being transferred to the beneficial owner of
---
such Notes;
or
/ /the Surrendered Notes are being transferred pursuant to and in
---
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are being transferred
to a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
or
B4-1
<PAGE>
/ /the Surrendered Notes are being transferred in a transaction permitted
---
by Rule 144 under the Securities Act;
or
/ /the Surrendered Notes are being transferred pursuant to an effective
---
registration statement under the Securities Act;
or
/ /such transfer is being effected pursuant to an exemption from the
---
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
Dated:
-------------, ----
------------------------------
[Address of Transferor]
------------------------------
cc: Wavetek Corporation
B4-2
<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM CERTIFICATED NOTE TO RULE 144A GLOBAL NOTE OR
REGULATION S PERMANENT GLOBAL NOTE
(Pursuant to Section 2.06(e) of the Indenture)
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation
Reference is hereby made to the Indenture, dated as of June 11, 1997 (the
"Indenture"), among Wavetek Corporation, as issuer (the "Company"), the
Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
/ /the Surrendered Notes are being transferred to the beneficial owner of
---
such Notes;
or
/ /the Surrendered Notes are being transferred pursuant to and in
---
accordance with Rule 144A under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, the Transferor
hereby further certifies that the Surrendered Notes are being transferred
to a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts with
respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A;
or
/ /the Surrendered Notes are being transferred in a transaction permitted
---
by Rule 144 under the Securities Act;
or
/ /the Surrendered Notes are being transferred in a transaction permitted
---
by Rule 904 under the
B5-1
<PAGE>
Securities Act;
or
/ /the Surrendered Notes are being transferred pursuant to an effective
---
registration statement under the Securities Act;
or
/ /such transfer is being effected pursuant to an exemption from the
---
registration requirements of the Securities Act other than Rule 144A or
Rule 144, and the Transferor hereby further certifies that the Notes are
being transferred in compliance with the transfer restrictions applicable
to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of
Counsel, provided by the transferor or the transferee (a copy of which the
Transferor has attached to this certification) in form reasonably
acceptable to the Company and to the Registrar, to the effect that such
transfer is in compliance with the Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Rule 144 or Regulation S under the Securities Act.
------------------------------
[Insert Name of Transferor]
By:
---------------------------------
Name:
Title:
Dated:
-------------, -----
cc: Wavetek Corporation
B5-2
<PAGE>
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of June 11, 1997
by and among
WAVETEK CORPORATION
and
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of June 11, 1997 by and between Wavetek Corporation, a
Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "PURCHASER"), who has agreed to purchase the
Company's 10 1/8% Series A Senior Subordinated Notes due 2007 (the "SERIES A
NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated June 6,
1997 (the "PURCHASE AGREEMENT"), by and between the Company and the
Purchaser. In order to induce the Purchaser to purchase the Series A 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 Purchaser set forth in Section 2 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) 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 (iii) the delivery by
the Company to the Registrar under the Indenture of Series B Notes in the
same aggregate principal amount as the aggregate principal amount of Series A
Notes that were tendered by Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Series A Notes,
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
1
<PAGE>
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Series B 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 Purchaser proposes to
sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3)
and (7) of Regulation D under the Act ("ACCREDITED INSTITUTIONS"), and to
"foreign persons" "outside the United States," as such terms are defined in
Regulation S under the Act.
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated as of June 11, 1997, by and between the
Company and The Bank of New York, 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 Series A Notes and the Series B Notes.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement, 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.
PURCHASER: As defined in the preamble hereto.
RECORD HOLDER: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
2
<PAGE>
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant
to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
SERIES B NOTES: The Company's 10 1/8% Series B Senior Subordinated Notes
due 2007 to be issued pursuant to the Indenture in the Exchange Offer.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
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 Series A Note, until the earliest
to occur of (a) the date on which such Series A 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 Series A Note has been effectively registered under
the Act and disposed of in accordance with a Shelf Registration Statement and
(c) the date on which such Series A Note is distributed to the public
pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein).
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 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.
3
<PAGE>
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a)
below have been complied with), the Company 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, a Registration Statement under the
Act relating to the Series B Notes and the Exchange Offer, (ii) use its best
efforts to cause such Registration Statement to become effective at the
earliest possible time, but in no event later than 120 days after the Closing
Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to
cause such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Series B 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 Registration
Statement, commence the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered
in exchange for the Transfer Restricted Securities and to permit resales of
Notes held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a
period of 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 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 shall
use its 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 45 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result
of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company) may exchange such
Series A Notes 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 any resales of the Series B Notes 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 resales by Broker-Dealers that the Commission may require in order to
permit such resales 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
4
<PAGE>
the extent required by the Commission as a result of a change in policy after
the date of this Agreement.
The Company shall use its 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 resales of Notes acquired by Broker-Dealers
for their own accounts as a result of market-making activities or other
trading activities, 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 one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during
such one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to Consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been
complied with) or (ii) if any Holder of Transfer Restricted Securities shall
notify the Company within 20 business days of the Consummation of the
Exchange Offer (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Series A Notes acquired directly from the Company or
one of its affiliates, then the Company shall:
(x) cause to be filed 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") on or prior to the earliest to occur of (1) the 60th day
after the date on which the Company determines that it is not required
to file the Exchange Offer Registration Statement, (2) the 60th day
after the date on which the Company receives notice from a Holder of
Transfer Restricted Securities as contemplated by clause (ii) above, and
(3) the 120th day after the Closing Date (such earliest date being the
"SHELF FILING DEADLINE"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of
which shall have provided the information required pursuant to Section
4(b) hereof; and
(y) use its best efforts to cause such Shelf Registration to be
declared effective by the Commission on or before the 60th day after the
Shelf Filing Deadline.
5
<PAGE>
The Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of 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 following the Closing Date.
(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 business days after receipt of a request
therefor, such information as the Company may reasonably request 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 used its best efforts to provide all such reasonably
requested 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.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements 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 of such Registration Statements 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 45 business days
after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) 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 immediately declared
effective (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), the Company hereby agrees 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, in an amount equal to $.05 per week per $1,000 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 $.50 per week per $1,000
principal amount of Transfer Restricted Securities. All accrued liquidated
damages shall be paid to Record Holders by the Company by wire transfer of
immediately available funds or by federal
6
<PAGE>
funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with
respect to such Transfer Restricted Securities will cease.
All obligations of the Company 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.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company shall comply with all of the provisions of
Section 6(c) below, shall use its best efforts to effect such exchange to
permit the sale of 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 in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter or
other favorable decision from the Commission allowing the
Company and the Guarantor to Consummate an Exchange Offer for such
Series A Notes. The Company hereby agrees to pursue the issuance of
such a decision to the Commission staff level but shall not be required
to take any action to effect a change of Commission policy. The Company
hereby agrees, however, to (A) participate in telephonic conferences
with the Commission, (B) deliver 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 pursue a resolution (which need
not be favorable) 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 thereof, a written representation to the
Company (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
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange
Offer. 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.,
7
<PAGE>
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 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 should be covered by an
effective 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 Series B Notes obtained by such Holder in exchange
for Series A Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is 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 and (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer
is acquiring the Series B Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its 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, and
pursuant thereto the Company will as expeditiously as possible 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.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales
of Notes by Broker-Dealers), the Company shall:
(i) use its 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 any guarantor of the Notes) 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
8
<PAGE>
Company shall file promptly an appropriate amendment
to such Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either clause (A)
or (B), use its 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;
(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 the
applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; 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 the applicable provisions of Rules 424 and 430A
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 intended method or methods of distribution by the sellers thereof
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, to confirm 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 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 or the
Prospectus in order to make the statements therein not misleading. 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 under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), 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), which documents will be
subject to the review of such Holders and
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underwriter(s), if any, 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 a selling Holder of Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s), if any, shall reasonably
object within five 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;
(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), if any, make the Company's 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 the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
any guarantor of the Notes and cause the Company's and any such
guarantor's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate 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, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities 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 incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal
amount of Notes covered thereby or the underwriter(s), if any;
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(ix) furnish to each selling Holder and each of the underwriter(s),
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);
(x) 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 hereby consents to the use
of the Prospectus and any 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;
(xi) 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,
all to such extent as may be requested by the Purchaser or 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 whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company shall:
(A) furnish to each selling Holder and each underwriter, if
any, in such substance and scope as they may request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer
and, if applicable, the effectiveness of the Shelf Registration
Statement:
(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 by (y) the
President or any Vice President and (z) a principal financial
or accounting officer of each of the Company and any guarantor
of the Notes, confirming, as of the date thereof, the matters
set forth in paragraphs (a), (b), (c) and (d) of Section 9 of
the Purchase Agreement and such other matters as such parties
may reasonably request;
(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, covering the matters set forth in paragraph (i) of
Section 9 of the Purchase Agreement and such other matter as
such parties may reasonably request, 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, representatives of the
independent public accountants for the Company in connection
with the preparation of such Registration Statement and the
related Prospectus and have considered the matters required to
be stated therein and the
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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 large
extent upon facts provided to such counsel by officers and
other representatives of the Company 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 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, and has not independently verified, 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
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section
9(k) 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 such parties 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 pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
contemplated in clause (A)(1) above cease to be true and correct, the
Company shall so advise the Purchaser and the underwriter(s), if any,
and each selling Holder promptly and, if requested by such Persons,
shall confirm such advice in writing;
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(xii) 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 under the
securities or Blue Sky laws of such jurisdictions as the selling Holders
or underwriter(s) 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 Shelf Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
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;
(xiii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be registered
in the name of such Holder or in the name of the purchaser(s) of such Notes,
as the case may be; in return, the Series A Notes held by such Holder shall
be surrendered to the Company for cancellation;
(xiv) 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 enable such Transfer Restricted
Securities to be in such denominations and registered in
such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of
Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer
Restricted Securities 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, subject to the proviso contained in clause
(viii) above;
(xvi) if any fact or event contemplated by clause
(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, 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 not
misleading;
(xvii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of
the Registration Statement 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 Depositary Trust Company;
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(xviii) 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") that is
required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable 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;
(xix) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission,
and make generally available to its security holders, as
soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the
end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best
efforts Underwritten Offering or (B) if not sold to
underwriters in such an offering,
(xx) 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;
(xxi) cause all Transfer Restricted Securities
covered by the Registration Statement to be listed on each
securities exchange on which similar securities issued by
the Company are then listed if requested by the Holders of a
majority in aggregate principal amount of Series A Notes or
the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon
request each document filed with the Commission pursuant to
the requirements of Section 13 and Section 15 of the
Exchange Act.
Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of 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)(xvi) hereof, or until it
is advised in writing (the "ADVICE") by the Company 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
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then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of 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)(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)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made by the Purchaser or 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 Series B 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 and, subject to
Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing Notes on a national
securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and any guarantor of the Notes
(including the expenses of any special audit and comfort letters required by
or incident to such performance).
The Company will, in any event, bear its and any guarantor's
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.
(b) In connection with any Shelf Registration Statement required
by this Agreement, the Company will reimburse the Holders of Transfer
Restricted Securities being registered pursuant to the Shelf Registration
Statement for the reasonable fees and disbursements of not more than one
counsel, who shall be Latham & Watkins or such other counsel as may be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Shelf Registration Statement is being
prepared.
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SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder and (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of
the persons referred to in this clause (ii) being hereinafter referred to as
a "controlling person") and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "INDEMNIFIED HOLDER"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including without limitation and as
incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly
or indirectly caused by, related to, based upon, arising out of or in
connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or 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, or any act or failure to act or
any alleged act or failure to act in connection with, or relating in any
manner to the transactions contemplated hereby, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the
Holders furnished in writing to the Company by any of the Holders expressly
for use therein.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Company in
writing (PROVIDED, that the failure to give such notice shall not relieve the
Company of its obligations pursuant to this Agreement). Such Indemnified
Holder shall have the right to employ its own counsel in any such action and
the fees and expenses of such counsel shall be paid, as incurred, by the
Company (regardless of whether it is ultimately determined that an
Indemnified Holder is not entitled to indemnification hereunder). The
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for such Indemnified Holders, which firm shall be designated by the Holders.
The Company shall be liable for any settlement of any such action or
proceeding effected with the Company's prior written consent, which consent
shall not be withheld unreasonably, and the Company agrees to indemnify and
hold harmless any Indemnified Holder from and against any loss, claim,
damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not,
without the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened
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action, claim, litigation or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not any Indemnified
Holder is a party thereto), unless such settlement, compromise, consent or
termination includes an unconditional release of each Indemnified Holder from
all liability arising out of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, and
its directors, officers, and any person controlling (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company, and the
respective officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing indemnity
from the Company to each of the Indemnified Holders, but only with respect to
claims and actions based on information relating to such Holder furnished in
writing by such Holder expressly for use in any Registration Statement. In
case any action or proceeding shall be brought against the Company or its
directors or officers or any such controlling person in respect of which
indemnity may be sought against a Holder of Transfer Restricted Securities,
such Holder shall have the rights and duties given the Company and the
Company or its directors or officers or such controlling person shall have
the rights and duties given to each Holder by the preceding paragraph. In no
event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holders on the other
hand from their sale of Transfer Restricted Securities or if such allocation
is not permitted by applicable law, the relative fault of the Company on the
one hand and of the Indemnified Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Indemnified Holder on the other 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 or by the Indemnified Holder and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.
The Company and each Holder of Transfer Restricted Securities agree
that it would not be just and equitable if contribution pursuant to this
Section 8(c) were determined by pro rata
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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
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, 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 Section 8, none of
the Holders (and its related Indemnified Holders) shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total discount received by such Holder with respect to the Series A Notes
exceeds 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. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders hereunder and
not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, 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.
SECTION 10. PARTICIPATION IN 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 any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering,
the investment banker or investment bankers and
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manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities included in such offering; PROVIDED, that such
investment bankers and managers must be reasonably satisfactory to the
Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages (including
the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it 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. The Company will not, 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. The
Company has not previously entered into any 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
securities under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take
any action, or 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 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 being tendered or registered.
(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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(ii) if to the Company:
Wavetek Corporation
11995 El Camino Real
Suite 301
San Diego, California 92130
Telecopier No.: (619) 793-2310
Attention: Chief Financial Officer
With a copy to:
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Telecopier No.: (213) 683-0457
Attention: Alison S. Ressler
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 answered back, if telexed; 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; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities from such Holder.
(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.
20
<PAGE>
(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 together with the other
Operative Documents (as defined in the Purchase 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 restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
WAVETEK CORPORATION
By: /s/ Vickie L. Capps
-----------------------
Name: Vickie L. Capps
Title: Vice President and
Chief Financial Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Ted Iantuono
---------------------
Name: Ted Iantuono
Title: Vice President
22
<PAGE>
EXHIBIT 5.1
[SULLIVAN & CROMWELL LETTERHEAD]
July 28, 1997
Wavetek Corporation,
Wavetek U.S. Inc.,
11995 El Camino Real, Suite 301,
San Diego, CA 92130.
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933
(the "Act") of $85,000,000 aggregate principal amount of 10 1/8% Senior
Subordinated Notes due 2007 (the "Securities") of Wavetek Corporation, a
Delaware corporation (the "Company"), and the Subsidiary Guarantee (the
"Subsidiary Guarantee") of Wavetek U.S. Inc., a Delaware Corporation (the
"Subsidiary Guarantor"), we, as your counsel, have examined such corporate
records, certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our
opinion, when the Registration Statement has
<PAGE>
-2-
become effective under the Act, the terms of the Securities and of their
issuance and sale have been duly established in conformity with the Indenture
relating to the Securities so as not to violate any applicable law or result
in a default under or breach of any agreement or instrument binding upon the
Company and so as to comply with any requirement or restriction imposed by
any court or governmental body having jurisdiction over the Company, and the
Securities and Subsidiary Guarantee have been duly executed and authenticated
in accordance with the Indenture and issued and sold as contemplated in the
Registration Statement, the Securities will constitute valid and legally
binding obligations of the Company and the Subsidiary Guarantee will
constitute the valid and legally binding obligation of the Subsidiary
Guarantor, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the United
States, the laws of the State of New York and the General Corporation Law of the
State of Delaware, and we are expressing no opinion as to the effect of the laws
of any other jurisdiction.
<PAGE>
-3-
We have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
Notes" in the Prospectus. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE>
EXHIBIT 8.1
[SULLIVAN & CROMWELL LETTERHEAD]
July 28, 1997
Wavetek Corporation,
Wavetek U.S. Inc.,
11995 El Camino Real, Suite 301,
San Diego, California 92130.
Ladies and Gentlemen:
We have acted as your counsel in connection with the registration
under the Securities Act of 1933 (the "Act") of $85,000,000 aggregate principal
amount of 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation (the
"Company") and the Subsidiary Guarantee of Wavetek U.S. Inc. (the "Subsidiary
Guarantor"). We hereby confirm to you that our opinion is as set forth under
the caption "The Exchange Offer--Federal Income Tax Consequences" in the
prospectus, dated July 28, 1997 (the "Prospectus"), included in the related
Registration Statement on Form S-4 filed by the Company and the Subsidiary
Guarantor with the Securities and Exchange Commission (the "Registration
Statement").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "The
Exchange Offer--Federal Income Tax Consequences" in the Prospectus. In giving
such consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$45,000,000
CREDIT AGREEMENT
DATED AS OF JUNE 11, 1997
AMONG
WAVETEK CORPORATION
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
AND
FLEET NATIONAL BANK,
AS ADMINISTRATIVE AGENT
ARRANGED BY:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WAVETEK CORPORATION
CREDIT AGREEMENT
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement. . . . . . . . . . . . . . . . 35
1.3 Other Definitional Provisions and Rules of Construction . . 35
1.4 Currency Equivalents Generally. . . . . . . . . . . . . . . 36
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS. . . . . . . . . 36
2.1 Commitments; Making of Loans; Notes; Register; General
Provisions Regarding Offshore Currency Loans. . . . . . . . 36
2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . 48
2.3 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments. . . . . 53
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 61
2.6 Special Provisions Governing Offshore Rate Loans. . . . . . 62
2.7 Increased Costs; Taxes; Capital Adequacy. . . . . . . . . . 65
2.8 Obligation of Lenders and Issuing Lenders to Mitigate . . . 69
2.9 DEFAULTING LENDERS. . . . . . . . . . . . . . . . . . . . . 70
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . 71
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein. . . . . . . . . . . . . . . . . . . 71
3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . 74
3.3 Drawings and Reimbursement of Amounts Paid Under Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 75
3.4 Obligations Absolute. . . . . . . . . . . . . . . . . . . . 78
3.5 Indemnification; Nature of Issuing Lenders' Duties. . . . . 79
3.6 Increased Costs and Taxes Relating to Letters of Credit . . 80
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . . . . 81
4.1 Conditions to Term Loans and Initial Revolving Loans,
Offshore Currency Loans and Swing Line Loans. . . . . . . . 81
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . 89
4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . 90
(i)
<PAGE>
PAGE
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 91
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries . . . . . . . . . . . . . . . . . 91
5.2 Authorization of Borrowing, etc.. . . . . . . . . . . . . . 92
5.3 Financial Condition . . . . . . . . . . . . . . . . . . . . 93
5.4 No Material Adverse Change; No Restricted Junior Payments . 94
5.5 Title to Properties; Liens; Real Property . . . . . . . . . 94
5.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . 95
5.7 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . 95
5.8 Performance of Agreements; Materially Adverse Agreements. . 96
5.9 Governmental Regulation . . . . . . . . . . . . . . . . . . 96
5.10 Securities Activities . . . . . . . . . . . . . . . . . . . 96
5.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 96
5.12 Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . 97
5.13 Environmental Protection. . . . . . . . . . . . . . . . . . 97
5.14 Employee Matters. . . . . . . . . . . . . . . . . . . . . . 98
5.15 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.16 Matters Relating to Collateral. . . . . . . . . . . . . . . 99
5.17 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 100
6.1 Financial Statements and Other Reports. . . . . . . . . . . 100
6.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . 105
6.3 Payment of Taxes and Claims; Tax Consolidation. . . . . . . 106
6.4 Maintenance of Properties; Insurance. . . . . . . . . . . . 106
6.5 Inspection Rights; Lender Meeting . . . . . . . . . . . . . 107
6.6 Compliance with Laws, etc.. . . . . . . . . . . . . . . . . 108
6.7 Environmental Review and Investigation, Disclosure, Etc.;
Company's Actions Regarding Hazardous Materials
Activities, Environmental Claims and Violations of
Environmental Laws. . . . . . . . . . . . . . . . . . . . . 108
6.8 Execution of Subsidiary Guaranty and Personal Property
Collateral Documents by Certain Subsidiaries and Future
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 111
6.9 Conforming Leasehold Interests; Matters Relating to
Additional Real Property Collateral . . . . . . . . . . . . 112
SECTION 7. COMPANY'S NEGATIVE COVENANTS. . . . . . . . . . . . . . . . 114
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 114
7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . 116
7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . 117
7.4 Contingent Obligations. . . . . . . . . . . . . . . . . . . 118
7.5 Restricted Junior Payments. . . . . . . . . . . . . . . . . 120
7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . 120
(ii)
<PAGE>
PAGE
7.7 Restriction on Fundamental Changes; Asset Sales and
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 124
7.8 Consolidated Capital Expenditures . . . . . . . . . . . . . 126
7.9 Restriction on Leases . . . . . . . . . . . . . . . . . . . 127
7.10 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . 127
7.11 Sale or Discount of Receivables . . . . . . . . . . . . . . 127
7.12 Transactions with Shareholders and Affiliates . . . . . . . 128
7.13 Disposal of Subsidiary Stock; Restrictions on
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 129
7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . 129
7.15 Amendments of Certain Documents; Designation of
"Designated Senior Debt." . . . . . . . . . . . . . . . . . 129
SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 130
8.1 Failure to Make Payments When Due . . . . . . . . . . . . . 130
8.2 Default in Other Agreements . . . . . . . . . . . . . . . . 130
8.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . 131
8.4 Breach of Warranty. . . . . . . . . . . . . . . . . . . . . 131
8.5 Other Defaults Under Loan Documents . . . . . . . . . . . . 131
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . 131
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . 132
8.8 Judgments and Attachments . . . . . . . . . . . . . . . . . 132
8.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 133
8.10 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 133
8.11 Change of Control . . . . . . . . . . . . . . . . . . . . . 133
8.12 Invalidity of Subsidiary Guaranty . . . . . . . . . . . . . 133
8.13 Failure of Security . . . . . . . . . . . . . . . . . . . . 133
8.14 Failure to Consummate the Recapitalization Transactions . . 133
8.15 Action Under Related Financing Documents. . . . . . . . . . 134
SECTION 9. THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . 135
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 135
9.2 Powers and Duties; General Immunity . . . . . . . . . . . . 136
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness . . . . . . . . . . . . . . . 138
9.4 Right to Indemnity. . . . . . . . . . . . . . . . . . . . . 139
9.5 Successor Agents, Swing Line Lender and Offshore
Currency Funding Lender . . . . . . . . . . . . . . . . . . 139
9.6 Collateral Documents and Subsidiary Guaranty. . . . . . . . 141
9.7 Other Titles. . . . . . . . . . . . . . . . . . . . . . . . 142
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 142
10.1 Assignments and Participations in Loans and Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 142
10.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 145
10.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 146
(iii)
<PAGE>
PAGE
10.4 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . 147
10.5 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . 148
10.6 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 148
10.7 Independence of Covenants . . . . . . . . . . . . . . . . . 150
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 150
10.9 Survival of Representations, Warranties and Agreements. . . 150
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . 151
10.11 Marshalling; Payments Set Aside . . . . . . . . . . . . . . 151
10.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . 151
10.13 Obligations Several; Independent Nature of Lenders' Rights. 151
10.14 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 152
10.15 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 152
10.16 Successors and Assigns. . . . . . . . . . . . . . . . . . . 152
10.17 Consent to Jurisdiction and Service of Process. . . . . . . 152
10.18 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 153
10.19 Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . 154
10.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 154
10.21 Counterparts; Effectiveness . . . . . . . . . . . . . . . . 155
Signature pages . . . . . . . . . . . . . . . . . . . . . . S-1
(iv)
<PAGE>
EXHIBITS
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 TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF COMPLIANCE CERTIFICATE
VIII FORM OF OPINION OF SULLIVAN & CROMWELL
IX FORMS OF OPINIONS OF LOCAL AND FOREIGN COUNSEL
X FORM OF OPINION OF O'MELVENY & MYERS LLP
XI FORM OF ASSIGNMENT AGREEMENT
XII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIII FORM OF COMPANY PLEDGE AGREEMENT
XIV FORM OF COMPANY SECURITY AGREEMENT
XV FORM OF COMPANY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
XVI FORM OF COMPANY TRADEMARK SECURITY AGREEMENT
XVII FORM OF SUBSIDIARY GUARANTY
XVIII FORM OF SUBSIDIARY PLEDGE AGREEMENT
XIX FORM OF SUBSIDIARY SECURITY AGREEMENT
XX FORM OF SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
XXI FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT
XXII FORM OF MORTGAGE
XXIII FORM OF FINANCIAL CONDITION CERTIFICATE
XXIV FORM OF AUDITOR'S LETTER
XXV FORM OF OFFSHORE CURRENCY NOTE
(v)
<PAGE>
SCHEDULES
1.1 LENDING OFFICES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1E CLOSING DATE MORTGAGED PROPERTIES
5.1 SUBSIDIARIES OF COMPANY
5.5 REAL PROPERTY
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
5.13 ENVIRONMENTAL MATTERS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
(vi)
<PAGE>
WAVETEK CORPORATION
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of June 11, 1997 and entered into by and
among WAVETEK CORPORATION, a Delaware corporation ("COMPANY"), THE LENDERS
LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a
"LENDER" and collectively as "LENDERS"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as
syndication agent hereunder for Lenders (in such capacity, "SYNDICATION AGENT"),
and FLEET NATIONAL BANK, as administrative agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT").
R E C I T A L S
WHEREAS, Company intends to engage in certain recapitalization transactions
(the "Recapitalization Transactions") whereby Company will repurchase shares of
its common stock (including all shares of its outstanding Class B Common Stock)
and make cash payments for the surrender of stock options from employees in an
aggregate amount not to exceed $159,400,000;
WHEREAS, Company will finance the Recapitalization Transactions, including
the payment of related fees and expenses, from the proceeds of (i) the issuance
of shares of its Common Stock (terms used herein without definition shall have
the meanings set forth therefor in subsection 1.1 of this Agreement) to the New
Equity Investors for an aggregate purchase price of approximately $43,500,000,
which shares of Common Stock represent 49.7% of Company's outstanding Common
Stock following the Recapitalization Transactions, (ii) the issuance of not less
than $85,000,000 in original principal amount of Senior Subordinated Notes,
(iii) cash-on-hand of Company and (iv) $25,000,000 in Term Loans and
approximately $3,500,000 in Revolving Loans;
WHEREAS, Company desires to secure all of its Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a First Priority Lien on substantially all of its property, including a
pledge of all of the capital stock of each of its Domestic Subsidiaries and a
pledge of sixty-five percent (65%) of the capital stock of each of its Foreign
Subsidiaries;
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 First Priority Lien on substantially all of their respective
property, including a pledge of all of the capital stock of each of their
respective Domestic Subsidiaries and a
1
<PAGE>
pledge of sixty-five percent (65%) of the capital stock of each of their Foreign
Subsidiaries other than any Immaterial Subsidiary;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders, Syndication Agent
and Administrative Agent agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACQUISITION" has the meaning assigned to that term in subsection
7.7(ii).
"ADDITIONAL MORTGAGE" has the meaning assigned to that term in
subsection 6.9B.
"ADDITIONAL MORTGAGE POLICY" has the meaning assigned to that term in
subsection 6.9B.
"ADDITIONAL MORTGAGED PROPERTY" has the meaning assigned to that term
in subsection 6.9B.
"ADJUSTED OFFSHORE RATE" means, for any Interest Rate Determination
Date with respect to an Interest Period for an Offshore Rate Loan, the rate per
annum obtained by (a) DIVIDING (i) the arithmetic average of the offered
quotations (rounded upward to the nearest 1/16 of one percent) to first class
banks in the London interbank market by Reference Lender for deposits (for
delivery on the first day of such Interest Period) in the Applicable Currency of
amounts comparable to the principal amount of the Offshore Rate Loans of
Reference Lender for which the Adjusted Offshore Rate is then being determined
with maturities comparable to such Interest Period as of 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 and without duplication, ADDING (b) the additional cost (expressed
as a percentage per annum and rounded upwards to the nearest 1/16 of one
percent) to the Lenders of complying with the relative reserve asset ratio
required by the Bank of England from time to time (if any) and any analogous
requirement of any central banking or financial regulatory authority imposed in
2
<PAGE>
respect of the funding or maintenance of commitments or loans of the type
contemplated hereby and applicable to a specific Offshore Currency.
"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.
"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 (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise, or (ii) the ownership of more than 5% of the voting
securities of that Person. Notwithstanding the foregoing, in no event shall any
Lender, the Arranger or any Agent be deemed to be an Affiliate of Company for
purposes of any Loan Document.
"AGENTS" means, collectively, the Syndication Agent and the
Administrative Agent.
"AGREEMENT" means this Credit Agreement dated as of June 11, 1997, as
it may be amended, supplemented or otherwise modified from time to time.
"APPLICABLE BASE RATE MARGIN" means, as of any date of determination,
a percentage per annum as set forth below opposite the applicable Consolidated
Leverage Ratio; PROVIDED that for the period beginning on and including the
Closing Date to and including August 15, 1997, the Applicable Base Rate Margin
shall be 1.50% per annum:
CONSOLIDATED LEVERAGE RATIO APPLICABLE BASE RATE MARGIN
greater than 4.50:1.00 1.50%
less than or equal to 4.50:1.00
but greater than 4.00:1.00 1.25%
less than or equal to 4.00:1.00
but greater than 3.00:1.00 1.00%
less than or equal to 3.00:1.00 0.75%
"APPLICABLE OFFSHORE RATE MARGIN" means, as of any date of
determination, a percentage per annum set forth below opposite the applicable
3
<PAGE>
Consolidated Leverage Ratio; PROVIDED that for the period beginning on and
including the Closing Date to and including August 15, 1997, the Applicable
Offshore Rate Margin shall be 2.50% per annum:
CONSOLIDATED LEVERAGE RATIO APPLICABLE OFFSHORE RATE MARGIN
greater than 4.50:1.00 2.50%
less than or equal to 4.50:1.00
but greater than 4.00:1.00 2.25%
less than or equal to 4.00:1.00
but greater than 3.00:1.00 2.00%
less than or equal to 3.00:1.00 1.75%
"APPLICABLE CURRENCY" means, as to any particular payment, Loan or
Letter of Credit, Dollars or the Offshore Currency in which it is denominated or
is payable.
"ARRANGER" means Donaldson, Lufkin & Jenrette Securities Corporation,
as arranger of the credit facilities described herein.
"ASSET SALE" means the sale, lease, assignment or other transfer
(whether voluntary or involuntary) for value (collectively, a "transfer") by
Company or any of its Subsidiaries to any Person other than Company or any of
its wholly-owned Subsidiaries of (i) any of the stock of any of Company's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of Company or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Company or any of its Subsidiaries
(including, without limitation, the loss, damage or destruction of assets giving
rise to insurance proceeds to the extent such insurance proceeds are not used to
restore, repair or replace the assets so lost, damaged or destroyed within six
months following the receipt of such insurance proceeds), other than (a)
Inventory sold in the ordinary course of business, (b) any such transfer to the
extent that the aggregate value of such assets so transferred in any Fiscal Year
is equal to $250,000 or less and (c) the sale and leaseback of the manufacturing
facility located in Norwich, England.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially
the form of EXHIBIT XI annexed hereto.
"AUDITOR'S LETTER" means a letter, substantially in the form of
EXHIBIT XXIV annexed hereto, from Company's independent certified public
accountants.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
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"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BUSINESS DAY" means (i) for all purposes other than as covered by
clause (ii) and (iii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or California
or the Commonwealth of Massachusetts or is a day on which banking institutions
located in any such state or commonwealth are authorized or required by law or
other governmental action to close, (ii) with respect to all notices,
determinations, fundings and payments in Dollars in connection with the Adjusted
Offshore Rate or any Offshore 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 London interbank market, and (iii) with respect
to all notices, determinations, fundings and payments in any Offshore Currency
in connection with the Adjusted Offshore Rate or any Offshore Rate Loans, any
day that is a Business Day described in clause (i) above and that is also a day
on which banks and foreign exchange markets are open for foreign exchange
business in London, and on which banks and foreign exchange markets are also
open for foreign exchange business in the principal financial center of the
country of that Offshore Currency.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least
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"adequately capitalized" (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations)
of not less than $100,000,000; and (v) shares of any money market mutual fund
that (a) has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of not
less than $500,000,000, and (c) has the highest rating obtainable from either
S&P or Moody's.
"CERTIFICATE RE NON-BANK STATUS" means a certificate in form and
substance satisfactory to Administrative Agent delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii) pursuant to which such
Lender certifies, under penalty of perjury, that it is not (i) a "bank" as such
term is defined in subsection 881(c)(3) of the Internal Revenue Code; (ii) a 10
percent shareholder of Company within the meaning of Section 871(h)(3)(B) or
Section 881(c)(3)(B) of the Internal Revenue Code; or (iii) a "controlled"
foreign corporation related to Company within the meaning of Section 864(d)(4)
of the Internal Revenue Code.
"CHANGE OF CONTROL" means (i) any Person (other than a Permitted
Holder) or any group (within the meaning of Section 13(d)(3) of the Exchange
Act) of Persons (other than any Permitted Holders), shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act), directly or indirectly, in one or
more transactions, of Securities of Company (or other Securities convertible
into such Securities) representing 30% or more of the combined voting power of
all Securities of Company entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, (ii) the first day on which a majority of the members of the Board
of Directors of Company are not Continuing Directors or (iii) any "Change of
Control" as such term is defined in the Senior Subordinated Note Indenture shall
have occurred.
"CLOSING DATE" means June 11, 1997.
"CLOSING DATE MORTGAGE" and "CLOSING DATE MORTGAGES" have the meanings
assigned to those terms in subsection 4.1E(i).
"CLOSING DATE MORTGAGED PROPERTY" and "CLOSING DATE MORTGAGED
PROPERTIES" have the meanings assigned to those terms in subsection 4.1E(i).
"COLLATERAL" means, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted
pursuant to the Collateral Documents as security for the Obligations.
"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 XII annexed hereto, as such
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Collateral Account Agreement may hereafter be amended, supplemented or otherwise
modified from time to time.
"COLLATERAL DOCUMENTS" means the Company Pledge Agreement, the Company
Security Agreement, the Company Trademark Security Agreement, the Company Patent
Collateral Assignment and Security Agreement, the Collateral Account Agreement,
the Subsidiary Pledge Agreements, the Subsidiary Security Agreements, the
Subsidiary Trademark Security Agreements, the Subsidiary Patent Collateral
Assignment and Security Agreements, the Mortgages 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 real, personal or mixed property of that Loan Party as
security for the Obligations.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"COMMITMENT FEE PERCENTAGE" means, as of any date of determination, a
percentage per annum set forth below opposite the applicable Consolidated
Leverage Ratio; PROVIDED that for the period beginning on and including the
Closing Date to and including August 15, 1997, the Commitment Fee Percentage
shall be .50% per annum:
CONSOLIDATED LEVERAGE RATIO COMMITMENT FEE PERCENTAGE
greater than 4.00:1.00 0.500%
less than or equal to 4.00:1.00
but greater than 3.00:1.00 0.375%
less than or equal to 3.00:1.00 0.250%
"COMMITMENTS" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"COMMON STOCK" means the Common Stock of Company, par value $0.01 per
share.
"COMPANY" has the meaning assigned to that term in the introduction to
this Agreement.
"COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement executed
and delivered by Company on the Closing Date, substantially in the form of
EXHIBIT XIII annexed hereto, or any other pledge agreement, document or
instrument
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with a similar or comparable effect executed by Company with respect to a
Foreign Subsidiary, in form and substance satisfactory to Agents, as such
Company Pledge Agreement may thereafter be amended, supplemented or otherwise
modified from time to time.
"COMPANY SECURITY AGREEMENT" means the Company Security Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of EXHIBIT XIV annexed hereto, as such Company Security Agreement may thereafter
be amended, supplemented or otherwise modified from time to time.
"COMPANY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT" means
the Company Patent Collateral Assignment and Security Agreement executed and
delivered by Company on the Closing Date, substantially in the form of EXHIBIT
XV annexed hereto, as such Company Patent Collateral Assignment and Security
Agreement may thereafter be amended, supplemented or otherwise modified from
time to time.
"COMPANY TRADEMARK SECURITY AGREEMENT" means the Company Trademark
Security Agreement executed and delivered by Company on the Closing Date,
substantially in the form of EXHIBIT XVI annexed hereto, as such Company
Trademark 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 VII annexed hereto delivered to Administrative Agent and Lenders by
Company pursuant to subsection 6.1(iv).
"COMPUTATION DATE" has the meaning specified in subsection 2.1F.
"CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest
as to which the lessor has agreed in writing for the benefit of Administrative
Agent (which writing has been delivered to Administrative Agent), whether under
the terms of the applicable lease, under the terms of a Landlord Estoppel and
Consent, or otherwise, to the matters described in the definition of "Landlord
Estoppel and Consent," which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
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.
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"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination,
the total assets of Company and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP, EXCLUDING
Cash and Cash Equivalents.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, EXCLUDING the current portions of Consolidated Total Debt.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income,
PLUS, to the extent such items were included in such computation of Consolidated
Net Income, the sum of the amounts for such period of (i) Consolidated Interest
Expense, (ii) provisions for taxes based on income, (iii) total depreciation
expense, (iv) total amortization expense, (v) other non-cash items reducing
Consolidated Net Income and (vi) with respect to the Fiscal Year ended September
30, 1996 only, any provision for restructuring operations LESS other non-cash
items increasing Consolidated Net Income, all of the foregoing as determined on
a consolidated basis for Company and its Subsidiaries in conformity with GAAP;
PROVIDED that Consolidated Net Income shall exclude the impact of foreign
currency translations and any one-time charge or expense incurred in order to
make cash payments to option holders pursuant to the Stock Purchase and
Recapitalization Agreement. Notwithstanding the foregoing, the provision for
taxes based on the income of, and the depreciation and amortization and other
non-cash charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to Company by such Subsidiary either (i) without prior governmental
approval or (ii) with governmental approval that has been obtained or that could
readily and reasonably be obtained, and without direct or indirect restriction
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 EXCESS CASH FLOW" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital
Adjustment MINUS (ii) the sum, without duplication, of the amounts for such
period of (a) voluntary and scheduled repayments of Consolidated Total Debt
(excluding repayments of Revolving Loans except to the extent the Revolving Loan
Commitments are permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (without duplication, net of any proceeds of
any related financings with respect to such expenditures), (c) Consolidated
Interest Expense, and (d) the provision for current taxes based on income of
Company and its Subsidiaries and payable in cash with respect to such period.
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<PAGE>
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Interest
Expense, (ii) provisions for taxes based on income, and (iii) scheduled
principal payments in respect of Consolidated Total Debt, 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, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Company and
its Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding, however, any
amounts payable to Arranger and Administrative Agent with respect to the
financings contemplated by this Agreement on or before the Closing Date.
"CONSOLIDATED LEVERAGE RATIO" means as at any date of determination,
the ratio of Consolidated Total Debt as of the last day of the Fiscal Quarter
immediately preceding the Fiscal Quarter in which such date of determination
occurs to Consolidated EBITDA for the four Fiscal Quarters ending as of such
last day of such immediately preceding Fiscal Quarter.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; PROVIDED
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted without prior governmental approval (unless such governmental
approval could be readily and reasonably obtained) or, directly or indirectly,
permitted 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, (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any Pension Plan, and
(v) (to the extent not included in clauses (i) through (iv) above) any net
extraordinary gains or net non-cash extraordinary losses.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the
sum of the capital stock and additional paid-in capital plus retained earnings
(or
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minus accumulated deficits) of Company and its Subsidiaries on a consolidated
basis determined in conformity with GAAP.
"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 as lessee.
"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.
"CONSOLIDATED WORKING CAPITAL" means, as at any date of determination,
the excess (or deficit) of Consolidated Current Assets over Consolidated Current
Liabilities.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"CONTINGENT OBLIGATION," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other monetary obligation of another if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof, (ii) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the
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amount of the obligation so guaranteed or otherwise supported or, if less, the
amount to which such Contingent Obligation is specifically limited.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of Company who (i) was a member of such Board
of Directors on the Closing Date (after the consummation of the Recapitalization
Transactions) or (ii) was nominated for election or elected to such Board of
Directors either pursuant to the Stockholders Agreement or with the affirmative
vote of a majority of the Continuing Directors who were members of such Board at
the time of nomination or election.
"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 designed to protect Company or any of its Subsidiaries against
fluctuations in currency values with respect to known or reasonably anticipated
receipts or disbursements of funds.
"DEFAULT EXCESS" has the meaning assigned to that term in subsection
2.9.
"DEFAULTING LENDER" has the meaning assigned to that term in
subsection 2.9.
"DEFAULT PERIOD" has the meaning assigned to that term in subsection
2.9.
"DEFAULTED REVOLVING LOAN" has the meaning assigned to that term in
subsection 2.9.
"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.
"DLJ" has the meaning assigned to that term in the introduction to
this Agreement.
"DLJMB INVESTOR GROUP" means DLJ Merchant Banking Partners II, L.P.,
DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding
II, Inc., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C., DLJ EAB
Partners, L.P. and DLJ Millenium Partners, L.P.
"DOLLAR EQUIVALENT" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to any
amount denominated in an Offshore Currency, the equivalent amount in Dollars as
determined by the Administrative Agent at such time on the basis of the Spot
Rate for the purchase of Dollars with such Offshore Currency on the most recent
Computation Date provided for in subsection 2.1F.
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"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"DOMESTIC SUBSIDIARY" means a direct or indirect Subsidiary of Company
that is incorporated or organized under the laws of a state of the United States
of America.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; PROVIDED that (x) such bank is
acting through a branch or agency located in the United States or (y) 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 (iv) 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 (B) any Lender and any Affiliate of any Lender;
PROVIDED that no Affiliate of Company shall be an Eligible Assignee.
"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.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), 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
health or safety as it relates to Hazardous Materials Activity, natural
resources or the environment.
"ENVIRONMENTAL LAWS" means any and all statutes, ordinances, orders,
rules, regulations, guidance documents, judgments, Governmental Authorizations,
or any other requirements of governmental authorities relating to (i)
environmental matters, including those relating to any Hazardous Materials
Activity, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (iii) occupational safety and health or industrial
hygiene as it relates to Hazardous Materials Activity, land use or the
protection of human, plant or animal health or welfare, in any manner applicable
to Company or any of its Subsidiaries or any Facility, including the
Comprehensive Environmental Response, 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.),
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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.) as it relates to
Hazardous Materials Activity, 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 state or local statutes or laws, and any regulations promulgated
pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and any similar or
comparable laws in a jurisdiction outside of the United States applicable to
Company or any of its Subsidiaries.
"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 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 liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of
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proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which constitutes grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the imposition of
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 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.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCESS INTEREST" has the meaning assigned to that term in subsection
2.4C.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and any comparable or similar laws
in a jurisdiction outside of the United States applicable to Company or any of
its Subsidiaries.
"EXISTING CREDIT AGREEMENT" means the First Amended and Restated
Business Loan Agreement, dated as of August 7, 1996, as amended on February 1,
1997, between Bank of America N.T. & S.A. and Wavetek U.S. Inc.
"FACILITIES" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned,
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leased, operated or used by Company or any of its Subsidiaries or any of their
respective predecessors or Affiliates; PROVIDED that any such real property of
any Affiliate shall not be a Facility within the meaning of this definition
unless such real property is in fact leased, operated or used by Company or any
of its Subsidiaries.
"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 (other than Permitted
Encumbrances which as a matter of statutory law have priority over any other
Lien irrespective of the prior perfection or filing of such other Lien) 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 September 30 of each calendar year or such other date as may be
adopted by Company.
"FLEET" means Fleet National Bank.
"FLOOD HAZARD PROPERTY" means a Mortgaged Property located in an area
designated by the Federal Emergency Management Agency as having special flood or
mud slide hazards.
"FOREIGN SUBSIDIARY" means a direct or indirect Subsidiary of Company
which is incorporated or organized under the laws of any government or
sovereignty other than any state of the United States of America.
"FUNDING AND PAYMENT OFFICE" means (i) in respect of funds or payments
in Dollars to Administrative Agent (a) the office of Administrative Agent
specified on Schedule 1.1 as Administrative Agent's Domestic Lending Office or
(b) such other office of Administrative Agent as may from time to time hereafter
be designated as
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such in a written notice delivered by Administrative Agent to Company and each
Lender, (ii) in respect of funds or payments to Swing Line Lender (a) the office
of Swing Line Lender specified on Schedule 1.1 as Swing Line Lender's Lending
Office or (b) such other office of Swing Line Lender as may from time to time
hereafter be designated as such in a written notice delivered by Swing Line
Lender to Company, Administrative Agent and each Lender and (iii) in the case of
payments in any Offshore Currency, (a) the office of Offshore Currency Funding
Lender specified on Schedule 1.1 as Offshore Currency Funding Lender's Offshore
Lending Office or (b) such other address as the Offshore Currency Funding Lender
may from time to time designate as such in a written notice delivered by
Offshore Currency Funding Lender to Company, Administrative Agent and each
Lender.
"FUNDING DATE" means the date of the funding of a Loan.
"FUNDING DEFAULT" has the meaning assigned to that term in subsection
2.9.
"FX TRADING OFFICE" means the office at 75 State Street, Boston MA.,
02109, Attn: Mark Morris, of Administrative Agent, or such other of
Administrative Agent's offices as Administrative Agent may designate from time
to time.
"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.
"GEI" means Green Equity Investors II, L.P.
"GOODING GROUP" means Dr. Terence J. Gooding and each of his Permitted
Transferees.
"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.
"HAZARDOUS MATERIALS" means (i) any chemical, material or substance at
any time 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
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environment (including harmful properties such as ignitability, corrosivity,
reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or
"EP toxicity" or words of similar import 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; (ix) pesticides; and
(x) any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority pursuant to any Environmental
Law or which may or could pose a hazard to the health and safety of the owners,
occupants or any Persons in the vicinity of any Facility or to the indoor or
outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response 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.
"IMMATERIAL SUBSIDIARY" means any Subsidiary of Company that does not
engage in any significant business activity and is designated as such on
SCHEDULE 5.1 annexed hereto; PROVIDED, HOWEVER, that all Immaterial Subsidiaries
in the aggregate shall not own assets with an aggregate fair market value in
excess of $500,000 and shall not generate aggregate annual revenues in excess of
$500,000; and PROVIDED FURTHER that no Immaterial Subsidiary shall have any
Subsidiary other than an Immaterial Subsidiary.
"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether
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the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person and (vi) any other liability that is
classified as indebtedness on a balance sheet in conformity with GAAP.
Obligations under Interest Rate Agreements and Currency Agreements constitute
(X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all
other cases, Investments, and in neither case constitute Indebtedness.
"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,
the fifteenth day of each March, June, September and December of each year,
commencing on the first such date to occur after the Closing Date, and (ii) with
respect to any Offshore Rate Loan, the last day of each Interest Period
applicable to such 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, or an integral multiple thereof, 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, and any similar or comparable laws in a jurisdiction outside of the
United States applicable to Company or any of its Subsidiaries.
"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.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person, (ii) any direct or indirect
redemption, retirement,
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purchase or other acquisition for value, by any Subsidiary of Company from any
Person other than Company or any of its wholly-owned Subsidiaries, of any equity
Securities of such Subsidiary, (iii) any direct or indirect loan, advance (other
than advances to employees for moving, entertainment and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by Company or any of its Subsidiaries to any other Person,
including all indebtedness and accounts receivable from that other Person that
are not current assets or did not arise from sales to that other Person in the
ordinary course of business, or (iv) Interest Rate Agreements or Currency
Agreements not constituting Hedge Agreements. The amount of any Investment
shall be the original cost of such Investment PLUS the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment.
"IP COLLATERAL" means, collectively, the Collateral under the Company
Patent Collateral Assignment and Security Agreement, the Company Trademark
Security Agreement, the Subsidiary Patent Collateral Assignment and Security
Agreement, and the Subsidiary Trademark Security Agreement.
"ISSUING LENDER" means, with respect to any Letter of Credit, the
Lender which is obligated to issue such Letter of Credit, determined as provided
in subsection 3.1B(ii).
"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.
"LANDLORD ESTOPPEL AND CONSENT" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, satisfactory in form and substance to Agents, pursuant
to which such lessor agrees, for the benefit of Administrative Agent, (i) that
without any further consent of such lessor or any further action on the part of
the Loan Party holding such Leasehold Property, such Leasehold Property may be
encumbered pursuant to a Mortgage and may be assigned to the purchaser at a
foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent
third party assignee if any Agent, any Lender, or an Affiliate of either so
acquires such Leasehold Property) and (ii) to such other matters relating to
such Leasehold Property as Agents may reasonably request.
"LEASEHOLD PROPERTY" means any leasehold interest of any Loan Party as
lessee or sublessee under any lease of real property.
"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, and the term "Lenders" shall
include
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Swing Line Lender and Offshore Currency Funding Lender unless the context
otherwise requires; PROVIDED that the term "Lenders", when used in the context
of a particular Commitment, shall mean Lenders having that Commitment.
"LENDING OFFICE" means, as to any Lender, the office or offices of
such Lender specified as its "Domestic Lending Office" or "Offshore Lending
Office," as the case may be, on SCHEDULE 1.1, or such other office or offices as
to which such Lender may from time to time notify Company and Administrative
Agent.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
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 Dollar Equivalent amount which is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding PLUS (ii) the aggregate Dollar Equivalent amount of all
drawings under Letters of Credit honored by Issuing Lenders and not theretofore
reimbursed by Company.
"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.
"LOAN" or "LOANS" means one or more of the Term Loans, Revolving
Loans, Offshore Currency Loans or Swing Line Loans or any combination thereof.
"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 an Issuing Lender relating to,
the Letters of Credit), the Subsidiary Guaranty and the Collateral Documents.
"LOAN PARTY" means each of Company and any of its Subsidiaries from
time to time executing a Loan Document, and "LOAN PARTIES" means all such
Persons, collectively.
"MARGIN DETERMINATION CERTIFICATE" means an Officer's Certificate of
Company delivered with the financial statements required pursuant to subsection
6.1(ii) or 6.1(iii) setting forth the Consolidated Leverage Ratio which is
applicable as of the last day of the fiscal period for which such financial
statements and Officer's Certificate are being delivered.
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"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 or condition (financial or otherwise) of Company and its
Subsidiaries taken as a whole or (ii) the impairment in any material respect of
the ability of any Loan Party to perform, or of Administrative Agent or Lenders
to enforce, the Obligations or any of the Loan Documents.
"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 could
reasonably be expected to have a Material Adverse Effect.
"MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably
determined by Agents to be of material value as Collateral or of material
importance to the operations of Company or any of its Subsidiaries.
"MINIMUM AMOUNT" means (i) in the case of Base Rate Loans, $100,000
or any multiple of $100,000 in excess of that amount, (ii) in the case of
Offshore Rate Loans denominated in Dollars, $100,000 or any multiple of
$100,000 in excess of that amount, (iii) in the case of Offshore Rate Loans
denominated in British pounds sterling, L65,000 or any multiples of L65,000
in excess of that amount, (iv) in the case of Offshore Rate Loans denominated
French francs, (symbol for French franc) 600,000 or any multiples of (symbol
for French franc) 600,000 in excess of that amount and (v) in the case of
Offshore Rate Loans denominated in Deutsche marks, DM175,000 or any multiple
of DM175,000 in excess of that amount.
"MORTGAGE" means (i) a security instrument (whether designated as a
deed of trust, mortgage, leasehold deed of trust or leasehold mortgage or by any
similar title) executed and delivered by any Loan Party, substantially in the
form of EXHIBIT XXII annexed hereto or in such other form as may be approved by
Agents in their sole discretion, in each case with such changes thereto as may
be recommended by Administrative Agent's local counsel based on local laws or
customary local mortgage or deed of trust practices, or (ii) at the option of
Agents, in the case of an Additional Mortgaged Property, an amendment to an
existing Mortgage, in form satisfactory to Agents, adding such Additional
Mortgaged Property to the Real Property Assets encumbered by such existing
Mortgage, in either case as such security instrument or amendment may be
amended, supplemented or otherwise modified from time to time. "MORTGAGES"
means all such instruments, including any Additional Mortgages, collectively.
"MORTGAGED PROPERTY" means a Closing Date Mortgaged Property or an
Additional Mortgaged Property.
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"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) or proceeds received from such Asset Sale, net of any bona fide direct
costs incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of such
Asset Sale as a result of any gain recognized in connection with such Asset Sale
and (ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.
"NEW EQUITY INVESTORS" means the DLJMB Investor Group and GEI.
"NON-US LENDER" has the meaning assigned to that term in subsection
2.7B.
"NOTE OFFERING MEMORANDUM" means the Offering Memorandum dated June 6,
1997, with respect to the Senior Subordinated Notes.
"NOTES" means one or more of the Term Notes, Revolving Notes ,
Offshore Currency Note or Swing Line Note or any combination thereof.
"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 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 Arranger, Agents, Lenders 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.
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"OFFICER'S CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its president or one of
its executive or senior vice presidents, its chief financial officer or its
treasurer; PROVIDED that every Officer's Certificate with respect to the
compliance with a condition precedent to the making of any Loans hereunder shall
include (i) a statement that the officer or officers making or giving such
Officer's Certificate have read such condition and any definitions or other
provisions contained in this Agreement relating thereto and (ii) a statement as
to whether, in the opinion of the signers, such condition has been complied
with.
"OFFSHORE CURRENCY" means at any time British pounds sterling, French
francs and Deutsche Mark.
"OFFSHORE CURRENCY FUNDING LENDER" means Fleet or any Person serving
as a successor Offshore Currency Funding Lender hereunder, in its capacity as
Offshore Currency Funding Lender hereunder.
"OFFSHORE CURRENCY LOAN" means any Offshore Rate Loan denominated in
an Offshore Currency.
"OFFSHORE CURRENCY LOAN COMMITMENT" means the commitment of Offshore
Currency Funding Lender to make Offshore Currency Loans to Company pursuant to
subsection 2.1A(iv).
"OFFSHORE CURRENCY NOTE" means (i) the promissory note of Company
issued pursuant to subsection 2.1D(d) on the Closing Date and (ii) any
promissory note issued by Company to any successor Offshore Currency Funding
Lender pursuant to the last sentence of subsection 9.5C, in each case
substantially in the form of EXHIBIT XXV annexed hereto, as it may be amended,
supplemented or otherwise modified from time to time.
"OFFSHORE CURRENCY SUBLIMIT" means, as to all Loans or Letters of
Credit denominated in Offshore Currencies, $7,500,000.
"OFFSHORE RATE LOANS" means Loans bearing interest at rates determined
by reference to the Adjusted Offshore Rate as provided in subsection 2.2A.
"OPERATING LEASE" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease in
accordance with GAAP other than any such lease under which that Person is the
lessor.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
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"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 (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Loan Documents):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory Liens of carriers, warehousemen, mechanics,
repairmen, workmen and materialmen, and other Liens imposed by law, in each
case incurred in the ordinary course of business (a) for amounts not yet
overdue or (b) for amounts that are overdue and that (in the case of any
such amounts overdue for a period in excess of 5 days) are being contested
in good faith by appropriate proceedings, so long as (1) such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall
have been made for any such contested amounts, and (2) in the case of a
Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;
(iii) 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 to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance
with any applicable terms of the Collateral Documents and not interfering
in any material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries or resulting in a material diminution in
the value of any Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not
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interfere in any material respect with the ordinary conduct of the business
of Company or any of its Subsidiaries or result in a material diminution in
the value of any Collateral as security for the Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any
lease permitted by subsection 7.9, (b) restriction or encumbrance (so long
as such restriction or encumbrance is approved by Agents in their
reasonable discretion) that the interest or title of such lessor or
sublessor may be subject to, or (c) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance
referred to in the preceding clause (b), so long as the holder of such
restriction or encumbrance agrees to recognize the rights of such lessee or
sublessee under such lease and so long as Agents consent to the
subordination;
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of any
real property;
(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the ordinary course of
business of Company and its Subsidiaries; and
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of Company or such Subsidiary.
"PERMITTED HOLDER" means (i) the DLJMB Investor Group, (ii) GEI, (iii)
the Gooding Group or (iv) any Permitted Transferee.
"PERMITTED TRANSFEREE" means, with respect to any Person, (i) any
Affiliate of such Person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such Person or (iii) a
spouse, child, grandchild, stepchild or a child of a stepchild of any such
Person or a trust as to which such Person or such spouse, child, grandchild,
stepchild or child of a stepchild thereof exercises substantial control over the
investment of the trust assets, in each case to
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whom such Person has transferred the beneficial ownership of any Securities of
Company.
"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 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.
"PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as
defined in the Company Pledge Agreement and the Subsidiary Pledge Agreements.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"PRIME RATE" means the rate that Fleet announces from time to time as
its base rate, as in effect from time to time. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. Fleet or any other Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"PRO RATA SHARE" means (i) with respect to all payments, computations
and other matters relating to the Term Loan Commitment or the Term Loan of any
Lender, the percentage obtained by DIVIDING (x) the Term Loan Exposure of that
Lender BY (y) the aggregate Term Loan Exposure of all Lenders, (ii) with respect
to all payments, computations and other matters relating to the Revolving Loan
Commitment or the Revolving Loans of any Lender or any Letters of Credit issued
or participations therein purchased by any Lender or any participations in any
Swing Line Loans or Offshore Currency Loans purchased by any Lender, the
percentage obtained by DIVIDING (x) the Revolving Loan Exposure of that Lender
BY (y) the aggregate Revolving Loan Exposure of all Lenders, and (iii) for all
other purposes with respect to each Lender, the percentage obtained by DIVIDING
(x) the sum of the Term Loan Exposure of that Lender PLUS the Revolving Loan
Exposure of that Lender BY (y) the sum of the aggregate Term Loan Exposure of
all Lenders PLUS the aggregate Revolving Loan Exposure of all Lenders, in any
such case as the applicable percentage may be adjusted by assignments permitted
pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for
purposes of each of clauses (i), (ii) and (iii) of the preceding sentence is set
forth opposite the name of that Lender in SCHEDULE 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any
successor or substitute office in which filings are necessary or, in the opinion
of
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Administrative Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"REAL PROPERTY ASSET" means, at any time of determination, any
interest in any real property then owned or leased (as lessee) by any Loan
Party.
"RECAPITALIZATION TRANSACTIONS" has the meaning assigned to that term
in the Recitals hereof.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect
to which a Record Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in the reasonable judgment of Agents, to give
constructive notice of such Leasehold Property to any and all third-parties.
For purposes of this definition, the term "RECORD DOCUMENT" means, with respect
to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a
memorandum thereof, executed and acknowledged by the owner of the affected real
property, as lessor, and the owner of the leasehold estate, as lessee or (b) if
such Leasehold Property was acquired or subleased from the holder of a Recorded
Leasehold Interest, the applicable assignment or sublease document, executed and
acknowledged by each party thereto, in each case in form sufficient to give such
constructive notice upon recordation and otherwise in form reasonably
satisfactory to Agents.
"REFERENCE LENDER" means Fleet.
"REGISTER" has the meaning assigned to that term in subsection 2.1E.
"REFUNDED OFFSHORE CURRENCY LOANS" has the meaning assigned to that
term in subsection 2.1A(iv).
"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(iii).
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement dated as of the Closing Date entered into by and among Company, the
New Equity Investors, the Gooding Group and certain other stockholders of the
Company, as such agreement may be amended, supplemented or otherwise modified
from time to time to the extent permitted under subsection 7.15.
"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.
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"RELATED AGREEMENTS" means the Stock Purchase and Recapitalization
Agreement, the Stockholders Agreement, the Registration Rights Agreement, the
Note Offering Memorandum and the Related Financing Documents.
"RELATED FINANCING DOCUMENTS" means the Senior Subordinated Note
Indenture and all other agreements or instruments delivered pursuant to or in
connection with any of the foregoing, including any purchase agreements or
registration rights agreements.
"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 (other than a Defaulting Lender)
having or holding a majority of the sum of (i) the aggregate Term Loan Exposure
of all Lenders PLUS (ii) the aggregate Revolving Loan Exposure of all Lenders.
"RESTRICTED AGREEMENTS" has the meaning assigned to that term in
subsection 7.15B.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(ii), to purchase
participations in Offshore Currency Loans pursuant to subsection 2.1A(iv), to
issue and/or purchase participations in Letters of Credit pursuant to Section 3
and to purchase participations in Swing Line Loans pursuant to subsection
2.1A(iii) and "REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders
in the aggregate.
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"REVOLVING LOAN COMMITMENT TERMINATION DATE" means December 15, 2002.
"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 Dollar Equivalent amount of the Revolving Loans of that
Lender PLUS (b) in the event that Lender is an Issuing Lender, the aggregate
Dollar Equivalent amount of the Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender (in each case net of the Dollar Equivalent
amount of any funded participations purchased by other Lenders in such Letters
of Credit or any unreimbursed drawings thereunder) PLUS (c) the aggregate Dollar
Equivalent amount of all funded participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any Letters of
Credit PLUS (d) in the case of Swing Line Lender, the aggregate outstanding
principal amount of all Swing Line Loans (net of any funded participations
therein purchased by other Lenders) PLUS (e) the aggregate amount of all funded
participations purchased by that Lender in any outstanding Swing Line Loans PLUS
(f) in the case of Offshore Currency Funding Lender, the aggregate outstanding
principal Dollar Equivalent amount of all Offshore Currency Loans (net of any
funded participations therein purchased by other Lenders) PLUS (g) the aggregate
Dollar Equivalent amount of any funded participations purchased by that Lender
in any outstanding Offshore Currency Loans.
"REVOLVING LOANS" means the Loans made by Lenders to Company pursuant
to subsection 2.1A(ii).
"REVOLVING NOTES" means (i) the promissory notes of Company issued
pursuant to subsection 2.1D(b) on the Closing Date and (ii) any promissory notes
issued by Company pursuant to 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 V
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"SAME DAY FUNDS" means (i) with respect to disbursements and payments
in Dollars, immediately available funds, and (ii) with respect to disbursements
and payments in an Offshore Currency, same day or other funds as may be
determined by the Administrative Agent to be customary in the place of
disbursement or payment for the settlement of international banking transactions
in the relevant Offshore Currency.
"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
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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, and any comparable or similar laws in a
jurisdiction outside of the United States applicable to Company or any of its
Subsidiaries.
"SENIOR SUBORDINATED NOTE INDENTURE" means the indenture pursuant to
which the Senior Subordinated Notes are issued, as such indenture may be amended
from time to time to the extent permitted under subsection 7.15.
"SENIOR SUBORDINATED NOTES" means the $85,000,000 in original
principal amount of 10 1/8% Senior Subordinated Notes due June 15, 2007 of
Company issued pursuant to the Senior Subordinated Note Indenture.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) 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; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) 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 (B) 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.
"SPOT RATE" for a currency means the rate quoted by Administrative
Agent as the spot rate for the purchase by Administrative Agent of such currency
with another currency through its FX Trading Office at approximately 8:00 a.m.
(New York time) on the date two Business Days prior to the date as of which the
foreign exchange computation is made.
"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,
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(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).
"STOCK PURCHASE AND RECAPITALIZATION AGREEMENT" means that certain
Stock Purchase and Recapitalization Agreement by and among Company, the New
Equity Investors, the Gooding Group and certain other stockholders of Company,
dated as of May 23, 1997, and as such agreement may be amended, supplemented or
otherwise modified from time to time to the extent permitted under subsection
7.15.
"STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement
dated as of the Closing Date entered into by and among Company, the New Equity
Investors, the Gooding Group and certain other stockholders of Company, as such
agreement may be amended, supplemented or otherwise modified from time to time
to the extent permitted under subsection 7.15.
"SUBORDINATED INDEBTEDNESS" means 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 satisfactory to Agents
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 Domestic 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 Domestic Subsidiaries of Company on the Closing Date and
to be executed and delivered by additional Domestic Subsidiaries of Company from
time to time thereafter in accordance with subsection 6.8, substantially in the
form of
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EXHIBIT XVII annexed hereto, as such Subsidiary Guaranty may hereafter be
amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT" means
each Subsidiary Patent Collateral Assignment and Security Agreement, patent
security agreement or other security agreement executed and delivered by an
existing Subsidiary Guarantor on the Closing Date or executed and delivered by
any additional Subsidiary Guarantor from time to time thereafter in accordance
with subsection 6.8, in each case substantially in the form of EXHIBIT XX
annexed hereto, as such Subsidiary Patent Collateral Assignment and Security
Agreement may be amended, supplemented or otherwise modified from time to time,
and "SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENTS" means all
such Subsidiary Patent Collateral Assignment and Security Agreements,
collectively.
"SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8, in each case substantially in
the form of EXHIBIT XVIII annexed hereto, as such Subsidiary Pledge Agreement
may be amended, supplemented or otherwise modified from time to time, and
"SUBSIDIARY PLEDGE AGREEMENTS" means all such Subsidiary Pledge Agreements,
collectively.
"SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of EXHIBIT XIX annexed hereto, as such Subsidiary
Security Agreement may be amended, supplemented or otherwise modified from time
to time, and "SUBSIDIARY SECURITY AGREEMENTS" means all such Subsidiary Security
Agreements, collectively.
"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means each Subsidiary
Trademark Security Agreement, copyright security agreement or other security
agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of EXHIBIT XXI annexed hereto, as such Subsidiary
Trademark Security Agreement may be amended, supplemented or otherwise modified
from time to time, and "SUBSIDIARY TRADEMARK SECURITY AGREEMENTS" means all such
Subsidiary Trademark Security Agreements, collectively.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term
in subsection 9.1B.
"SWING LINE LENDER" means Fleet or any Person serving as a successor
Swing Line Lender hereunder, in its capacity as Swing Line Lender hereunder.
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"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender
to make Swing Line Loans to Company pursuant to subsection 2.1A(iii).
"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(iii).
"SWING LINE NOTE" means (i) the promissory note of Company issued
pursuant to subsection 2.1D(c) on the Closing Date and (ii) any promissory note
issued by Company to any successor Swing Line Lender pursuant to the last
sentence of subsection 9.5B, in each case substantially in the form of EXHIBIT
VI annexed hereto, as it may be amended, supplemented or otherwise modified from
time to time.
"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 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, capital, net worth, or gains
(whether worldwide, or only insofar as such income, profits, capital, net worth,
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).
"TERM LOANS" means the Term Loans made by Lenders to Company pursuant
to subsection 2.1A(i).
"TERM LOAN COMMITMENT" means the commitment of a Lender to make a Term
Loan to Company pursuant to subsection 2.1A(i), and "TERM LOAN COMMITMENTS"
means such commitments of all Lenders in the aggregate.
"TERM LOAN EXPOSURE" means, with respect to any Lender as of any date
of determination (i) prior to the funding of the Term Loans, that Lender's Term
Loan Commitment and (ii) after the funding of the Term Loans, the outstanding
principal amount of the Term Loan of that Lender.
"TERM NOTES" means (i) the promissory notes of Company issued pursuant
to subsection 2.1D(a) on the Closing Date and (ii) any promissory notes issued
by Company pursuant to the last sentence of subsection 10.1B(i) in connection
with assignments of the Term Loan Commitments or Term Loans of any Lenders, in
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each case substantially in the form of EXHIBIT IV annexed hereto, as they may be
amended, supplemented or otherwise modified from time to time.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any
date of determination, the sum of (i) the aggregate principal Dollar Equivalent
amount of all outstanding Revolving Loans PLUS (ii) the aggregate principal
amount of all outstanding Swing Line Loans PLUS (iii) without duplication, the
aggregate principal Dollar Equivalent amount of all outstanding Offshore
Currency Loans and (iv) the Dollar Equivalent amount of all Letter of Credit
Usage.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
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
(iii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect
at the time of such preparation and the Financial Plan required to be delivered
pursuant to clause (xiii) of subsection 6.1 shall be prepared on the same basis
as such financial statements. 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.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents 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.
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1.4 CURRENCY EQUIVALENTS GENERALLY.
For all purposes of this Agreement (but not for purposes of the
preparation of any financial statements delivered pursuant hereto), the
equivalent in any Offshore Currency or other currency of an amount in Dollars,
and the equivalent in Dollars of an amount in any Offshore Currency or other
currency, shall be determined at the Spot Rate.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; NOTES; REGISTER; GENERAL PROVISIONS REGARDING
OFFSHORE CURRENCY LOANS.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Company herein set
forth, the Lenders hereby severally agree to make the Loans described in
subsections 2.1A(i) and 2.1A(ii), Swing Line Lender hereby agrees to make the
Loans described in subsection 2.1A(iii) and Offshore Currency Funding Lender
hereby agrees to make the Loans described in subsection 2.1A(iv).
(i) TERM LOANS. Each Lender severally agrees to lend to Company on
the Closing Date an amount in Dollars not exceeding its Pro Rata Share of
the aggregate amount of the Term Loan Commitments to be used for the
purposes identified in subsection 2.5A. The original amount of each
Lender's Term Loan Commitment is set forth opposite its name on SCHEDULE
2.1 annexed hereto and the aggregate amount of the Term Loan Commitments is
$25,000,000; PROVIDED that the Term Loan Commitments of Lenders shall be
adjusted to give effect to any assignments of the Term Loan Commitments
pursuant to subsection 10.1B. Each Lender's Term Loan Commitment shall
expire immediately and without further action on June 30, 1997 if the Term
Loans are not made on or before that date. Company may make only one
borrowing under the Term Loan Commitments. Amounts borrowed under this
subsection 2.1A(i) and subsequently repaid or prepaid may not be
reborrowed.
(ii) REVOLVING LOANS. Each Lender severally agrees, subject to the
limitation 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 Dollar
Equivalent 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 2.5B. 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
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$20,000,000; 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 reductions thereto made pursuant to subsections
2.4B(ii) and 2.4B(iii). 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 June 30, 1997 if the Term
Loans and the initial Revolving Loans are not made on or before that date.
Amounts borrowed under this subsection 2.1A(ii) 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 limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.
(iii) SWING LINE LOANS. Swing Line Lender hereby agrees, subject to
the limitation set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Company from time to time
during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date by making Swing Line Loans to Company in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment
to be used for the purposes identified in subsection 2.5B, notwithstanding
the fact that such Swing Line Loans, when aggregated with Swing Line
Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share
of the Letter of Credit Usage then in effect, may exceed Swing Line
Lender's Revolving Loan Commitment. The original amount of the Swing Line
Loan Commitment is $2,000,000; PROVIDED that any reduction of the Revolving
Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which
reduces the aggregate Revolving Loan Commitments to an amount less than the
then current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to the
amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Company, Administrative Agent or Swing Line
Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Swing Line Loans and all other amounts
owed hereunder with respect to the Swing Line Loans shall be paid in full
no later than that date; PROVIDED that the Swing Line Loan Commitment
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shall expire immediately and without further action on June 30, 1997 if the
Term Loans and the initial Revolving Loans are not made on or before that
date. Amounts borrowed under this subsection 2.1A(iii) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Company), no later than 10:00 A.M. (New York City
time) on the proposed Funding Date, a notice (which shall be deemed to be a
Notice of Borrowing given by Company) requesting Lenders to make Revolving
Loans that are Base Rate Loans on such Funding Date in an amount equal to
the amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS")
outstanding on the date such notice is given which Swing Line Lender
requests Lenders to prepay. Anything contained in this Agreement to the
contrary notwithstanding, (i) the proceeds of such Revolving Loans made by
Lenders other than Swing Line Lender shall be immediately delivered by
Administrative Agent to Swing Line Lender (and not to Company) and applied
to repay a corresponding portion of the Refunded Swing Line Loans and
(ii) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata
Share of the Refunded Swing Line Loans shall be deemed to be paid with the
proceeds of a Revolving Loan made by Swing Line Lender, and such portion of
the Swing Line Loans deemed to be so paid shall no longer be outstanding as
Swing Line Loans and shall no longer be due under the Swing Line Note of
Swing Line Lender but shall instead constitute part of Swing Line Lender's
outstanding Revolving Loans and shall be due under the Revolving Note of
Swing Line Lender. Company hereby authorizes Administrative Agent and
Swing Line Lender to charge Company's accounts with Administrative Agent
and Swing Line Lender (up to the amount available in each such account) in
order to immediately pay Swing Line Lender the amount of the Refunded Swing
Line Loans to the extent the proceeds of such Revolving Loans made by
Lenders, including the Revolving Loan deemed to be made by Swing Line
Lender, are not sufficient to repay in full the Refunded Swing Line Loans.
If any portion of any such amount paid (or deemed to be paid) to Swing Line
Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.
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Immediately upon funding of the Swing Line Loans by the Swing Line
Lender, each Lender having a Revolving Loan Commitment shall be deemed to,
and hereby agrees to, have purchased a participation in such outstanding
Swing Line Loans in an amount equal to its Pro Rata Share of the unpaid
amount of such Swing Line Loans together with accrued interest thereon.
Upon notice from Swing Line Lender no later than 10:00 A.M. (New York City
time) on any Business Day, each such Lender shall deliver to Swing Line
Lender an amount equal to its respective participation in Same Day Funds at
the Funding and Payment Office no later than 5:00 P.M. (New York City time)
on such Business Day. In the event any Lender fails to make available to
Swing Line Lender the amount of such Lender's participation as provided in
this paragraph, Swing Line Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the Federal
Funds Effective Rate for three Business Days and thereafter at the Base
Rate. In the event Swing Line Lender receives a payment of any amount in
which other Lenders have purchased participations as provided in this
paragraph, Swing Line Lender shall promptly distribute to each such other
Lender its Pro Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to purchase a participation in any unpaid Swing
Line Loans pursuant to the immediately preceding paragraph shall be
absolute and unconditional and shall not be affected by any circumstance,
including (a) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against Swing Line Lender, Company or any other
Person for any reason whatsoever; (b) the occurrence or continuation of an
Event of Default or a Potential Event of Default; (c) any adverse change in
the business, operations or condition (financial or otherwise) of Company
or any of its Subsidiaries; (d) any breach of this Agreement or any other
Loan Document by any party thereto; or (e) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing; PROVIDED that such obligations of each Lender are subject to the
satisfaction of one of the following conditions (X) Swing Line Lender shall
not have received written notice that any condition under Section 4 to the
making of the applicable Refunded Swing Line Loans or other unpaid Swing
Line Loans, as the case may be, was unsatisfied at the time such Refunded
Swing Line Loans or unpaid Swing Line Loans were made or (Y) the
satisfaction of any such condition not satisfied had been waived in
accordance with subsection 10.6.
(iv) OFFSHORE CURRENCY LOANS. Offshore Currency Funding Lender hereby
agrees, subject to the limitations set forth below with respect to the
maximum Dollar Equivalent amount of Offshore Currency Loans permitted to be
outstanding from time to time, to make a portion of the Revolving Loan
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Commitments available to Company from time to time during the period from
the Closing Date to but excluding the Revolving Loan Commitment Termination
Date by making Offshore Currency Loans to Company in an aggregate amount
not exceeding the Dollar Equivalent amount of the Offshore Currency Loan
Commitment to be used for the purposes identified in subsection 2.5B,
notwithstanding the fact that such Offshore Currency Loans, when aggregated
with Offshore Currency Funding Lender's outstanding Revolving Loans and
Swing Line Loans and Offshore Currency Funding Lender's Pro Rata Share of
the Letter of Credit Usage then in effect, may exceed Offshore Currency
Funding Lender's Revolving Loan Commitment. The original Dollar Equivalent
amount of the Offshore Currency Loan Commitment is $7,500,000; PROVIDED
that any reduction of the Revolving Loan Commitments made pursuant to
subsection 2.4B(ii) or 2.4B(iii) which reduces the aggregate Revolving Loan
Commitments to an amount less than the then current amount of the Offshore
Currency Loan Commitment shall result in an automatic corresponding
reduction of the Offshore Currency Loan Commitment to the amount of the
Revolving Loan Commitments, as so reduced, without any further action on
the part of Company, Administrative Agent or Offshore Currency Funding
Lender. The Offshore Currency Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Offshore Currency Loans
and all other amounts owed hereunder with respect to the Offshore Currency
Loans shall be paid in full no later than that date; PROVIDED that the
Offshore Currency Loan Commitment shall expire immediately and without
further action on June 30, 1997 if the Term Loans and the initial Revolving
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(iv) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Offshore Currency Loans and the Offshore Currency Loan Commitment shall
be subject to the following limitations:
(a) in no event shall the Total Utilization of Revolving Loan
Commitments at any time exceed the Revolving Loan Commitments then in
effect; and
(b) in no event on any Computation Date pursuant to subsection
2.1F, after giving effect to any Offshore Currency Loans then being
requested, shall the aggregate principal Dollar Equivalent amount of
all outstanding Offshore Currency Loans PLUS the Letter of Credit
Usage for outstanding Letters of Credit denominated in Offshore
Currencies, exceed the Offshore Currency Sublimit.
With respect to any Offshore Currency Loans which have not been
voluntarily prepaid by Company pursuant to subsection 2.4B(i), Offshore
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Currency Funding Lender may, at any time upon the occurrence and during the
continuation of a Potential Event of Default or an Event of Default,
deliver to Administrative Agent (with a copy to Company), five Business
Days in advance of the proposed Funding Date, a notice (which shall be
deemed to be a Notice of Borrowing given by Company) requesting Lenders
having a Revolving Loan Commitment to make Revolving Loans that are
Offshore Currency Loans on such Funding Date in an amount equal to the
amount of such Offshore Currency Loans and in the Offshore Currency in
which such Offshore Currency Loans are denominated (the "REFUNDED OFFSHORE
CURRENCY LOANS"). Anything contained in this Agreement to the contrary
notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders
other than Offshore Currency Funding Lender shall be immediately delivered
by Administrative Agent to Offshore Currency Funding Lender (and not to
Company) and applied to repay a corresponding portion of the Refunded
Offshore Currency Loans and (ii) on the day such Revolving Loans are made,
Offshore Currency Funding Lender's Pro Rata Share of the Refunded Offshore
Currency Loans shall be deemed to be paid with the proceeds of a Revolving
Loan made by Offshore Currency Funding Lender, and such portion of the
Offshore Currency Loans deemed to be so paid shall no longer be outstanding
as Offshore Currency Loans but shall instead constitute part of Offshore
Currency Funding Lender's outstanding Revolving Loans. Company hereby
authorizes Administrative Agent and Offshore Currency Funding Lender to
charge Company's accounts with Administrative Agent and Offshore Currency
Funding Lender (up to the amount available in each such account) in order
to immediately pay Offshore Currency Funding Lender the amount of the
Offshore Currency Loans to the extent the proceeds of such Revolving Loans
made by Lenders, including the Revolving Loan deemed to be made by Offshore
Currency Funding Lender, are not sufficient to repay in full the Refunded
Offshore Currency Loans. If any portion of any such amount paid (or deemed
to be paid) to Offshore Currency Funding Lender should be recovered by or
on behalf of Company from Offshore Currency Funding Lender in bankruptcy,
by assignment for the benefit of creditors or otherwise, the loss of the
amount so recovered shall be ratably shared among all Lenders in the manner
contemplated by subsection 10.5.
Immediately upon funding of the Offshore Currency Loans by the
Offshore Currency Funding Lender, each Lender having a Revolving Loan
Commitment shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Offshore Currency Loans in an amount
equal to its Pro Rata Share of the unpaid amount of such Offshore Currency
Loans together with accrued interest thereon. At any time upon the
occurrence and during the continuation of a Potential Event of Default or
an Event of Default and upon five Business Days' notice, Offshore Currency
Funding Lender may deliver to each other Lender having a Revolving Loan
Commitment a notice setting forth the amount of the outstanding Offshore
Currency Loans, the
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Applicable Currency in which such Offshore Currency Loans are denominated
and the amount of such Lender's Pro Rata Share of such Offshore Currency
Loans, and each such Lender shall deliver to Offshore Currency Funding
Lender an amount equal to its respective participation in Same Day Funds in
the Applicable Currency at the Funding and Payment Office. In the event
any Lender fails to make available to Offshore Currency Funding Lender the
amount of such Lender's participation as provided in this paragraph,
Offshore Currency Funding Lender shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the Federal
Funds Effective Rate for three Business Days and thereafter at the Base
Rate. In the event Offshore Currency Funding Lender receives a payment of
any amount in which other Lenders have purchased participations as provided
in this paragraph, Offshore Currency Funding Lender shall promptly
distribute to each such other Lender its Pro Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Offshore Currency Loans pursuant to the second preceding paragraph
and each Lender's obligation to purchase a participation in any unpaid
Offshore Currency Loans pursuant to the immediately preceding paragraph
shall be absolute and unconditional and shall not be affected by any
circumstance, including (a) any set-off, counterclaim, recoupment, defense
or other right which such Lender may have against Offshore Currency Funding
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event of
Default; (c) any adverse change in the business, operations or condition
(financial or otherwise) of Company or any of its Subsidiaries; (d) any
breach of this Agreement or any other Loan Document by any party thereto;
or (e) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing; PROVIDED that such obligations of each
Lender are subject to the satisfaction of one of the following conditions
(X) Offshore Currency Funding Lender shall not have received written notice
that any condition under Section 4 to the making of the applicable Offshore
Currency Loans was unsatisfied at the time such Offshore Currency Loans
were made or (Y) the satisfaction of any such condition not satisfied had
been waived in accordance with subsection 10.6.
B. BORROWING MECHANICS. Term Loans, Revolving Loans, or Offshore
Currency Loans made on any Funding Date (other than Revolving Loans made
pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(iii) for
the purpose of repaying any Refunded Swing Line Loans, Revolving Loans made
pursuant to a request by Offshore Currency Funding Lender pursuant to subsection
2.1A(iv) for the purpose of repaying any Refunded Offshore Currency Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
any Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it)
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shall be in the applicable Minimum Amount. Swing Line Loans made on any Funding
Date shall be in an aggregate minimum amount of $100,000 and integral multiples
of $100,000 in excess of that amount. Whenever Company desires that Lenders
make Term Loans or Revolving Loans it shall deliver to Administrative Agent a
Notice of Borrowing no later than 10:00 A.M. (New York City time) at least three
Business Days in advance of the proposed Funding Date (in the case of an
Offshore Rate Loan denominated in Dollars) or at least one Business Day in
advance of the proposed Funding Date (in the case of a Base Rate Loan).
Whenever Company desires that Offshore Currency Funding Lender make Offshore
Currency Loans it shall deliver to Administrative Agent a Notice of Borrowing
five Business Days prior to the requested Funding Date. Whenever Company
desires that Swing Line Lender make a Swing Line Loan, it shall deliver to
Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York
City time) on the proposed Funding Date. The Notice of Borrowing shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
and type of Loans requested, (iii) in the case of Swing Line Loans and any Loans
made on the Closing Date, that such Loans shall be Base Rate Loans, (iv) in the
case of Revolving Loans not made on the Closing Date, whether such Loans shall
be Base Rate Loans or Offshore Rate Loans denominated in Dollars, (v) in the
case of any Loans requested to be made as Offshore Rate Loans, the initial
Interest Period requested therefor, and (vi) in the case of any Offshore
Currency Loans, the Applicable Currency. Term Loans, Revolving Loans and
Offshore Currency Loans may be continued as or converted into Base Rate Loans
and Offshore Rate Loans to the extent and in the manner provided in subsection
2.2D. In lieu of delivering the above-described Notice of Borrowing, Company
may give Administrative Agent 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 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 Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
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 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.
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Except as otherwise provided in subsections 2.1F, 2.6B, 2.6C and 2.6G,
a Notice of Borrowing for an Offshore 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 Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares of the Commitments for the Term Loans or Revolving
Loans requested, 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 Loan
requested hereunder nor shall the Commitment of any Lender to make the
particular type of 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 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, Offshore Currency Funding Lender
or Swing Line Lender, as the case may be, of the proposed borrowing. In the
case of Loans in Dollars, each Lender shall make the amount of its Loan
available to Administrative Agent not later than 12:00 Noon (New York City time)
on the applicable Funding Date, and Swing Line Lender shall make the amount of
its Swing Line Loan available to Administrative Agent not later than 2:00
P.M.(New York City time) on the applicable Funding Date, in each case in Same
Day Funds in Dollars, at the Funding and Payment Office. In the case of
Offshore Currency Loans, Offshore Currency Funding Lender shall make the amount
of its Loan available by such time on the applicable Funding Date as
Administrative Agent may specify in Same Day Funds in the requested currency at
the Funding and Payment Office. Except as provided in subsection 2.1A(iii),
subsection 2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to
repay Refunded Swing Line Loans, to repay Refunded Offshore Currency Loans or to
reimburse any 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 subsections 4.1 (in the case of Loans made on the Closing Date) and
4.2 (in the case of all Loans), Administrative Agent shall make the proceeds of
such Loans available to Company on the applicable Funding Date by causing an
amount of Same Day Funds in like funds as received by Administrative Agent equal
to the proceeds of all such Loans received by Administrative Agent from Lenders,
Offshore Currency Funding Lender or Swing Line Lender, as the case may be, 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 Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's 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
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corresponding amount is not in fact made available to Administrative 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 Federal Funds Effective Rate 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. NOTES. Company shall execute and deliver on the Closing Date (a) to
each Lender having a Term Loan Commitment (or to Administrative Agent for that
Lender) a Term Note substantially in the form of EXHIBIT IV annexed hereto to
evidence that Lender's Term Loan, in the principal amount of that Lender's Term
Loan and with other appropriate insertions, (b) to each Lender having a
Revolving Loan Commitment a Revolving Note substantially in the form of
EXHIBIT V 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, and (c) to Swing Line Lender (or to Administrative Agent
for Swing Line Lender) a Swing Line Note substantially in the form of EXHIBIT VI
annexed hereto to evidence Swing Line Lender's Swing Line Loans, in the
principal amount of the Swing Line Loan Commitment and with other appropriate
insertions and (d) to Offshore Currency Funding Lender (or to Administrative
Agent for Offshore Currency Funding Lender) an Offshore Currency Note
substantially in the form of EXHIBIT XXV annexed hereto to evidence Offshore
Currency Funding Lender's Offshore Currency Loans, in the principal amount of
the Offshore Currency Loan Commitment and with other appropriate insertions.
Each Lender shall endorse on the schedules annexed to any Note evidencing such
Lender's Loan the amount and Applicable Currency of each payment of principal
made by the Company with respect thereto.
E. 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 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.
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(ii) Administrative Agent shall record in the Register the Term Loan
Commitment and the Revolving Loan Commitment and the Term Loans and
Revolving Loans from time to time of each Lender, the Swing Line Loan
Commitment and the Swing Line Loans from time to time of Swing Line Lender,
the Offshore Currency Loan Commitment and Offshore Currency Loans from time
to time of Offshore Currency Funding Lender and each repayment or
prepayment in respect of the principal amount of the Term Loans or
Revolving Loans of each Lender, the Swing Line Loans of Swing Line Lender
or the Offshore Currency Loans of Offshore Currency Funding Lender. Any
such recordation shall be conclusive and binding on Company and each
Lender, absent manifest error; 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 the applicable
Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of the Term
Loan and each Revolving Loan made by it and each payment in respect
thereof. Any such recordation shall be conclusive and binding on Company,
absent manifest error; 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 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, absent
manifest error.
(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 Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or 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 as provided in subsection
10.1B(ii). Prior to such recordation, all amounts owed with respect to the
applicable Commitment or 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 Loans.
(v) Company hereby designates Fleet to serve as Company's agent
solely for purposes of maintaining the Register as provided in this
subsection 2.1E, and Company and Lenders hereby agree that, to the extent
Fleet serves in such capacity, Fleet and its officers, directors,
employees, agents and affiliates shall constitute Indemnitees for all
purposes under subsection 10.3 and shall enjoy the general immunity
provided for in subsection 9.2.
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F. GENERAL PROVISIONS REGARDING OFFSHORE CURRENCY LOANS. Administrative
Agent will determine the Dollar Equivalent amount with respect to any (i)
Offshore Currency Loans as of the Interest Rate Determination Date,(ii)
outstanding Offshore Currency Loans as of the last day of the applicable
Interest Period, (iii) Letters of Credit denominated in an Offshore Currency as
of the requested date of issuance and (iv) outstanding Letters of Credit
denominated in an Offshore Currency as of the last Business Day of each month
(each such date under clauses (i) through (iv) a "COMPUTATION DATE").
In the case of proposed Offshore Currency Loans, if Offshore Currency
Funding Lender has determined that it cannot provide or continue to provide
Loans in the requested Offshore Currency, Offshore Currency Funding Lender shall
so notify Administrative Agent by 10:30 A.M. (New York time) four Business Days
prior to the proposed Funding Date or the proposed date of continuation of such
Loans in which event Administrative Agent will give notice to Company no later
than 5:00 P.M. (New York time) on the fourth Business Day prior to the requested
Funding Date or the proposed date of continuation of such Loans that the Loans
in the requested Offshore Currency are not then available, and Offshore Currency
Funding Lender shall be under no obligation to make or continue Offshore
Currency Loans in the requested Offshore Currency. If Administrative Agent
shall have so notified Company that any such Loan in a requested Offshore
Currency is not then available, Company may, by notice to Administrative Agent
not later than Noon (New York time) three Business Days prior to the requested
Funding Date of such Loan, withdraw the Notice of Borrowing relating to such
Loan. If the Company does so withdraw such Notice of Borrowing, the Loan
requested therein shall not occur and Administrative Agent will promptly so
notify Offshore Currency Funding Lender. If the Company does not so withdraw
such Notice of Borrowing, Administrative Agent will promptly notify each Lender
having a Revolving Loan Commitment and such Notice of Borrowing shall be deemed
to be a Notice of Borrowing that requests Revolving Loans comprised of Base Rate
Loans in an aggregate amount equal to the Dollar Equivalent amount of the
originally requested Loans; and in such notice by Administrative Agent to each
Lender Administrative Agent will state such aggregate amount of such Loans in
Dollars and such Lender's Pro Rata Share thereof. In the case of Offshore
Currency Loans as to which Administrative Agent shall have so notified Company
that any such continuation of such Offshore Currency Loans is not then
available, any Notice of Continuation/Conversion with respect thereto shall be
deemed withdrawn and such Offshore Currency Loans shall be repaid by Company on
the last day of the Interest Period with respect to such Offshore Currency
Loans.
The European Economic and Monetary Union (the "European Monetary
Union") anticipates the introduction of a single currency and the substitution
of the national currencies of the member states participating in the European
Monetary Union. On the date on which any of the Offshore Currencies are
replaced by the single currency, conversion into such single currency shall take
effect; PROVIDED that the original currency shall be retained for so long as is
legally permissible.
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Conversion shall be based on the officially fixed rate of conversion. Neither
the introduction of the single currency nor the substitution of the national
currencies of the member states participating in European Monetary Union nor the
fixing of the official rate of conversion nor any economic consequences that
arise from any of the aforementioned events or in connection with European
Monetary Union shall give rise to any right to terminate prematurely, contest,
cancel, rescind, modify or renegotiate this Agreement or any of its provisions
or to raise any other objections and/or exceptions or to assert any claims for
compensation.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and 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 Offshore Rate. Subject to the provisions of subsection 2.7, each
Swing Line 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. Subject to the provisions of
subsections 2.6 and 2.7, each Offshore Currency 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 Adjusted
Offshore Rate. The applicable basis for determining the rate of interest with
respect to any Term Loan or any Revolving Loan shall be selected by Company
initially at the time a Notice of Borrowing is given with respect to such Loan
pursuant to subsection 2.1B, and the basis for determining the interest rate
with respect to any Term Loan or any Revolving Loan may be changed from time to
time pursuant to subsection 2.2D. If on any day a Term Loan or 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 Loan shall bear interest determined by reference to the Base Rate.
(i)Subject to the provisions of subsections 2.2E and 2.7, the Term
Loans and 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 Base Rate Margin; or
(b) if an Offshore Rate Loan denominated in Dollars, then at the sum
of the Adjusted Offshore Rate PLUS the Applicable Offshore Rate Margin.
(ii) Subject to the provisions of subsections 2.2E and 2.7, the Swing
Line Loans shall bear interest through maturity at the sum of the Base Rate PLUS
the Applicable Base Rate Margin MINUS the Commitment Fee Percentage.
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(iii) Subject to the provisions of subsections 2.2E and 2.7, the
Offshore Currency Loans shall bear interest through maturity at the sum of the
Adjusted Offshore Rate PLUS the Applicable Offshore Rate Margin MINUS the
Commitment Fee Percentage.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(xv), the Applicable Base Rate
Margin and the Applicable Offshore Rate Margin shall automatically be adjusted
in accordance with such Margin Determination Certificate, such adjustment to
become effective, or to be retroactively effective to the extent a Margin
Determination Certificate is not timely delivered pursuant to subsection
6.1(xv), on the forty-sixth day following the end of the Fiscal Quarter for
which such Margin Determination Certificate is being or should have been so
delivered; PROVIDED that if a Margin Determination Certificate erroneously
indicates an applicable margin more favorable to Company than should be afforded
by the actual calculation of the Consolidated Leverage Ratio, Company shall
promptly pay additional interest and letter of credit fees to correct for such
error.
B. INTEREST PERIODS. In connection with each Offshore 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 Loan, which Interest Period shall be, at
Company's option, either a one, two, three or, with respect to Offshore Rate
Loans denominated in Dollars, six month period; PROVIDED that:
(i) the initial Interest Period for any Offshore Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as an Offshore Rate Loan, or on the date specified in the
applicable Notice of Conversion/Continuation, in the case of a Loan
converted to an Offshore Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to an Offshore 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
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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 Term Loans
shall extend beyond December 15, 2002, and no Interest Period with respect
to any portion of the Revolving Loans or Offshore Currency Loans shall
extend beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal of the Term Loans, unless the sum of (a) the aggregate
principal amount of Term Loans that are Base Rate Loans PLUS (b) the
aggregate principal amount of Term Loans that are Offshore Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Term Loans on such date;
(vii) there shall be no more than 8 Interest Periods outstanding at
any time; and
(viii) in the event Company fails to specify an Interest Period for any
Offshore Rate Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, then 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 Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); PROVIDED that in the event any Swing Line Loans or any Revolving
Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i),
interest accrued on such Swing Line Loans or Revolving Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at 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 Term Loans or Revolving Loans which are Base Rate Loans in an
amount equal to the applicable Minimum Amount to Loans denominated in Dollars
and bearing interest at a rate determined by reference to the Adjusted Offshore
Rate, (ii) to convert all or any part of its outstanding Term Loans or Revolving
Loans which are Offshore Rate Loans denominated in Dollars to Base Rate Loans
upon the expiration of the Interest Period applicable to such Offshore Rate
Loans, (iii) to continue all or any part of its outstanding Term Loans or
Revolving Loans which are Offshore Rate Loans denominated in Dollars in an
amount equal to the applicable
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Minimum Amount upon the expiration of the Interest Period applicable to such
Offshore Rate Loans, or (iv) upon the expiration of any Interest Period
applicable to an Offshore Currency Loan, to continue all or any portion of such
Loan equal to the applicable Minimum Amount as an Offshore Rate Loan denominated
in the same Offshore Currency.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 10:00 A.M. (New York City time) (i) in the
case of a conversion to a Base Rate Loan, at least one Business Day in advance
of the proposed conversion date, (ii) in the case of a conversion to, or a
continuation of, an Offshore Rate Loan denominated in Dollars, at least three
Business Days in advance of the proposed conversion/continuation date, and
(iii) in the case of a continuation of Offshore Currency Loans, at least five
Business Days in advance of the proposed continuation date. 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 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, an Offshore Rate
Loan, the requested Interest Period, and (v) in the case of a conversion to, or
a continuation of, an Offshore 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,
including, if applicable, Offshore Currency Funding 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 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 2.1F, 2.6B, 2.6C and 2.6G,
a Notice of Conversion/Continuation for conversion to, or continuation of, an
Offshore 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.
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E. DEFAULT RATE. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any 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 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 Offshore Rate Loans denominated in
Dollars, upon the expiration of the Interest Period in effect at the time any
such increase in interest rate is effective such Offshore 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 any
Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year,
as the case may be, and (ii) in the case of Offshore Rate Loans, 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 Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from an Offshore Rate
Loan, the date of conversion of such Offshore Rate Loan to such Base Rate Loan,
as the case may be, shall be included, and the date of payment of such Loan or
the expiration date of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted to an Offshore Rate Loan, the date
of conversion of such Base Rate Loan to such Offshore Rate Loan, as the case may
be, shall be excluded; PROVIDED that if a Loan is repaid on the same day on
which it is made, one day's interest shall be paid on that Loan. Each
determination of an interest rate or a Dollar Equivalent amount by
Administrative Agent shall be conclusive and binding on Company and Lenders in
the absence of manifest error.
2.3 FEES.
Company agrees to pay to Administrative Agent, for distribution to each
Lender having a Revolving Loan Commitment 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) aggregate principal Dollar Equivalent amount of outstanding Revolving Loans
(but
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not including any outstanding Swing Line Loans outstanding under subsection
2.1A(iii) or Offshore Currency Loans outstanding under subsection 2.1A(iv)) plus
(ii) the Letter of Credit Usage MULTIPLIED BY the then applicable Commitment Fee
Percentage, 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
the fifteenth day of each March, June, September and December of each year,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date. For purposes of determining the
commitment fees, the amount of any outstanding Offshore Currency Loan or any
Letter of Credit denominated in an Offshore Currency on any date shall be
determined based upon the Dollar Equivalent amount as of the most recent
Computation Date with respect to such Offshore Currency Loan or such Letter of
Credit.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(xv), the Commitment Fee
Percentage shall automatically be adjusted in accordance with such Margin
Determination Certificate, such adjustment to become effective, or to be
retroactively effective to the extent a Margin Determination Certificate is not
timely delivered pursuant to such subsection 6.1(xv), on the forty-sixth day
following the end of the Fiscal Quarter for which such Margin Determination
Certificate is being or should have been so delivered; PROVIDED that if a Margin
Determination Certificate erroneously indicates an applicable margin more
favorable to Company than should be afforded by the actual calculation of the
Consolidated Leverage Ratio, Company shall promptly pay additional commitment
fees to correct for such error.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS.
A. SCHEDULED PAYMENTS OF TERM LOANS. Company shall make principal
payments on the Term Loans in installments on the dates and in the amounts set
forth below:
Scheduled Repayment
Date of Term Loans
------ -----------------------
September 15, 1998 $1,000,000
December 15, 1998 1,000,000
March 15, 1999 1,000,000
June 15, 1999 1,000,000
September 15, 1999 1,250,000
December 15, 1999 1,250,000
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March 15, 2000 1,250,000
June 15, 2000 1,250,000
September 15, 2000 1,500,000
December 15, 2000 1,500,000
March 15, 2001 1,500,000
June 15, 2001 1,500,000
September 15, 2001 1,750,000
December 15, 2001 1,750,000
March 15, 2002 1,750,000
June 15, 2002 1,750,000
September 15, 2002 1,500,000
December 15, 2002 1,500,000
-----------
Total $25,000,000
; PROVIDED that the scheduled installments of principal of the Term Loans
set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and PROVIDED, FURTHER that the Term Loans and all
other amounts owed hereunder with respect to the Term Loans shall be paid
in full no later than December 15, 2002, and the final installment payable
by Company in respect of the Term Loans on such date shall be in an amount,
if such amount is different from that specified above, sufficient to repay
all amounts owing by Company under this Agreement with respect to the Term
Loans.
B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN COMMITMENTS.
(i) VOLUNTARY PREPAYMENTS. Company may, upon written or telephonic
notice to Administrative Agent on or prior to 12:00 Noon (New York City
time) on the date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time prepay any
Swing Line Loan on any Business Day in whole or in part in an aggregate
minimum amount of $100,000 and integral multiples of $100,000 in excess of
that amount. Company may, upon not less than one Business Day's prior
written or telephonic notice, in the case of Base Rate Loans, three
Business Days' prior written or telephonic notice, in the case of Offshore
Rate Loans denominated in Dollars, and five Business' Days prior written or
telephonic notice, in the case of Offshore Currency Loans, in each case
given to Administrative Agent by 12:00 Noon (New York City 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, including, if applicable, Offshore Currency Funding
Lender), at
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any time and from time to time prepay any Term Loans, Revolving Loans or
Offshore Currency Loans on any Business Day in whole or in part in the
applicable Minimum Amount; PROVIDED, HOWEVER, that an Offshore Rate Loan
may only be prepaid on the expiration of the Interest Period applicable
thereto unless Company complies with subsection 2.6D with respect to any
breakage costs resulting from such prepayment being made on a date prior to
the expiration of the applicable Interest Period. Notice of prepayment
having been given as aforesaid, the principal amount of the 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 2.4B(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 AND MANDATORY REDUCTIONS OF REVOLVING LOAN
COMMITMENTS. The Loans shall be prepaid and/or the Revolving Loan
Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in subsection
2.4B(iv):
(a) PREPAYMENTS AND REDUCTIONS FROM NET ASSET SALE PROCEEDS.
Company shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an aggregate amount equal to any Net
Asset Sale Proceeds received by Company or any of its Subsidiaries,
such prepayment or reduction to be made no later than the earlier to
occur of (i) the second Business Day following the date of receipt, or
if Company would incur breakage costs under subsection 2.6D as a
result of a prepayment on such date, on the earlier to occur of the
first such date thereafter on which no such breakage costs are
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incurred or 90 days after such date of receipt, by Company or any of
its Subsidiaries of any Net Asset Sale Proceeds in an amount in excess
of $150,000, (ii) the date of the occurrence of any Event of Default,
or (iii) the forty-fifth day following the end of each Fiscal Quarter
in which Net Asset Sale Proceeds were received in respect of any Asset
Sale.
If, following the receipt by Company or any of its
Subsidiaries of Net Asset Sale Proceeds, Company is required to apply
or cause to be applied any portion of such Net Asset Sale Proceeds to
prepay any Indebtedness evidenced by any of the Related Financing
Documents pursuant to the applicable Related Financing Document, then,
notwithstanding anything contained in this subsection 2.4B(iii)(a),
Company shall prepay the Loans and/or reduce the Revolving Loan
Commitments in the order set forth in this subsection 2.4B(iii)(a) so
as to eliminate any obligation to prepay such Indebtedness.
(b) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF EQUITY
SECURITIES. On the second Business Day following the date of receipt
by Company or any of its Subsidiaries of the Cash proceeds (any such
proceeds, net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, including
reasonable legal fees and expenses, being "NET EQUITY PROCEEDS") from
the issuance of equity Securities of Company or any of its
Subsidiaries after the Closing Date (other than issuances of equity to
employees pursuant to stock plans permitted under subsection 7.12),
Company shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an aggregate amount equal to 50% of
such Net Equity Proceeds.
(c) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF DEBT
SECURITIES. On the second Business Day following the date of receipt
by Company or any of its Subsidiaries of the Cash proceeds (any such
proceeds, net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, including
reasonable legal fees and expenses, being "NET DEBT PROCEEDS") from
the issuance of debt Securities (other than in respect of Indebtedness
permitted pursuant to subsection 7.1(i)-(viii)) of Company or any of
its Subsidiaries after the Closing Date, Company shall prepay the
Loans and/or the Revolving Loan Commitments shall be permanently
reduced in an aggregate amount equal to 100% of such Net Debt
Proceeds.
(d) PREPAYMENTS AND REDUCTIONS FROM CONSOLIDATED EXCESS CASH
FLOW. In the event that there shall be Consolidated Excess Cash Flow
for any Fiscal Year (commencing with the Fiscal Year beginning October
1, 1997), Company shall, no later than 90 days after the end of
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such Fiscal Year, prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount equal
to 50% of such Consolidated Excess Cash Flow.
(e) CALCULATIONS OF NET PROCEEDS AMOUNTS; ADDITIONAL PREPAYMENTS
AND REDUCTIONS BASED ON SUBSEQUENT CALCULATIONS. Concurrently with
any prepayment of the Loans and/or reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(d), Company shall
deliver to Agents an Officer's Certificate demonstrating the
calculation of the amount (the "NET PROCEEDS AMOUNT") of the
applicable Net Asset Sale Proceeds, Net Equity Proceeds or Net Debt
Proceeds (as such terms are defined in subsections 2.4B(iii)(b) and
(c)), or the applicable Consolidated Excess Cash Flow, as the case may
be, that gave rise to such prepayment and/or reduction. In the event
that Company shall subsequently determine that the actual Net Proceeds
Amount was greater than the amount set forth in such Officer's
Certificate, Company shall promptly make an additional prepayment of
the Loans (and/or, if applicable, the Revolving Loan Commitments shall
be permanently reduced) in an amount equal to the amount of such
excess, and Company shall concurrently therewith deliver to Agents an
Officer's Certificate demonstrating the derivation of the additional
Net Proceeds Amount resulting in such excess.
(f) PREPAYMENTS DUE TO REDUCTIONS OR RESTRICTIONS OF REVOLVING
LOAN COMMITMENTS. Company shall from time to time prepay FIRST the
Swing Line Loans, SECOND the Offshore Currency Loans and THIRD the
Revolving Loans to the extent necessary (1) so that the Total
Utilization of Revolving Loan Commitments shall not at any time exceed
the Revolving Loan Commitments then in effect and (2) to give effect
to the limitations set forth in clause (b) of the second paragraph of
subsection 2.1A(iv).
(iv) APPLICATION OF PREPAYMENTS.
(a) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS AND
ORDER OF MATURITY. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied to Term Loans, Revolving Loans, Offshore
Currency Loans and Swing Line Loans as specified by Company in the
applicable notice of prepayment; PROVIDED that in the event Company
fails to specify the Loans to which any such prepayment shall be
applied, such prepayment shall be applied FIRST to repay outstanding
Swing Line Loans to the full extent thereof, SECOND to repay
outstanding Term Loans to the full extent thereof, THIRD to repay
outstanding Offshore Currency Loans to the full extent thereof, and
FOURTH to repay outstanding Revolving Loans to the full extent
thereof.
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Any voluntary prepayments of the Term Loans pursuant to subsection
2.4B(i) shall be applied first to amortization payments scheduled
within six months of the prepayment in forward order of maturity, and
second to the remaining scheduled amortization payments of the Term
Loans on a pro rata basis.
(b) APPLICATION OF MANDATORY PREPAYMENTS BY TYPE OF LOANS. Any
amount (the "APPLIED AMOUNT") required to be applied as a mandatory
prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(d) shall be applied
FIRST to prepay the Term Loans to the full extent thereof, SECOND, to
the extent of any remaining portion of the Applied Amount, to prepay
the Swing Line Loans to the full extent thereof and to permanently
reduce the Revolving Loan Commitments by the amount of such
prepayment, THIRD to the extent of any remaining portion of the
Applied Amount, to prepay the Offshore Currency Loans to the full
extent thereof and to permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, FOURTH to the extent of
any remaining portion of the Applied Amount, to prepay the Revolving
Loans to the full extent thereof and to further permanently reduce the
Revolving Loan Commitments by the amount of such prepayment, FIFTH, to
the extent of any remaining portion of the Applied Amount, to cash
collateralize any outstanding Letters of Credit, and SIXTH, to the
extent of any remaining portion of the Applied Amount, to further
permanently reduce the Revolving Loan Commitments to the full extent
thereof.
(c) APPLICATION OF MANDATORY PREPAYMENTS OF TERM LOANS BY ORDER
OF MATURITY. Any mandatory prepayments of the Term Loans pursuant to
subsection 2.4B(iii) shall be applied on a pro rata basis to the
remaining scheduled installments of principal of the Term Loans set
forth in subsection 2.4A.
(d) APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND OFFSHORE
RATE LOANS. Considering Term Loans and Revolving Loans being prepaid
separately, any prepayment thereof shall be applied first to Base Rate
Loans to the full extent thereof before application to Offshore 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.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) MANNER AND TIME OF PAYMENT. Except for principal of, interest
on, and any other amounts relating to any Offshore Currency Loan which
shall be made in Same Day Funds in the Offshore Currency in which such Loan
is
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denominated or payable, all payments by Company of principal, interest,
fees and other Obligations hereunder and under the Notes shall be made in
Dollars in Same Day Funds. Payments relating to any Loan shall be made
without defense, setoff or counterclaim, free of any restriction or
condition, and delivered to Administrative Agent not later than 12:00 Noon
(New York City time) in the case of any Dollar payments, and not later than
such time as may be determined by the Administrative Agent and notified to
Company to be necessary for such payment to be credited on such date in
accordance with normal banking procedures in the place of payment, 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.
(ii) APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding 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 Lending Office 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 Offshore 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) INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Company shall not
be required to pay, and neither Administrative Agent nor any Lender shall
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collect, any amount of interest in excess of the maximum amount of interest
permitted by law ("EXCESS INTEREST") to be paid to such Lender. If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Agreement or in any of the
other Loan Documents to be paid to any Lender, then in such event: (1) the
provisions of this subsection shall govern and control; (2) neither Company
nor any Loan Party shall be obligated to pay any Excess Interest; (3) any
Excess Interest that any Lender may have received hereunder shall be, at
such Lender's option, (a) applied as a credit against the outstanding
principal balance of the Obligations or accrued and unpaid interest (not to
exceed the maximum amount permitted by law) owing to such Lender, (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4)
the interest rate(s) provided for herein with respect to such Lender shall
be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the "Maximum Rate"), and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed
and modified to reflect such reduction; and (5) neither Company nor any
Loan Party shall have any action against such Lender for any damages
arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligations owing to any Lender is calculated at the Maximum Rate rather
than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Obligations shall remain at the Maximum Rate until such
Lender shall have received the amount of interest which such Lender would
have received during such period on such Obligations had the rate of
interest not been limited to the Maximum Rate during such period.
D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER SUBSIDIARY
GUARANTY.
(i) APPLICATION OF PROCEEDS OF COLLATERAL. Except as provided in
subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale
Proceeds, 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
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 Administrative Agent's
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
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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
Administrative Agent's 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.
2.5 USE OF PROCEEDS.
A. TERM LOANS. The proceeds of the Term Loans, together with the
proceeds of (i) the issuance of shares of its Common Stock to the New Equity
Investors for an aggregate purchase price of approximately $43,500,000, (ii) the
issuance for cash of not less than $85,000,000 in original principal amount of
Senior Subordinated Notes, (iii) cash-on-hand of Company and (iv) approximately
$3,500,000 of Revolving Loans on the Closing Date, shall be applied by Company
(i) to
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repurchase shares of the outstanding Common Stock of Company (including all
shares of its outstanding Class B Common Stock) and make cash payments for
employee stock options in an aggregate amount not to exceed $159,400,000, and
(ii) to pay fees and expenses incurred in connection with the Recapitalization
Transactions in an approximate aggregate amount not to exceed $4,800,000.
B. REVOLVING LOANS; SWING LINE LOANS; OFFSHORE CURRENCY LOANS. The
proceeds of the Revolving Loans made on the Closing Date shall be applied by the
Company as provided in subsection 2.5A. The proceeds of any other Revolving
Loans, Offshore Currency Loans and any Swing Line Loans shall be applied by
Company for working capital requirements and general corporate purposes of the
Company and its Subsidiaries.
C. 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 OFFSHORE RATE LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Offshore Rate Loans as to
the matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 11:00 A.M. (London time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be conclusive and binding upon all parties) the interest rate that shall
apply to the Offshore 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 funding such Offshore Rate Loan.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Offshore Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Offshore Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Company and each Lender funding such Offshore Rate Loan of such
determination, whereupon (i) no Loans may
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be made as, or converted to, such Offshore Rate Loans until such time as
Administrative Agent notifies Company and such 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 Loans in
respect of which such determination was made shall be deemed to be rescinded by
Company.
C. ILLEGALITY OR IMPRACTICABILITY OF OFFSHORE RATE LOANS. In the event
that on any date any Lender shall reasonably determine (which determination
shall be conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Offshore Rate Loans (i) has become unlawful
as a result of compliance by such Lender or its applicable Lending Office in
good faith with any law, treaty, governmental rule, regulation, guideline or
order (or would conflict with any such treaty, 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) has become impracticable, or would
cause such Lender or its applicable Lending Office material hardship, as a
result of contingencies occurring after the date of this Agreement which
materially and adversely affect the London interbank market or the position of
such Lender or its applicable Lending Office 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 Loans as, or to convert Loans to,
Offshore 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 an Offshore 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 Loan as (or convert such Loan to, as the case may be) a Base
Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding
Offshore 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 an Offshore 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
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maintain Loans as, or to convert Loans to, Offshore 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 Offshore Rate
Loans and any loss, expense or liability sustained by that Lender in connection
with the liquidation or re-employment of such funds or from fees payable to
terminate the deposits from which such funds were obtained or from charges
relating to any Offshore Currency Loans) which that Lender may sustain: (i) if
for any reason (other than a default by that Lender) a borrowing of any Offshore
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
Offshore 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 Offshore Rate Loans
occurs on a date prior to the last day of an Interest Period applicable to that
Loan, (iii) if any prepayment of any of its Offshore Rate Loans is not made on
any date 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 Offshore
Rate Loans when required by the terms of this Agreement.
E. BOOKING OF OFFSHORE RATE LOANS. Any Lender may make, carry or
transfer Offshore 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 OFFSHORE 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 Offshore Rate Loans through the purchase of a deposit in the Applicable
Currency bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Offshore Rate in an amount equal to the amount of such
Offshore Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such 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 Offshore 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. OFFSHORE RATE LOANS AFTER DEFAULT. After the occurrence of and during
the continuation of a Potential Event of Default or an Event of Default, Company
may not elect to have a Loan be made or maintained as, or converted to, an
Offshore Rate Loan after the expiration of any Interest Period then in effect
for that Loan and
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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 (which
determination shall be conclusive and binding upon all parties hereto) that any
law, treaty or governmental rule, regulation or order, or any change therein or
in the interpretation, administration or application thereof (including the
introduction 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 or its
applicable Lending Office or any corporation controlling the Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank, the National Association of Insurance Commissioners ("NAIC") 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 applicable Lending Office) of
principal, interest, fees or any other amount payable hereunder;
(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, any office of such Lender (other than any such
reserve or other requirements with respect to Offshore Rate Loans that are
reflected in the definition of Adjusted Offshore Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable Lending Office) or
its obligations hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining 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 promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or
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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. 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 conclusive and binding upon all parties hereto absent
manifest error.
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 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; and
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(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.
(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
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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.
(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 or Issuing Lender shall
have determined that the adoption, effectiveness, phase-in or applicability
after the date hereof of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank, the NAIC or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender or
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Issuing 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 NAIC or comparable agency,
has or would have the effect of reducing the rate of return on the capital of
such Lender or Issuing Lender or any corporation controlling such Lender or
Issuing Lender as a consequence of, or with reference to, such Lender's or
Issuing Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or Issuing Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or Issuing 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 or Issuing Lender
of the statement referred to in the next sentence, Company shall pay to such
Lender or Issuing Lender such additional amount or amounts as will compensate
such Lender or Issuing Lender or such controlling corporation on an after-tax
basis for such reduction. Such Lender or Issuing 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 conclusive and binding upon all parties hereto absent
manifest error.
2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS 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 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 Loans or Letters of Credit of such
Lender or Issuing Lender through another Lending Office of such Lender or
Issuing Lender, or (ii) take such other measures as such Lender or Issuing
Lender may deem reasonable, 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 determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other Lending Office or in accordance
with such other measures, as the case may be, would not otherwise materially
adversely affect such Commitments or 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 Office pursuant to this
subsection 2.8 unless Company
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agrees to pay all incremental expenses incurred by such Lender or Issuing Lender
as a result of utilizing such other Lending 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 conclusive absent
manifest error.
2.9 DEFAULTING LENDERS.
Anything contained herein to the contrary notwithstanding, in the
event that any Lender having a Revolving Loan Commitment (a "DEFAULTING LENDER")
defaults (a "FUNDING DEFAULT") in its obligation to fund any Revolving Loan (a
"DEFAULTED REVOLVING LOAN") in accordance with subsection 2.1, then (i) during
any Default Period (as defined below) with respect to such Defaulting Lender,
the Revolving Loan Exposure of such Defaulting Lender shall be determined as
though the Revolving Loan Commitments of such Lender have been terminated (but
such Commitments shall not actually be terminated) for purposes of voting on any
matters (including without limitation the granting of any consents or waivers)
with respect to any of the Loan Documents; (ii) until such time as the Default
Excess (as defined below) with respect to such Defaulting Lender shall have been
reduced to zero (a) any voluntary prepayment of the Revolving Loans pursuant to
subsection 2.4B(i) shall be applied to the Revolving Loans of other Lenders as
if such Defaulting Lender had no Revolving Loans outstanding and the Revolving
Loan Exposure of such Defaulting Lender were zero and (b) any mandatory
prepayment of the Revolving Loans pursuant to subsection 2.4B(iii) shall be
applied to the Revolving Loans of other Lenders (but not to the Revolving Loans
of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted
Revolving Loans of such Defaulting Lender, it being understood and agreed that
Company shall be entitled to retain any portion of any mandatory prepayment of
the Revolving Loans that is not paid to such Defaulting Lender solely as a
result of the operation of the provisions of this clause (b); PROVIDED that the
provisions of this clause (b) shall not affect any mandatory reductions of the
Revolving Loan Commitment of such Defaulting Lender pursuant to subsection
2.4B(iii); (iii) such Defaulting Lender's Revolving Loan Commitment and
outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the
Letter of Credit Usage in respect of Letters of Credit shall be excluded for
purposes of calculating the commitment fee payable to Lenders having Revolving
Loan Commitments pursuant to subsection 2.3 in respect of any day during any
Default Period with respect to such Defaulting Lender, and such Defaulting
Lender shall not be entitled to receive any commitment fee pursuant to
subsection 2.3 with respect to such Defaulting Lender's Revolving Loan
Commitment in respect of any Default Period with respect to such Defaulting
Lender; and (iv) the Total Utilization of Revolving Loan Commitments as at any
date of determination shall be calculated as if such Defaulting Lender had
funded all Defaulted Revolving Loans of such Defaulting Lender.
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For purposes of this Agreement (A) "DEFAULT PERIOD" means, with
respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(a) the date on which all Revolving Loan Commitments are cancelled or terminated
and/or the Obligations are declared or become immediately due and payable,
(b) the date on which (1) the Default Excess with respect to such Defaulting
Lender shall have been reduced to zero (whether by the funding by such
Defaulting Lender of any Defaulted Revolving Loans of such Defaulting Lender or
by the non-pro rata application of any voluntary or mandatory prepayments of the
Revolving Loans in accordance with the terms of this subsection 2.9 or by a
combination thereof) and (2) such Defaulting Lender shall have delivered to
Company and Administrative Agent a written reaffirmation of its intention to
honor its obligations under this Agreement with respect to its Revolving Loan
Commitment, and (c) the date on which Company, Administrative Agent and
Requisite Lenders waive all Funding Defaults of such Defaulting Lender in
writing, and (B) "DEFAULT EXCESS" means, with respect to any Defaulting Lender,
the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate
outstanding principal amount of Revolving Loans of all Lenders (calculated as if
all Defaulting Lenders (other than such Defaulting Lender) had funded all of
their respective Defaulting Revolving Loans) over the aggregate outstanding
principal amount of Revolving Loans of such Defaulting Lender.
No Commitment of any Lender shall be increased or otherwise affected,
and, except as otherwise expressly provided in this subsection 2.9, performance
by Company of its obligations under this Agreement and the other Loan Documents
shall not be excused or otherwise modified, as a result of any Funding Default
or the operation of this subsection 2.9.
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
having a Revolving Loan Commitment make Revolving Loans pursuant to subsection
2.1A(ii), that Swing Line Lender make Swing Line Loans pursuant to subsection
2.1A(iii) and that Offshore Currency Funding Lender make Offshore Currency Loans
pursuant to subsection 2.1A(iv), 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 Administrative Agent issue Letters of Credit for the account of Company for
the purposes specified in the definitions of Commercial Letters of Credit and
Standby Letters of Credit; PROVIDED that Company shall not request that
Administrative Agent issue:
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(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 $5,000,000;
(iii) any Standby Letter of Credit having a final expiration date later
than the earlier of (a) the date which is 30 days prior to the Revolving
Loan Commitment Termination Date and (b) the date which is 18 months from
the date of issuance of such Standby Letter of Credit; PROVIDED that the
immediately preceding clause (b) shall not prevent any Issuing Lender from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods not to exceed 18 months each unless such
Issuing Lender elects not to extend for any such additional period; and
PROVIDED, FURTHER that such Issuing Lender shall elect not to extend such
Standby Letter of Credit if it has received written notice that an Event of
Default has occurred and is continuing (and has not been waived in
accordance with subsection 10.6);
(iv) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or
(b) that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;
(v) any Letter of Credit denominated in a currency other than Dollars
or an Offshore Currency; and
(vi) any Letter of Credit denominated in an Offshore Currency if the
Dollar Equivalent amount of all outstanding Offshore Currency Loans PLUS
the Letter of Credit Usage for outstanding Letters of Credit denominated in
Offshore Currencies exceed the Offshore Currency Sublimit.
B. MECHANICS OF ISSUANCE.
(i) NOTICE OF ISSUANCE. Whenever Company desires the issuance of a
Letter of Credit, it shall deliver to Administrative Agent a Notice of
Issuance of Letter of Credit substantially in the form of EXHIBIT III
annexed hereto no later than 12:00 Noon (New York City time) at least three
Business Days (in the case of Standby Letters of Credit) or five Business
Days (in the case of Commercial Letters of Credit and Letters of Credit
denominated in an Offshore Currency), or in each case such shorter period
as may be agreed to by the Issuing Lender in any particular instance, in
advance of the proposed date
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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) whether the Letter of Credit is to be a Standby Letter of Credit or a
Commercial Letter of Credit, (c) the face amount of the Letter of Credit,
(d) in the case of a Letter of Credit which Company requests to be
denominated in an Offshore Currency, the Applicable Currency in which
Company requests such Letter of Credit to be issued, (e) the expiration
date of the Letter of Credit, (f) the name and address of the beneficiary,
and (g) 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 the Issuing Lender to make payment under the Letter of Credit;
PROVIDED that the 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 the 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 the Issuing Lender) on such business day.
Company shall notify the Administrative Agent 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 re-certified, 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) DETERMINATION OF ISSUING LENDER. Upon receipt by Administrative
Agent of a Notice of Issuance of Letter of Credit pursuant to subsection
3.1B(i) requesting the issuance of a Letter of Credit, Administrative Agent
shall be the Issuing Lender with respect thereto, notwithstanding the fact
that the Letter of Credit Usage with respect to such Letter of Credit and
with respect to all other Letters of Credit issued by Administrative Agent,
when aggregated with Administrative Agent's outstanding Revolving Loans,
Offshore Currency Loans and Swing Line Loans, may exceed Administrative
Agent's Revolving Loan Commitment then in effect.
(iii) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction or waiver (in
accordance with subsection 10.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures.
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(iv) NOTIFICATION TO LENDERS. Upon the issuance of any Letter of
Credit the Administrative Agent shall promptly notify each other Lender of
such issuance, which notice shall be accompanied by a copy of such Letter
of Credit. 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.
(v) REPORTS TO LENDERS. Within 15 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,
Administrative Agent shall deliver to each other Lender a report setting
forth for such calendar quarter the daily aggregate Dollar Equivalent
amount available to be drawn under the Letters of Credit that were
outstanding during such calendar quarter.
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 the 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
of the maximum Dollar Equivalent amount which is or at any time may become
available to be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
Company agrees to pay to Administrative Agent the following amounts
with respect to Letters of Credit issued hereunder:
(i) with respect to each Standby Letter of Credit, a letter of credit
fee equal to the Applicable Offshore Rate Margin MULTIPLIED BY the daily
maximum Dollar Equivalent amount available to be drawn under such Standby
Letter of Credit (whether or not conditions to drawing thereunder could be
met), payable in arrears on and to (but excluding) the fifteenth day of
each March, June, September and December of each year and computed on the
basis of a 360-day year for the actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, a letter of
credit fee equal to (x) the Applicable Offshore Rate Margin MINUS 1.00% per
annum PROVIDED that in no event shall the amount utilized under this clause
(x) be less than 1.00% per annum MULTIPLIED BY (y) the daily maximum Dollar
Equivalent amount available to be drawn under such Commercial Letter of
Credit (whether or not conditions to drawing thereunder could be met),
payable in arrears on and to (but excluding) the fifteenth day of each
March, June, September and December of each year and computed on the basis
of a 360-day year for the actual number of days elapsed; and
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(iii) 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 clauses (i) and (ii) above),
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such 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 clauses (i) and (ii) of this
subsection 3.2, the daily amount or the daily maximum amount available to be
drawn under any Letter of Credit shall be determined as of the close of business
on any date of determination and the Dollar Equivalent amount of any Letter of
Credit denominated in an Offshore Currency shall be determined based on the
Dollar Equivalent amount as of the most recent Computation Date for such Letter
of Credit. Upon receipt by Administrative Agent of any amount described in
clause (i) or (ii) of this subsection 3.2, Administrative Agent shall retain an
amount equal to 0.25% per annum of the daily Dollar Equivalent amount available
to be drawn under such Letter of Credit for its own account as a fronting fee
and Administrative Agent shall promptly distribute to each Lender having a
Revolving Loan Commitment its Pro Rata Share of the remaining portion of such
Letter of Credit fees.
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, the 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.
B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify Company and
Administrative Agent, and Company shall reimburse such 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 the Applicable Currency 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 such Issuing Lender prior
to 10:00 A.M. (New York City time) on the date such drawing is honored that
Company intends to reimburse such 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 or in the
case of Letters of Credit denominated in an Offshore Currency, to make Revolving
Loans that are Offshore
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Rate Loans in the Applicable Currency on the Reimbursement Date in an amount
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 or Revolving
Loans that are Offshore Rate Loans in the Applicable Currency in the amount of
such honored drawing, the proceeds of which shall be applied directly by
Administrative Agent to reimburse such 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 such Issuing Lender on the Reimbursement
Date in an amount equal to the amount of such honored drawing, Company shall
reimburse such Issuing Lender, on demand, in an amount in Same Day Funds and in
the Applicable Currency 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 any Issuing Lender as provided in subsection 3.3B in an
amount equal to the amount of any drawing honored by such Issuing Lender
under a Letter of Credit issued by it, such Issuing Lender shall promptly
notify each other Lender having a Revolving Loan Commitment 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.
Each Lender shall make available to such Issuing Lender an amount equal to
its respective participation, in the Applicable Currency and in Same Day
Funds, at the office of such Issuing Lender specified in such notice, not
later than 12:00 Noon (New York City time) on the first business day (under
the laws of the jurisdiction in which such office of such Issuing Lender is
located) after the date notified by such Issuing Lender. In the event that
any Lender fails to make available to such 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, such Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the Federal Funds Effective Rate for three Business Days and
thereafter at the Base Rate. Nothing in this subsection 3.3C shall be
deemed to prejudice the right of any Lender to recover from any Issuing
Lender any amounts made available by such Lender to such 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 such Issuing Lender in respect of
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which payment was made by such Lender constituted gross negligence or
willful misconduct on the part of such Issuing Lender.
(ii) DISTRIBUTION TO LENDERS OF REIMBURSEMENTS RECEIVED FROM
COMPANY. In the event any 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 such Issuing Lender under a Letter of Credit issued by
it, such 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 such Issuing Lender from Company in reimbursement
of such honored drawing when such payments are received. Any such
distribution shall be made to a Lender in the Applicable Currency at its
Lending Office 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 in the
Applicable Currency to each Issuing Lender, with respect to drawings
honored under any Letters of Credit issued by it, interest on the amount
paid by such 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 rate then in effect under this Agreement 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 any 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) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date such drawing is honored to but excluding the date
on which such 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 period
pursuant to subsection 3.2 if no
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drawing had been honored under such Letter of Credit, and (b) in the event
such Issuing Lender shall have been reimbursed by other Lenders pursuant to
subsection 3.3C(i) for all or any portion of such honored drawing, such
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 such
Issuing Lender in respect of that portion of such honored drawing so
reimbursed by other Lenders for the period from the date on which such
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 each 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), any 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 the applicable 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;
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(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;
(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 the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each 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 such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such 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 LENDERS' DUTIES. As between Company and any Issuing
Lender, Company assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by such Issuing Lender by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such 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
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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 such Issuing Lender, including any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of such 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 any 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, shall not put such 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 any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such 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 any
Issuing Lender or Lender having a Revolving Loan Commitment shall reasonably
determine (which determination shall be conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction 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 any
Issuing Lender or Lender or its applicable Lending Office with any guideline,
request or directive issued or made after the date hereof by any central bank,
the NAIC or other governmental or quasi-governmental authority (whether or not
having the force of law):
(i) subjects such Issuing Lender or Lender (or its applicable
Lending Office) to any additional Tax (other than any Tax on the overall
net income of
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such Issuing Lender or 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 any particular
Issuing Lender (or its applicable Lending Office);
(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 any Issuing Lender or participations
therein purchased by any Lender (or its applicable Lending Office); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Issuing Lender or Lender (or its applicable
Lending Office) regarding this Section 3 or any Letter of Credit or any
participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or 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
Lender (or its applicable Lending Office) with respect thereto; then, in any
case, Company shall promptly pay to such Issuing Lender or Lender, upon receipt
of the statement referred to in the next sentence, such additional amount or
amounts as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 CONDITIONS TO TERM LOANS AND INITIAL REVOLVING LOANS, OFFSHORE CURRENCY
LOANS AND SWING LINE LOANS.
The obligations of Lenders to make the Term Loans and any Revolving
Loans, Offshore Currency Loans and Swing Line Loans to be made on the Closing
Date are, in addition to the conditions precedent specified in subsection 4.2,
subject to prior or concurrent satisfaction of the following conditions:
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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 Agents 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 to which it is a party, certified as of the Closing Date by the
corporate 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 Agents may reasonably request.
B. NO MATERIAL ADVERSE EFFECT. Since September 30, 1996, no Material
Adverse Effect (in the sole opinion of Arranger and Agents) shall have occurred.
C. CORPORATE AND CAPITAL STRUCTURE, OWNERSHIP, MANAGEMENT, ETC.
(i) CORPORATE STRUCTURE. The organization structure of Company
and its Subsidiaries, both before and after giving effect to the
Recapitalization Transactions, shall be as set forth on SCHEDULE 5.1
annexed hereto and be satisfactory to Agents, Arranger and Lenders.
(ii) CAPITAL STRUCTURE AND OWNERSHIP. The capital structure and
ownership of Company, both before and after giving effect to the
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Recapitalization Transactions, shall be as described in the Note Offering
Materials and be satisfactory to Agents, Arranger and Lenders.
(iii) MANAGEMENT. The management structure of Company, after giving
effect to the Recapitalization Transactions, shall be as described in the
Note Offering Memorandum and be satisfactory to Agents and Arranger.
(iv) RELATED AGREEMENTS. Each of the Related Agreements shall be
satisfactory in form and substance to Agents and Arranger. Agents shall
have received a fully executed or conformed copy of each Related Agreement
and any documents executed in connection therewith, and each Related
Agreement shall be in full force and effect and no provision thereof shall
have been modified or waived in any respect determined by Agents to be
material, in each case without the consent of Agents and Arranger. Any
existing stockholders or similar agreements shall have been terminated.
(v) STOCK PURCHASE AND RECAPITALIZATION AGREEMENT. The Stock
Purchase and Recapitalization Agreement shall be in full force and effect
and shall not have been modified or waived in any material respect without
the consent of Agents and Arranger. All conditions to the Recapitalization
Transactions shall have been satisfied in all material respects or the
fulfillment of any such conditions shall have been waived with the consent
of Agents and Arranger.
D. DEBT AND EQUITY CAPITALIZATION OF COMPANY.
(i) COMMON STOCK. On or prior to the Closing Date, Company shall
have authorized such amendments to its Certificate of Incorporation as may
be required to permit the Recapitalization Transactions to occur as
described in the Note Offering Memorandum, including without limitation
eliminating its Class B Common Stock, shall have obtained the requisite
approval of its shareholders thereto, and shall have filed its amended
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The terms of such Company's Common Stock, as so amended on or
prior to the Closing Date, shall be satisfactory to Agents and Arranger and
a copy of its Certificate of Incorporation, as filed with the Secretary of
State of the State of Delaware, shall have been delivered to Agents.
(ii) ISSUANCE OF EQUITY SECURITIES TO NEW EQUITY INVESTORS. On or
prior to the Closing Date, Company shall have issued approximately
$43,500,000 of shares of its Common Stock to the New Equity Investors for
Cash, which shares shall represent 49.7% of Company's outstanding Common
Stock on a fully-diluted basis following the Recapitalization Transactions.
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(iii) REPURCHASE OF COMMON STOCK. On or prior to the Closing Date,
Company shall have repurchased approximately 651,361 shares of Common Stock
and all of its outstanding Class B Common Stock for an aggregate purchase
amount not exceeding $159,400,000. Upon consummation of the
Recapitalization Transactions, the shares of Company's Common Stock owned
by the Gooding Group shall represent not less than 31.3% of the Company's
outstanding Common Stock, and the shares of Company's Common Stock owned by
all Persons owning shares of Company's common stock immediately prior to
the effectiveness of the Recapitalization Transactions shall represent not
less than 50.3% of the Company's outstanding Common Stock.
(iv) SENIOR SUBORDINATED NOTES. On or prior to the Closing Date,
Company shall have issued not less than $85,000,000 in original principal
amount of Senior Subordinated Notes. The terms and conditions of the
Senior Subordinated Notes shall be substantially as described in the Note
Offering Memorandum and shall be satisfactory to Agents, Arranger and
Lenders, PROVIDED that the Senior Subordinated Notes shall be unsecured and
shall not mature or provide for any scheduled principal payments prior to
the tenth anniversary of the Closing Date; PROVIDED FURTHER that the
negative covenants and default provisions shall be less restrictive than
those contained in this Agreement. Company shall have delivered to
Administrative Agent a fully executed or conformed copy of the Senior
Subordinated Note Indenture.
E. CLOSING DATE MORTGAGES. Administrative Agent shall have
received from Company and each applicable Subsidiary Guarantor:
(i) CLOSING DATE MORTGAGES. Fully executed and notarized
Mortgages (each a "CLOSING DATE MORTGAGE" and, collectively, the "CLOSING
DATE MORTGAGES") in proper form for recording in all appropriate places in
all applicable jurisdictions, encumbering each Real Property Asset listed
in SCHEDULE 4.1E annexed hereto (each a "CLOSING DATE MORTGAGED PROPERTY"
and, collectively, the "CLOSING DATE MORTGAGED PROPERTIES");
(ii) OPINIONS OF LOCAL COUNSEL. An opinion of counsel (which
counsel shall be reasonably satisfactory to Agents) in each state in which
a Closing Date Mortgaged Property is located with respect to the
enforceability of the form(s) of Closing Date Mortgages to be recorded in
such state and such other matters as Agents may reasonably request, in each
case substantially in the form of Exhibit IX attached hereto;
(iii) LANDLORD ESTOPPELS AND CONSENTS. In the case of each
Leasehold Property of Company or such Subsidiary constituting a Closing
Date Mortgaged Property, a Landlord Estoppel and Consent from the landlords
of such real property.
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(iv) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to whether (1) any Closing Date Mortgaged Property
is a Flood Hazard Property and (2) the community in which any such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, (b) if there are any such Flood Hazard Properties, such Loan
Party's written acknowledgement of receipt of written notification from
Administrative Agent (1) as to the existence of each such Flood Hazard
Property and (2) as to whether the community in which each such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, and (c) in the event any such Flood Hazard Property is located in
a community that participates in the National Flood Insurance Program,
evidence that Company has obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable regulations of
the Board of Governors of the Federal Reserve System; and
F. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not
otherwise satisfied pursuant to subsection 4.1E, Agents shall have received
evidence satisfactory to each of them 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 clauses (iii), (iv)
and (v) below) that may be necessary or, in the opinion of Agents, 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 the entire personal and mixed property Collateral. Such actions
shall include the following:
(i) SCHEDULES TO COLLATERAL DOCUMENTS. Delivery to Agents of
accurate and complete schedules to all of the applicable Collateral
Documents.
(ii) STOCK CERTIFICATES AND INSTRUMENTS. Delivery to
Administrative Agent of (a) certificates (which certificates shall be
accompanied by irrevocable undated stock powers, duly endorsed in blank and
otherwise satisfactory in form and substance to Agents) representing all
capital stock of Company's Subsidiaries other than any Immaterial
Subsidiary pledged pursuant to the Company Pledge Agreement and the
Subsidiary Pledge Agreements and (b) all promissory notes or other
instruments (duly endorsed, where appropriate, in a manner satisfactory to
Agents) evidencing any Collateral;
(iii) LIEN SEARCHES AND UCC TERMINATION STATEMENTS. Delivery to
Agents of (a) the results of a recent search, by a Person satisfactory to
Agents, 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 or mixed property of any Loan Party, together with copies of
all such filings
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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).
(iv) 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 Agents,
desirable to perfect the security interests created in such Collateral
pursuant to the Collateral Documents;
(v) PTO COVER SHEETS, ETC. Delivery to Administrative Agent of
all cover sheets or other documents or instruments required to be filed
with the PTO in order to create or perfect Liens in respect of any IP
Collateral;
(vi) OPINIONS OF LOCAL AND FOREIGN COUNSEL. Delivery to Agents of
an opinion of counsel (which counsel shall be reasonably satisfactory to
Agents) under the laws of each jurisdiction in which any Loan Party or any
personal or mixed property Collateral is located, including without
limitation each such jurisdiction in which a Foreign Subsidiary is located
the stock of which will be pledged to secure the Obligations, with respect
to the creation and perfection of the security interests in favor of
Administrative Agent in such Collateral and such other matters governed by
the laws of such jurisdiction regarding such security interests as Agents
may reasonably request, in each case in form and substance reasonably
satisfactory to Agents dated as of the Closing Date and setting forth
substantially the matters in the forms of opinion annexed hereto as EXHIBIT
IX and as to such other matters as Agents may reasonably require.
G. MATTERS RELATING TO EXISTING INDEBTEDNESS OF COMPANY AND ITS
SUBSIDIARIES.
(i) TERMINATION OF EXISTING CREDIT AGREEMENT AND RELATED LIENS.
On the Closing Date, Company and its Subsidiaries shall have (a) repaid in
full all Indebtedness outstanding under the Existing Credit Agreement, (b)
terminated any commitments to lend or make other extensions of credit
thereunder, and (c) delivered to Agents all documents or instruments
necessary to release all Liens securing Indebtedness or other obligations
of Company and its Subsidiaries thereunder.
(ii) EXISTING INDEBTEDNESS TO REMAIN OUTSTANDING. Agents shall
have received an Officer's Certificate of Company stating that, after
giving effect to the transactions described in this subsection 4.1G, the
Indebtedness of
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Company and its Subsidiaries (other than Indebtedness under the Loan
Documents and the Senior Subordinated Notes) shall consist only of the
Indebtedness described on Schedule 7.1 hereto and Indebtedness permitted
pursuant to subsection 7.1(iv) and (vii). Company shall be in compliance
with its obligations under such existing Indebtedness and Company shall
have delivered to Agents a fully-executed or conformed copy of each of the
agreements or documents setting forth the terms and conditions of such
existing Indebtedness. The terms and conditions of all such Indebtedness
shall be in form and in substance satisfactory to Arrangers and Agents.
H. EVIDENCE OF INSURANCE. 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.
I. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of Sullivan & Cromwell, counsel for Loan Parties, in form and
substance reasonably satisfactory to Agents and their counsel, dated as of the
Closing Date and setting forth substantially the matters in the opinions
designated in EXHIBIT VIII annexed hereto and as to such other matters as Agents
acting on behalf of Lenders may reasonably request.
J. OPINIONS OF SYNDICATION AGENT'S COUNSEL. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Syndication Agent, dated as of the Closing
Date, substantially in the form of EXHIBIT X annexed hereto and as to such other
matters as Syndication Agent acting on behalf of Lenders may reasonably request.
K. FEES. Company shall have paid to Agents and Arranger the fees payable
on the Closing Date with respect to the financings contemplated by this
Agreement.
L. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company
shall have delivered to Agents an Officer's Certificate, in form and substance
satisfactory to Agents, 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 Agents and Requisite Lenders.
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M. 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 Recapitalization Transactions 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 Recapitalization Transactions. 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.
N. OPINIONS OF COUNSEL UNDER RELATED AGREEMENTS. Agents shall have
received copies of each of the opinions of counsel delivered on behalf of or to
any Loan Party, under the Related Agreements, together with a letter from each
such counsel authorizing Lenders to rely on such opinion to the same extent as
though it were addressed to Lenders.
O. FINANCIAL STATEMENTS; PRO FORMA CONSOLIDATED BALANCE SHEET. On or
before the Closing Date, Lenders shall have received from Company (i) audited
financial statements of Company and its Subsidiaries for Fiscal Years 1995 and
1996, consisting of balance sheets and the related consolidated statements of
income, stockholders' equity and cash flows for such Fiscal Years, (ii)
unaudited financial statements of Company and its Subsidiaries as at April 30,
1997 consisting of a balance sheet and the related consolidated statement of
income for the one-month period ending on such date, all in reasonable detail
and certified by the chief financial officer of Company that they fairly present
the financial condition of Company and its Subsidiaries as at the date indicated
and the results of their operations for the period indicated, subject to changes
resulting from audit and normal year-end adjustments, (iii) unaudited financial
statements of Company and its Subsidiaries as at March 31, 1997, consisting of a
balance sheet and the related consolidated statement of income, stockholders'
equity and cash flows for the six-month period ending on such date, all in
reasonable detail and certified by the chief financial officer of Company that
they fairly present 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 (iv) pro forma consolidated balance sheet of Company
and its Subsidiaries as at March 31, 1997, prepared in accordance with GAAP and
giving effect to the consummation of the Recapitalization Transactions, the
related financings and the other transactions contemplated by the Loan Documents
and the Related Agreements, which pro forma financial statements shall be in
form and substance satisfactory to Lenders.
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P. SOLVENCY ASSURANCES. On the Closing Date, Agents, Arranger, and
Lenders shall have received a Financial Condition Certificate dated the Closing
Date, substantially in the form of EXHIBIT XXIII annexed hereto and with
appropriate attachments, certifying that, after giving effect to the
consummation of the Recapitalization Transactions, the related financings and
the other transactions contemplated by the Loan Documents, Company will be
Solvent.
Q. LETTER TO AUDITOR. Agents shall have received an executed copy of a
letter to be delivered to Ernst & Young LLP with respect to Lenders' reliance on
Company's audited consolidated financial statements for the Fiscal Year ended
September 30, 1996.
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 acceptable by each Agent,
acting on behalf of Lenders, and its counsel shall be satisfactory in form and
substance to Agents and such counsel, and Agents and such counsel shall have
received all such counterpart originals or certified copies of such documents as
Agents may reasonably request.
S. LENDER APPROVAL. Each Lender hereby agrees that by its execution and
delivery of its signature page hereto and by the funding of its Loans to be made
on the Closing Date, such Lender approves of and consents to each of the matters
set forth in this subsection 4.1 which must be approved by, or which must be
satisfactory to, all or Requisite Lenders; PROVIDED that in the case of any
agreement or document which must be approved by, or which must be satisfactory
to, all or Requisite Lenders, Agent or Company shall have delivered a copy of
such agreement or document in substantially the form in which executed or
delivered to such Lender on or prior to the Closing Date.
4.2 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make 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.
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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 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 Loans to be made by it on that Funding Date;
(v) The making of the 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 or any
other comparable or similar law of any Governmental Authority applicable to
the Loans; and
(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 Loans (or, in the case of the initial 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, in the opinion of Agents or of Requisite Lenders, would be expected
to have a Material Adverse Effect.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
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A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial 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 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 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 and the Agents to enter into this
Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of
Credit and to induce other Lenders to purchase participations therein, Company
represents and warrants to each Lender and the Agents, 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 as now conducted and as proposed to be
conducted, to enter into the Loan Documents 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 could not reasonably be expected to have a Material Adverse Effect.
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C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.14.
D. SUBSIDIARIES. All of the Subsidiaries of Company 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(xiv). The capital stock of
each of the Subsidiaries of Company identified in SCHEDULE 5.1 annexed hereto
(as so supplemented) is duly 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 could not reasonably be expected 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 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 consummation of the transactions contemplated by
the Loan Documents do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Company 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 Material Contract of Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Company 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 Material
Contract of Company or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date.
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C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents 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 body except for
filings and recordings required in connection with the perfection of the
security interests granted pursuant to the Loan Documents.
D. BINDING OBLIGATION. Each of the Loan Documents 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 COMMON STOCK AND SENIOR SUBORDINATED NOTES.
(i) COMMON STOCK. The Common Stock issued to the New Equity
Investors in the Recapitalization Transactions is, or when issued and
delivered will be, duly and validly issued, fully paid and nonassessable.
No stockholder of Company has any preemptive rights to subscribe for any
additional equity Securities of Company except pursuant to the Related
Agreements. The issuance and sale of Company's Common Stock in the
Recapitalization Transactions, 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 SUBORDINATED NOTES . Company has the corporate power
and authority to issue the Senior Subordinated Notes. The Senior
Subordinated 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 subordination provisions of the Senior Subordinated
Notes will be enforceable against the holders thereof and the Loans and all
other monetary Obligations hereunder are and will be within the definition
of "Senior Indebtedness" included in such provisions. Senior Subordinated
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
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sheets of Company and its Subsidiaries as at September 30, 1996 and September
30, 1995 and the related consolidated statements of income, stockholders' equity
and cash flows of Company and its Subsidiaries for the Fiscal Years then ended,
(ii) the unaudited consolidated balance sheets of Company and its Subsidiaries
as at March 31, 1997 and the related unaudited consolidated statements of
income, stockholders' equity and cash flows of Company and its Subsidiaries for
the six months then ended and (iii) the unaudited consolidated balance sheet of
Company and its Subsidiaries as at April 30, 1997 and the related unaudited
consolidated statement of income of Company and its Subsidiaries for the one
month then ended. All such statements in (i) and (ii) were prepared in
conformity with GAAP and all such statements 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, subject, in the
case of any such unaudited financial statements, to changes resulting from
normal year-end adjustments. Company does not (and will not following the
funding of the initial Loans) 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 or, if not so reflected, is material in relation to the
business, operations or condition (financial or otherwise) of Company or any of
its Subsidiaries.
5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.
Since September 30, 1996, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Since September 30, 1996, 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 Junior Payment or agreed to do so except as
permitted by subsection 7.5, in the ordinary course of business consistent with
past practices or as described in the Note Offering Memorandum.
5.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY.
A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries 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 7.7.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
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B. REAL PROPERTY. As of the Closing Date, SCHEDULE 5.5 annexed hereto
contains a true, accurate and complete list of (i) all real property owned by
Company or any Subsidiary and (ii) all leases, subleases or assignments of
leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in SCHEDULE 5.5 annexed hereto, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any material default
that has occurred and is continuing thereunder, and each such agreement
constitutes the legally valid and binding obligation of each applicable Loan
Party, enforceable against such Loan Party in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles.
5.6 LITIGATION; ADVERSE FACTS.
There are no actions, suits, proceedings, arbitrations or governmental
investigations (whether or not purportedly on behalf of Company 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
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries and that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither Company nor any of its
Subsidiaries (i) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could 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, could reasonably be expected to
result in a Material Adverse Effect.
5.7 PAYMENT OF TAXES.
Except to the extent permitted by subsection 6.3, all tax returns that
could reasonably be expected to have a Material Adverse Effect on Company or its
Subsidiaries if not filed, and reports of Company and its Subsidiaries required
to be filed by any of them, have been timely filed, and all 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. Company knows of no proposed tax
assessment against Company or any of
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its Subsidiaries which is not in the ordinary course of business or being
actively contested by Company 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.
A. Neither Company 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 securities, indentures, mortgages, deeds of
trust, contracts, undertakings, agreements or other instruments, 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 have a Material Adverse
Effect.
B. Neither Company 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, could reasonably
be expected to result in a Material Adverse Effect.
5.9 GOVERNMENTAL REGULATION.
Neither Company 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 or under any other comparable or similar
laws of any governmental authority 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. Neither Company 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 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 7.7 or subject to any restriction contained in any agreement
or instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
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5.11 EMPLOYEE BENEFIT PLANS.
A. Company, each of its Subsidiaries and each of their respective
ERISA Affiliates are in substantial compliance with all applicable provisions
and requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their material obligations under each Employee Benefit Plan. To the best
knowledge of Company, each Employee Benefit Plan which is intended to qualify
under Section 401(a) of the Internal Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur
that could be reasonably expected to subject Company, any of its Subsidiaries or
their respective ERISA Affiliates to a liability in excess of $500,000.
C. Except as disclosed on SCHEDULE 5.11, and except to the extent
required under Section 4980B of the Internal Revenue Code or Part 6 of Subtitle
B of Title I of ERISA, no "employee welfare benefit plan" (within the meaning of
Section 3(1) of ERISA) of Company provides benefits to any retired or former
employee of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in excess of $500,000.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $500,000.
E. As of the most recent valuation date for each Multiemployer
Plan for which the actuarial report is available to Company, the potential
liability of Company, its Subsidiaries and their respective ERISA Affiliates 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 $500,000 in the aggregate
for all such benefits.
5.12 CERTAIN FEES.
Other than as disclosed in the Note Offering Memorandum, no broker's
or finder's fee or commission will be payable with respect to this Agreement or
any of the transactions 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.
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5.13 ENVIRONMENTAL PROTECTION.
Except as set forth in SCHEDULE 5.13 annexed hereto:
(i) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to
(a) any Environmental Law, (b) any Environmental Claim, or (c) any
Hazardous Materials Activity;
(ii) neither Company 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 with respect to a matter which could
reasonably be expected to have a Material Adverse Effect on Company;
(iii) there are and, to Company's knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities which could
reasonably be expected to form the basis of an Environmental Claim against
Company or any of its Subsidiaries reasonably likely to have a Material
Adverse Effect;
(iv) neither Company nor any of its Subsidiaries nor, to Company's
knowledge, any predecessor of Company or any of its Subsidiaries has filed
any notice under any Environmental Law indicating past or present treatment
of Hazardous Materials at any Facility, and none of Company' or any of its
Subsidiaries' operations involves the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent; and
(v) compliance with all Environmental Laws will not, individually
or in the aggregate, have a reasonable likelihood 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 Company 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.
There is no strike or work stoppage in existence or, to Company's
knowledge, threatened involving Company or any of its Subsidiaries that 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 (i) the
actions taken on or prior to the date hereof pursuant to subsections 4.1E, 4.1F,
6.8 and 6.9 and (ii) the delivery to Administrative Agent of any Pledged
Collateral not delivered to Administrative Agent at the time of execution and
delivery of the applicable Collateral Document (all of which Pledged Collateral
has been so delivered) 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, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such 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 and except as may be required, in connection with the
disposition of any Pledged Collateral, by laws generally affecting the offering
and sale of securities.
C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in
favor of Administrative Agent as contemplated by subsection 5.16A, (i) 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 and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO.
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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.
5.17 DISCLOSURE.
No information contained in the Loan Documents or in any other
document, certificate or written statement furnished to Lenders by or on behalf
of Company or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement is inaccurate, incomplete, untrue or
misleading in any material respect. 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. 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 herein or in such other documents,
certificates and statements furnished to Lenders for use in connection with the
transactions contemplated hereby.
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 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 Agents and Lenders:
(i) MONTHLY FINANCIALS: as soon as available and in any event
within 30 days after the end of each month ending after the Closing Date,
the consolidated statement of income of Company and its Subsidiaries as at
the end of such month and for the period from the beginning of the then
current Fiscal Year to the end of such month, setting forth in each case in
comparative form the corresponding figures for the corresponding periods of
the previous Fiscal Year, to the extent prepared on a monthly basis and in
the form
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prepared for internal reporting purposes, all in reasonable detail and
certified by the chief financial officer, chief accounting officer or
controller of Company that they fairly present the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments;
(ii) QUARTERLY FINANCIALS: as soon as available and in any event
within 45 days after the end of each Fiscal Quarter, (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, if available, the corresponding figures from
the Financial Plan for the current Fiscal Year, (b) sales, gross profit,
operating income and EBITDA figures on a business unit basis for such
Fiscal Quarter and for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter and prepared on a basis
consistent with the financial statements delivered pursuant to subsection
4.1O, all in reasonable detail and certified by the chief financial officer
of Company that they fairly present 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 (c) 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; PROVIDED that delivery of the
financial statements and narrative required pursuant to the foregoing
clause (a) and (c) may be satisfied by delivery of Company's Quarterly
Report on Form 10-Q as filed with the Securities and Exchange Commission;
(iii) YEAR-END FINANCIALS: as soon as available 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, if available, the corresponding figures
from the Financial Plan for the Fiscal Year covered by such financial
statements, (b) sales, gross profit, operating income and EBITDA figures on
a business unit basis for such Fiscal Year and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Year
and prepared on a basis consistent with the financial statements delivered
pursuant to subsection 4.1O, all in reasonable
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detail and certified by the chief financial officer, chief accounting
officer or controller of Company that they fairly present 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,
(c) a narrative report describing the operations of Company and its
Subsidiaries in the form prepared for presentation to senior management for
such Fiscal Year, and (d) in the case of such consolidated financial
statements, (1) a report thereon of Ernst & Young LLP, or other independent
certified public accountants of recognized national standing selected by
Company and satisfactory to Agents, 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 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, and (2) a copy of an Auditor's Letter substantially in
the form of EXHIBIT XXIV from Ernst & Young LLP or other independent
certified public accountants to Company with respect to such audited
consolidated financial statements; PROVIDED that delivery of the financial
statements and narrative required pursuant to the foregoing clause (a) and
(c) may be satisfied by delivery of Company's Annual Report on Form 10-K as
filed with the Securities and Exchange Commission;
(iv) OFFICER'S AND COMPLIANCE CERTIFICATES: together with each
delivery of financial statements of Company and its Subsidiaries pursuant
to subdivisions (i), (ii) and (iii) above, (a) an Officer's Certificate of
Company stating that the signers do not have knowledge of the existence as
at the date of such Officer's 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 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;
(v) CERTAIN ACCOUNTING CHANGES: 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), (iii) or (xiii) of this subsection 6.1
will differ in any
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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 or, if as a result of any
change in Company's Fiscal Year-end, the numbers set forth in the financial
covenants or other covenants set forth herein do not measure Company's
compliance with such covenants in the same manner as before such change,
then (a) Company shall promptly notify Administrative Agent of any such
change and Company and Lenders will negotiate in good faith to amend
Sections 1, 6 and 7 hereof so that the criteria for evaluating Company's
financial condition and performance shall be the same as they were prior to
such changes, and (b) together with each delivery of financial statements
pursuant to subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1
following such change until such time as Company and Lenders have agreed on
such amendments to Sections 1, 6 and 7, a written 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 7.6) which
would have resulted if such financial statements had been prepared, or
compliance with such covenants had been measured, without giving effect to
such change;
(vi) 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 Section 7 of
this Agreement 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;
(vii) ACCOUNTANTS' REPORTS: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of any comment
letter submitted by such accountants to management in connection with their
annual audit;
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(viii) 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, and (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 regulatory authority;
(ix) 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 Administrative Agent) or taken any
other action with respect to a claimed Event of Default or Potential Event
of Default, (b) that any Person has given any notice to Company or any of
its Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in subsection 8.2,
(c) 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 (d) 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 Officer's 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;
(x) LITIGATION OR OTHER PROCEEDINGS: promptly upon any officer of
Company obtaining knowledge of (X) the institution of, or written threat
of, any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in
writing by Company to Lenders or (Y) any material development in any
Proceeding that, in any case:
(1) if adversely determined, 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;
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written notice thereof;
(xi) ERISA EVENTS: promptly upon becoming aware of the occurrence
of or forthcoming occurrence of any ERISA Event that individually or in the
aggregate could reasonably be expected to result in a material liability to
Company, a written notice specifying the nature thereof, what action
Company, any of its Subsidiaries 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 in writing by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto;
(xii) FISCAL YEAR: promptly upon any decision by Company to change
Company's Fiscal Year, written notice of such new Fiscal Year-end;
(xiii) FINANCIAL PLANS: at such time as prepared by Company, a
consolidated plan and financial forecast for such Fiscal Year or for at
least the six month period succeeding the delivery of such plan and
financial forecast (the "FINANCIAL PLAN") as customarily prepared by
Company, including without limitation (a) forecasted balance sheets and
forecasted statements of income and cash flows of Company and its
Subsidiaries on a consolidated basis, together with an explanation of the
assumptions on which such forecasts are based and (b) forecasted statements
of income and cash flows of Company and its Subsidiaries on a consolidated
basis for each Fiscal Period of such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based; PROVIDED
that at all times Administrative Agent and Lenders shall have a Financial
Plan effective for at least the next succeeding month;
(xiv) 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);
(xv) MARGIN DETERMINATION CERTIFICATE: concurrently with the
delivery of the financial statements required under subsections 6.1(ii) and
6.1(iii), Company shall deliver a Margin Determination Certificate;
(xvi) INSURANCE: as soon as practicable and in any event by the
last day of each Fiscal Year, an Officer's Certificate or other report or
certificates of insurance outlining all material insurance coverage
maintained as of the date of such report or certificate by Company and its
Subsidiaries; 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 any Lender.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and 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 is not disadvantageous
in any material respect to Company, such Subsidiary or Lenders.
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes that could reasonably be expected to have a Material Adverse Effect on
Company or its Subsidiaries if not paid, 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, and all 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.
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 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
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and replacements thereof; PROVIDED, HOWEVER that neither Company nor any of its
Subsidiaries shall be required to maintain any such property if the Board of
Directors of Company or such Subsidiary shall determine that the maintenance
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 is not disadvantageous
in any material respect to Company, such Subsidiary or Lenders.
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 (i)
flood insurance with respect to each Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program, in each
case in compliance with any applicable regulations of the Board of Governors of
the Federal Reserve System, and (ii) replacement value property insurance on the
Collateral. Each such policy of insurance 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 business interruption and casualty
insurance policy, contain a loss payable clause or endorsement, satisfactory in
form and substance to Agents, that names Administrative Agent for the benefit of
Lenders as the loss payee thereunder for any covered loss in excess of $500,000
and provides for at least 30 days prior written notice to Agents of any
modification or cancellation of such policy.
6.5 INSPECTION RIGHTS; 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 as often as may reasonably be requested and for
all such purposes as are reasonably related to this Agreement or the extensions
of credit hereunder.
B. LENDER MEETING. Company will, upon the request of Agents or Requisite
Lenders, participate in a meeting of Agents and Lenders once during each
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Fiscal Year to be held at Company's corporate offices (or at such other location
as may be agreed to by Company and Agents) at such time as may be agreed to by
Company and Agents.
6.6 COMPLIANCE WITH LAWS, ETC.
Company shall comply, and shall cause each of its Subsidiaries to
comply, and shall use its best efforts to cause all other Persons on or
occupying any Facilities to comply, with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority (including all
Environmental Laws), noncompliance with which could 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 Agents
may, if an Event of Default has occurred and is continuing, or if Administrative
Agent has received information indicating a Release, Environmental Claim or
other environmental liability at a Facility having a reasonable possibility of
causing a Material Adverse Effect, and to the extent permitted by any lease or
other third party agreement governing activities at such Facility, (i) retain,
at Company's expense, an independent professional consultant to review any
environmental audits, investigations, analyses and reports relating to Hazardous
Materials prepared by or for Company and (ii) conduct its own investigation of
any such 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 reasonable efforts to obtain permission for Agents'
professional consultant to conduct an investigation of such Facility. For
purposes of conducting such a review and/or investigation, Company hereby grants
to Agents and their respective 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 in
compliance with all Environmental Laws and any lease or other third party
document governing activities at such Facility, unless otherwise agreed to by
Company and Agents, 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. Company and Agents hereby acknowledge and agree that any report
of any investigation conducted at the request of Agents pursuant to this
subsection 6.7A will be obtained and shall be used by Agents and Lenders for the
purposes of Lenders' internal credit decisions, to monitor and police the Loans
and to protect Lenders' security interests, if any, created by the Loan
Documents, and any
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other purpose required by law. Agents agree to deliver a copy of any such
report, subject to any contractual obligations restricting or prohibiting such
delivery, to Company with the understanding that Company acknowledges and agrees
that neither of the Agents nor any Lender makes any representation or warranty
with respect to such report, and (z) by delivering such report to Company,
neither of the Agents 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 Agents and Lenders:
(i) ENVIRONMENTAL AUDITS AND REPORTS. As soon as practicable
following receipt thereof, copies of all material environmental audits,
investigations, analyses and reports of any kind or character under its
control, whether prepared by personnel of Company or any of its
Subsidiaries or by independent consultants, governmental authorities or any
other Persons, with respect to significant environmental matters at any
Facility;
(ii) NOTICE OF CERTAIN RELEASES, REMEDIAL ACTIONS, ETC. As soon as
practicable 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, (b) any remedial action taken by Company or any other
Person in response to (1) any Hazardous Materials Activities the existence
of which has a reasonable possibility of resulting in one or more
Environmental Claims having, individually or in the aggregate, a Material
Adverse Effect, or (2) any Environmental Claims that, individually or in
the aggregate, have a reasonable likelihood 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 cause such Facility or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use thereof
under any Environmental Laws reasonably likely to have a Material Adverse
Effect on Company.
(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, (b) any Release required to be reported
to any federal, state or local governmental or regulatory agency, and (c)
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 any Hazardous Materials Activity.
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(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) impair 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 commence manufacturing or other industrial operations or to
modify current operations in a manner that could reasonably be expected to
subject Company or any of its Subsidiaries to any additional material
obligations or requirements under any Environmental Laws.
(v) OTHER INFORMATION. With reasonable promptness, such other
documents and information as from time to time may be reasonably requested
by Agents 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 puts Company or any
Subsidiary in violation of any Environmental Laws or that presents a
material risk of giving rise to an Environmental Claim against Company or
any Subsidiary. 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 violation of applicable Environmental Laws by Company or its
Subsidiaries and (ii) make an appropriate response to any Environmental
Claim against
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Company or any of its Subsidiaries and discharge any obligations it may
have to any Person thereunder.
6.8 EXECUTION OF SUBSIDIARY GUARANTY, PERSONAL PROPERTY COLLATERAL
DOCUMENTS BY CERTAIN SUBSIDIARIES, FUTURE SUBSIDIARIES AND COMPANY
PLEDGE AGREEMENTS.
A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL
DOCUMENTS. In the event that any Person becomes a Subsidiary of Company after
the date hereof, Company will promptly notify Administrative Agent of that fact
and cause such Subsidiary which is a Domestic Subsidiary to execute and deliver
to Administrative Agent a counterpart of the Subsidiary Guaranty, and, as
appropriate, a Subsidiary Pledge Agreement, a Subsidiary Security Agreement,
Additional Mortgages, a Subsidiary Patent Collateral Assignment and Security
Agreement and a Subsidiary Trademark 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 4.1E) as may be necessary or, in the opinion of Agents, desirable to
create in favor of Administrative Agent, for the benefit of Lenders, a valid and
perfected First Priority Lien on all of the personal and mixed property assets
of such Subsidiary described in the applicable forms of Collateral Documents.
With respect to any such Domestic Subsidiary, Company shall also deliver to
Administrative Agent a pledge amendment to the Company Pledge Agreement or the
applicable Subsidiary Pledge Agreement, as appropriate, granting to
Administrative Agent on behalf of Lenders a first priority security interest in
100% of the capital stock of such Domestic Subsidiary.
B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall
deliver to Administrative Agent, together with such Loan Documents, (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 satisfactory to Agents and their respective
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization,
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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 creation and perfection of Liens in
any Collateral pursuant to such Loan Documents) as Agents may reasonably
request, all of the foregoing to be satisfactory in form and substance to Agents
and their respective counsel.
C. FUTURE FOREIGN SUBSIDIARIES. In the event that any Person becomes a
Subsidiary of Company after the date hereof and such Subsidiary is a Foreign
Subsidiary which is not an Immaterial Subsidiary, with respect to any such
Foreign Subsidiary, Company shall deliver to Administrative Agent a pledge
amendment to the Company Pledge Agreement or shall execute a Company Pledge
Agreement under the laws of the jurisdiction of organization or incorporation of
such Foreign Subsidiary, in each case granting to Administrative Agent on behalf
of Lenders a first priority security interest in 65% of the capital stock of
such Foreign Subsidiary, and, in each case, Company shall take, or cause to be
taken, all such other actions as Administrative Agent shall deem necessary or
desirable to perfect such security interest.
D. COMPANY PLEDGE AGREEMENTS. To the extent not delivered to
Administrative Agent on the Closing Date, by June 20, 1997, Administrative Agent
shall have received executed originals of all Company Pledge Agreements, in each
case in form and substance satisfactory to Administrative Agent, with respect to
the pledge of 65% of the capital stock of each Foreign Subsidiary that is a
direct Subsidiary of Company, together with evidence satisfactory to
Administrative Agent that all filings, recordings and other actions that
Administrative Agent deems necessary or advisable to establish, preserve and
protect the Liens granted to Administrative Agent on behalf of Lenders with
respect to such Foreign Subsidiary stock under the Collateral Documents shall
have been made.
6.9 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL
PROPERTY COLLATERAL.
A. CONFORMING LEASEHOLD INTERESTS. If Company or any of its Subsidiaries
acquires any Leasehold Property, Company shall, or shall cause such Subsidiary
to, cause such Leasehold Property to be a Conforming Leasehold Interest.
B. ADDITIONAL MORTGAGES, ETC. From and after the Closing Date, in the
event that (i) Company or any Subsidiary Guarantor acquires any fee interest in
real property or any Material Leasehold Property or (ii) at the time any Person
becomes a Subsidiary Guarantor, such Person owns or holds any fee interest in
real property or any Material Leasehold Property, in either case excluding any
such Real Property Asset the encumbrancing of which requires the consent of any
applicable lessor or (in the case of clause (ii) above) then-existing senior
lienholder, where Company and its Subsidiaries are unable to obtain such
lessor's or senior lienholder's consent (any such
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non-excluded Real Property Asset described in the foregoing clause (i) or (ii)
being an "ADDITIONAL MORTGAGED PROPERTY"), Company or such Subsidiary Guarantor
shall deliver to Administrative Agent, as soon as practicable after such Person
acquires such Additional Mortgaged Property or becomes a Subsidiary Guarantor,
as the case may be, the following:
(i) ADDITIONAL MORTGAGE. A fully executed and notarized Mortgage
(an "ADDITIONAL MORTGAGE"), duly recorded in all appropriate places in all
applicable jurisdictions, encumbering the interest of such Loan Party in
such Additional Mortgaged Property;
(ii) OPINIONS OF COUNSEL. (a) A favorable opinion of counsel to
such Loan Party, in form and substance satisfactory to Agents and their
respective counsel, as to the due authorization, execution and delivery by
such Loan Party of such Additional Mortgage and such other matters as
Agents may reasonably request, and (b) if required by Agents, an opinion of
counsel (which counsel shall be reasonably satisfactory to Agents) in the
state in which such Additional Mortgaged Property is located with respect
to the enforceability of the form of Additional Mortgage recorded in such
state and such other matters (including any matters governed by the laws of
such state regarding personal property security interests in respect of any
Collateral) as Agents may reasonably request, in each case in form and
substance reasonably satisfactory to Agents;
(iii) LANDLORD ESTOPPEL AND CONSENT; RECORDED LEASEHOLD INTEREST.
In the case of an Additional Mortgaged Property consisting of a Leasehold
Property, (a) a Landlord Estoppel and Consent and (b) evidence that such
Leasehold Property is a Recorded Leasehold Interest;
(iv) TITLE INSURANCE. (a) If required by Agents with respect to
fee interests in real property owned by Company or any Subsidiary
Guarantor, an ALTA mortgagee title insurance policy or an unconditional
commitment therefor (an "ADDITIONAL MORTGAGE POLICY") issued by a reputable
title company with respect to such Additional Mortgaged Property, in an
amount satisfactory to Agents, insuring fee simple title to, or a valid
leasehold interest in, such Additional Mortgaged Property vested in such
Loan Party and assuring Agents that such Additional Mortgage creates a
valid and enforceable First Priority mortgage Lien on such Additional
Mortgaged Property, subject only to a standard survey exception, which
Additional Mortgage Policy (1) shall include an endorsement for mechanics'
liens, for future advances under this Agreement and for any other matters
reasonably requested by Agents and (2) shall provide for affirmative
insurance and such reinsurance as Agents may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to Agents; and (b)
evidence satisfactory to Agents that such Loan Party has (i) delivered to
such title company all certificates and affidavits required by such title
company in connection with the issuance of the Additional Mortgage
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Policy and (ii) paid to such title company or to the appropriate
governmental authorities all expenses and premiums of such title company in
connection with the issuance of the Additional Mortgage Policy and all
recording and stamp taxes (including mortgage recording and intangible
taxes) payable in connection with recording the Additional Mortgage in the
appropriate real estate records;
(v) TITLE REPORT. If no Additional Mortgage Policy is required
with respect to such Additional Mortgaged Property, a title report issued
by such title company with respect thereto, dated not more than 30 days
prior to the date such Additional Mortgage is to be recorded and
satisfactory in form and substance to Agents;
(vi) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies of
all recorded documents listed as exceptions to title or otherwise referred
to in the Additional Mortgage Policy or title report delivered pursuant to
clause (iv) or (v) above;
(vii) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property is
a Flood Hazard Property and (2) if so, whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, (b) if such Additional Mortgaged Property is a Flood
Hazard Property, such Loan Party's written acknowledgement of receipt of
written notification from Administrative Agent (1) that such Additional
Mortgaged Property is a Flood Hazard Property and (2) as to whether the
community in which such Flood Hazard Property is located is participating
in the National Flood Insurance Program, and (c) in the event such
Additional Mortgaged Property is a Flood Hazard Property that is located in
a community that participates in the National Flood Insurance Program,
evidence that Company has obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable regulations of
the Board of Governors of the Federal Reserve System; and
(viii) ENVIRONMENTAL AUDIT. If required by Agents, reports and other
information, in form, scope and substance satisfactory to Agents and
prepared by environmental consultants satisfactory to Agents, concerning
any environmental hazards or liabilities to which Company or any of its
Subsidiaries may be subject with respect to such Additional Mortgaged
Property.
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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 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, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness in respect of Capital Leases, mortgage financings
or purchase money obligations; PROVIDED that such Capital Leases, mortgage
financings or purchase money obligations are incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvements of property used in the business of the Company or its
Subsidiaries, in an aggregate principal amount not to exceed $4,000,000 at
any time outstanding;
(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other wholly-owned Subsidiary of Company;
PROVIDED that (a) all such intercompany Indebtedness shall be evidenced by
promissory notes which promissory notes (other than notes issued and
payable to Foreign Subsidiaries) are pledged to Administrative Agent
pursuant to the terms of the applicable Collateral Documents, (b) all such
intercompany Indebtedness owed by Company or by any guarantor Subsidiary to
Company or to any of Company's Subsidiaries shall be subordinated in right
of payment to the payment in full of the Obligations pursuant to the terms
of the applicable promissory notes or an intercompany subordination
agreement, in each case in form and substance satisfactory to
Administrative Agent, and (c) any payment by any Subsidiary of Company
under any guaranty of the Obligations shall
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result in a PRO TANTO reduction of the amount of any intercompany
Indebtedness owed by such Subsidiary to Company or to any of its
Subsidiaries for whose benefit such payment is made;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to the existing Indebtedness described in SCHEDULE 7.1 annexed
hereto and any Indebtedness incurred to refinance such existing
Indebtedness; PROVIDED that after giving effect to such refinancing
Indebtedness and the repayment of the corresponding existing Indebtedness
with the proceeds thereof, (a) the aggregate principal amount of the
refinancing Indebtedness and the corresponding existing Indebtedness so
refinanced shall not be greater than the outstanding principal amount of
such existing Indebtedness immediately prior to such refinancing, (b) the
weighted average life to maturity of such refinancing Indebtedness shall be
no shorter than the existing Indebtedness being refinanced and (c) such
refinancing Indebtedness shall not be secured by any additional property
than that which secures the existing Indebtedness being refinanced;
PROVIDED FURTHER that with respect to Foreign Subsidiaries, such
Indebtedness is permitted pursuant to subsection 7.1(vii);
(vi) Company and its Subsidiaries may become and remain liable with
respect to Indebtedness evidenced by the Senior Subordinated Notes in an
aggregate principal amount not to exceed $85,000,000;
(vii) Company's Foreign Subsidiaries may become and remain liable
with respect to committed or uncommitted lines of credit for loans to, or
for the sale with recourse or discounting of notes or accounts receivable
of, such Foreign Subsidiaries, such lines of credit to be in form and
substance satisfactory to Administrative Agent, including without
limitation existing lines of credit described on Schedule 7.1 annexed
hereto, in an aggregate amount for all such lines of credit of up to
$6,500,000; PROVIDED HOWEVER that the aggregate amount outstanding and
drawn under all such lines of credit, together with the aggregate amount of
any liabilities or Indebtedness which is outstanding and drawn with respect
to the Contingent Obligations permitted under subsection 7.4(iii), does not
exceed $6,500,000 at any time; and
(viii) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $2,500,000 at any time outstanding.
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
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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:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents, including
Liens securing its obligations to Lenders or Affiliates of Lenders as
Interest Rate Exchangers or Currency Exchangers (as such terms are defined
in the Collateral Documents);
(iii) Existing Liens described in SCHEDULE 7.2 annexed hereto;
(iv) Liens on the assets of Company's Foreign Subsidiaries securing
the Indebtedness permitted under subsection 7.1(vii) and the Contingent
Obligations under subsection 7.4(iii);
(v) Liens securing Indebtedness permitted under subsection
7.1(iii); PROVIDED that such Liens extend only to the property or asset so
financed and the proceeds thereof; and
(vi) Other Liens on assets other than Collateral securing
Indebtedness in an aggregate amount not to exceed $2,500,000 at any time
outstanding.
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
Subordinated Note Indenture or any other agreement prohibiting only the creation
of Liens securing Subordinated Indebtedness) prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.
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7.3 INVESTMENTS; JOINT VENTURES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may make and own Investments in
any wholly-owned Subsidiaries of Company that is engaged in the test
instrumentation business or a business reasonably related thereto;
(iii) Company and its wholly-owned Subsidiaries may make
intercompany loans to the extent permitted under subsection 7.1(iv);
(iv) Company and its wholly-owned Domestic Subsidiaries may make
and own Investments in Persons that, as a result of such Investments,
become additional wholly-owned Domestic Subsidiaries, and Company may make
and own Investments in Persons that, as a result of such Investments,
become additional direct wholly-owned Foreign Subsidiaries, in each case to
the extent such Investments are permitted under subsection 7.7(ii);
(v) Company and its Subsidiaries may continue to own the existing
Investments owned by them and described in SCHEDULE 7.3 annexed hereto;
(vi) Company may make loans to its employees for the purposes of
purchasing Common Stock from Company in connection with the exercise of
stock options granted pursuant to a stock option plan approved by Company's
Board of Directors; PROVIDED that the aggregate principal amount of such
loans shall not exceed $2,000,000 at any time outstanding;
(vii) Company and its Subsidiaries may accept promissory notes
received in consideration of any Asset Sale to the extent permitted
pursuant to subsection 7.7(vi); PROVIDED that any such promissory notes so
accepted shall be pledged as security for the Obligations pursuant to the
applicable Collateral Documents; and
(viii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $2,500,000.
7.4 CONTINGENT OBLIGATIONS.
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Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary Guaranty,
including Contingent Obligations thereunder for the benefit of Lenders or
Affiliates of Lenders as Interest Rate Exchangers or Currency Exchangers
(as such terms are defined in the Subsidiary Guaranty);
(ii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of Letters of Credit;
(iii) Foreign Subsidiaries of Company may become and remain liable
with respect to Contingent Obligations in respect of letters of credit,
performance, completion or surety bonds or guaranties or other similar
Contingent Obligations, including without limitation existing Contingent
Obligations described on Schedule 7.4 annexed hereto, in an aggregate
amount for all such Contingent Obligations of up to $4,000,000; PROVIDED
that the aggregate amount of any liabilities or Indebtedness which is
outstanding and drawn with respect to such Contingent Obligations, together
with the aggregate amount outstanding and drawn under the lines of credit
permitted under subsection 7.1(vii), does not exceed $6,500,000 at any
time; and Company may become and remain liable with respect to guarantees
of the Foreign Subsidiaries' Contingent Obligations permitted under this
subsection 7.4(iii) and with respect to guarantees of the Foreign
Subsidiaries' Indebtedness permitted under subsection 7.1(vii);
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under Currency Agreements entered into in
the ordinary course of business with a Lender or an Affiliate of a Lender
in a notional amount not to exceed $10,000,000 for all such Currency
Agreements;
(v) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business of the obligations of suppliers, customers, franchisees and
licensees of Company and its Subsidiaries in an aggregate amount not to
exceed at any time $2,500,000;
(vi) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of any Indebtedness of Company
or any of its Subsidiaries permitted by subsection 7.1 and Company may
become and remain liable with respect to Contingent Obligations in respect
of any other liabilities or obligations or any of its Subsidiaries not
prohibited under this Agreement;
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(vii) Company and its Subsidiaries, as applicable, may remain
liable with respect to existing Contingent Obligations described in
SCHEDULE 7.4 annexed hereto; PROVIDED that with respect to Foreign
Subsidiaries, such Contingent Obligations are permitted pursuant to
subsection 7.4(iii);
(viii) Subsidiary Guarantors may become and remain liable with
respect to Contingent Obligations arising under their subordinated
guaranties of the Senior Subordinated Notes as set forth in the Senior
Subordinated Note Indenture as in effect on the Closing Date; and
(ix) Company and its Domestic Subsidiaries may become and remain
liable with respect to other Contingent Obligations; PROVIDED that the
maximum aggregate liability, contingent or otherwise, of Company and its
Domestic Subsidiaries in respect of all such Contingent Obligations shall
at no time exceed $2,500,000.
7.5 RESTRICTED JUNIOR PAYMENTS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; PROVIDED that, so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing or occurs as a
result thereof: (i) on the Closing Date, Company may purchase for cash up to
approximately 651,361 shares in aggregate of Company's Common Stock (including
stock options) and all of its outstanding shares of Class B Common Stock for an
aggregate price not exceeding $159,400,000; (ii) Company may make regularly
scheduled payments of interest in respect of the Senior Subordinated Notes in
accordance with the terms of, and only to the extent required by, and subject to
the subordination provisions contained in, the Senior Subordinated Note
Indenture; (iii) Company may make Restricted Junior Payments in an aggregate
amount not to exceed $1,000,000 in any Fiscal Year or $5,000,000 during the term
of this Agreement to repurchase shares of its common stock from officers and
employees of Company; PROVIDED that after the date of this Agreement such
repurchases shall be pursuant to stock plans permitted under subsection 7.12;
and (iv) Company and any Subsidiary may make Restricted Junior Payments on
Indebtedness permitted pursuant to Section 7.1(iv) subject to the subordination
provisions contained in the notes or agreements governing such Indebtedness.
Neither Company nor any of its Subsidiaries will directly or indirectly declare,
order, pay or make, or set apart any sum or property for, any Restricted Junior
Payment or agree to do so except as permitted by this subsection 7.5.
7.6 FINANCIAL COVENANTS.
With respect to the calculation of the financial covenants contained in
this subsection 7.6, to the extent that during the period for which compliance
is being determined, Company or any Subsidiary of Company has made an
Acquisition
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permitted under subsection 7.7(ii) or has disposed of any assets or operations
in an amount for any such transaction or series of related transactions
exceeding $1,000,000, such calculations shall be made as if such Acquisition or
such disposition took place on the first day of such period on a PRO FORMA basis
for the portion of such period prior to the date of such Acquisition or after
the date of such disposition and on an actual basis for the portion of such
period after the date of such Acquisition or before the date of such
disposition, and such calculations shall be made after giving effect to the
incurrence, assumption or repayment of any Indebtedness made in connection with
such acquisition or disposition. With respect to any such Acquisition, such PRO
FORMA calculations shall be based on the audited or reviewed financial results
delivered in compliance with clause (c)(3) of subsection 7.7(ii).
A. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the
ratio of (i) Consolidated EBITDA to (ii) Consolidated Fixed Charges for any
consecutive four-Fiscal Quarter period ending on the dates set forth below to be
less than the correlative ratio indicated:
MINIMUM FIXED CHARGE
FISCAL QUARTER ENDING DATE COVERAGE RATIO
-------------------------- --------------------
06/30/1997 1.30:1.00
09/30/1997 1.36:1.00
12/31/1997 1.27:1.00
03/31/1998 1.30:1.00
06/30/1998 1.34:1.00
09/30/1998 1.34:1.00
12/31/1998 1.37:1.00
03/31/1999 1.40:1.00
06/30/1999 1.40:1.00
09/30/1999 1.43:1.00
12/31/1999 1.46:1.00
03/31/2000 1.48:1.00
06/30/2000 1.48:1.00
09/30/2000 1.50:1.00
12/31/2000 1.50:1.00
03/31/2001 1.50:1.00
06/30/2001 1.50:1.00
09/30/2001 1.51:1.00
12/31/2001 1.51:1.00
03/31/2002 1.51:1.00
06/30/2002 1.52:1.00
09/30/2002 1.53:1.00
12/31/2002 1.53:1.00
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B. MAXIMUM LEVERAGE RATIO. Company shall not permit the Consolidated
Leverage Ratio at any time during any of the periods set forth below to exceed
the correlative ratio indicated:
MAXIMUM
PERIOD LEVERAGE RATIO
------ --------------------
06/30/1997 5.9:1.00
09/30/1997 5.7:1.00
12/31/1997 5.7:1.00
03/31/1998 5.4:1.00
06/30/1998 4.5:1.00
09/30/1998 4.3:1.00
12/31/1998 4.0:1.00
03/31/1999 3.6:1.00
06/30/1999 3.3:1.00
09/30/1999 3.0:1.00
12/31/1999 2.9:1.00
03/31/2000 2.7:1.00
06/30/2000 2.6:1.00
09/30/2000 2.5:1.00
12/31/2000 2.5:1.00
03/31/2001 2.4:1.00
06/30/2001 2.4:1.00
09/30/2001 2.3:1.00
12/31/2001 2.3:1.00
03/31/2002 2.2:1.00
06/30/2002 2.2:1.00
09/30/2002 2.1:1.00
12/31/2002 2.1:1.00
C. MINIMUM CONSOLIDATED EBITDA. Company shall not permit Consolidated
EBITDA for the consecutive four-Fiscal Quarter period ending on the date
indicated below to be less than the correlative amount indicated:
MINIMUM
CONSOLIDATED EBITDA
-------------------------
PERIOD ($ in millions)
------
06/30/1997 $20.7
09/30/1997 21.7
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MINIMUM
CONSOLIDATED EBITDA
-------------------------
PERIOD ($ in millions)
------
12/31/1997 20.8
03/31/1998 21.8
06/30/1998 25.2
09/30/1998 26.2
12/31/1998 27.4
03/31/1999 28.9
06/30/1999 30.3
09/30/1999 31.8
12/31/1999 32.7
03/31/2000 33.9
06/30/2000 34.8
09/30/2000 36.0
12/31/2000 36.0
03/31/2001 37.0
06/30/2001 38.2
09/30/2001 39.3
12/31/2001 39.9
03/31/2002 40.7
06/30/2002 41.7
09/30/2002 42.5
12/31/2002 42.5
D. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Consolidated
Net Worth at any time during the period ending on the dates set forth below to
be less than the correlative amount indicated:
MINIMUM
PERIOD ENDING CONSOLIDATED NET WORTH
------------- ----------------------
($ in millions)
06/30/1997 ($76.7)
09/30/1997 (76.6)
12/31/1997 (75.7)
03/31/1998 (73.3)
06/30/1998 (70.5)
09/30/1998 (68.1)
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MINIMUM
PERIOD ENDING CONSOLIDATED NET WORTH
------------- ----------------------
($ in millions)
12/31/1998 (65.3)
03/31/1999 (60.4)
06/30/1999 (56.2)
09/30/1999 (51.4)
12/31/1999 (47.7)
03/31/2000 (43.6)
06/30/2000 (39.0)
09/30/2000 (35.4)
12/31/2000 (32.0)
03/31/2001 (27.4)
06/30/2001 (21.8)
09/30/2001 (18.3)
12/31/2001 (14.2)
03/31/2002 (9.0)
06/30/2002 (2.4)
09/30/2002 1.9
12/31/2002 1.9
7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Company shall not, and shall not permit any of Company's Subsidiaries
to, enter into any transaction of merger or consolidation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any Person or
any division or line of business of any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any wholly-owned
Subsidiary Guarantor; PROVIDED that, in the case of such a merger, Company
or such wholly-owned Subsidiary Guarantor shall be the continuing or
surviving corporation;
(ii) Company and its wholly-owned Subsidiaries may acquire all or
substantially all the business, property or fixed assets of, or stock or
other
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evidence of beneficial ownership of, any Person, or any division or line of
business of any Person, in each case in the test instrumentation business
or a business reasonably related thereto (collectively, an "Acquisition");
PROVIDED that (a) such Person becomes a wholly-owned Subsidiary of Company,
or such business, property or other assets are acquired by Company or a
wholly-owned Subsidiary of Company, and any such wholly-owned Subsidiary
which is a Foreign Subsidiary shall be a direct Subsidiary of Company; (b)
the aggregate consideration paid by Company or any of its Subsidiaries in
connection with all such Acquisitions, including without limitation, the
fair market value of all Cash (including without limitation earn outs or
deferred compensation or non-competition arrangements), Common Stock or
other property so paid or transferred, and the amount of all Indebtedness
or other liabilities assumed or incurred by Company or any of its
Subsidiaries, shall not exceed $25,000,000 or, in the event that Company's
Consolidated Leverage Ratio as of the last day of each of the two
immediately preceding Fiscal Quarters is less than or equal to 3.50:1.00,
$35,000,000; PROVIDED that with respect to such aggregate consideration,
the aggregate Cash consideration paid by Company or any of its
Subsidiaries, including the amount of all Indebtedness or other liabilities
so assumed or incurred, shall not exceed (x) for all Acquisitions of
Foreign Subsidiaries or of businesses, properties or other assets not
located in the United States the lesser of (I) the amount permitted
therefor under the Senior Subordinated Note Indenture or (II) $7,500,000
or, in the event that Company's Consolidated Leverage Ratio as of the last
day of each of the two immediately preceding Fiscal Quarters is less than
or equal to 3.50:1.00, the lesser of (I) the amount permitted therefor
under the Senior Subordinated Note Indenture or (II) $15,000,000, and
(y) for all Acquisitions $10,000,000 or, in the event that Company's
Consolidated Leverage Ratio as of the last day of each of the two
immediately preceding Fiscal Quarters is less than or equal to 3.50:1.00,
$20,000,000; (c) prior to the consummation of such Acquisition, Company
shall deliver to Agents an Officer's Certificate (1) certifying that no
Potential Event of Default or Event of Default under this Agreement or
under the Senior Subordinated Note Indenture shall then exist or shall
occur as a result of such Acquisition, (2) demonstrating that after giving
effect to such Acquisition and to all Indebtedness to be incurred or
assumed or repaid in connection with or as consideration for such
Acquisition, that Company is in PRO FORMA compliance with the financial
covenants referred to in subsection 7.6 for the four consecutive Fiscal
Quarter period ending immediately prior to the date of the proposed
Acquisition and that, giving effect to such Acquisition, Company is in
compliance with the clause (b) of this subsection 7.7(ii) on a cumulative
basis for all Acquisitions, and (3) delivering a copy, prepared in
conformity with GAAP, of (i) financial statements of the Person or business
so acquired for the immediately preceding four consecutive Fiscal Quarter
period corresponding to the calculation period for the financial covenants
in the immediately preceding clause, and (ii) audited financial statements
of the Person or business so acquired for the fiscal year ended within such
period;
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(d) concurrently with the consummation of such Acquisition, Company shall,
and shall cause its Subsidiaries to, comply with the requirements of
subsections 6.8 and 6.9 with respect to such Acquisitions; and (e) the
earnings before interest, income taxes, depreciation and amortization of
the Person or business so acquired for the preceding twelve-month period
shall exceed zero.
(iii) Company and its Subsidiaries may dispose of obsolete, worn out
or surplus property in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; PROVIDED that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;
(v) Company and its Subsidiaries may sell and leaseback the
facility located in Norwich, England for a consideration at least equal to
the fair market value thereof; PROVIDED that the proceeds thereof shall be
applied as required by subsection 2.4B(iii)(a), shall be utilized to make
Consolidated Capital Expenditures or shall be used to make an acquisition
of a business permitted under subsection 7.7(ii); and
(vi) Company and its Subsidiaries may make Asset Sales of assets
having a fair market value not in excess of $1,000,000 in any Fiscal Year;
PROVIDED that (x) the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof; (y) at least 75% of
the consideration received therefor is in the form of cash (PROVIDED that
any liabilities which are assumed by the transferee of such Assets pursuant
to a customary novation agreement that releases Company or such Subsidiary
from further liability, and any promissory notes received that are
converted into cash, shall be deemed to be cash for purposes of this
provision); and (z) the proceeds of such Asset Sales shall be applied as
required by subsection 2.4B(iii)(a).
7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Company shall not, and shall not permit its Subsidiaries to, make or
incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in
an aggregate amount in excess of the corresponding amount set forth below
opposite such Fiscal Year:
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MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
------------------------- --------------------
1997 $7,500,000
1998 $6,500,000
1999 $6,500,000
2000 $7,000,000
2001 $7,000,000
2002 $7,000,000
PROVIDED, HOWEVER, to the extent that any expenditures of Company or any of its
Subsidiaries constitute an Acquisition permitted under subsection 7.7(ii), then
for purposes of this subsection 7.8 such expenditures shall not constitute or be
deemed to be Consolidated Capital Expenditures under this subsection 7.8.
7.9 RESTRICTION ON LEASES.
Company shall not, and shall not permit any of its Subsidiaries to,
become liable in any way, whether directly or by assignment or as a guarantor or
other surety, for the obligations of the lessee under any lease, whether an
Operating Lease or a Capital Lease (other than intercompany leases between
Company and its wholly-owned Subsidiaries), unless, immediately after giving
effect to the incurrence of liability with respect to such lease, the
Consolidated Rental Payments at the time in effect during the then current
Fiscal Year shall not exceed the corresponding amount set forth below opposite
such Fiscal Year:
MAXIMUM CONSOLIDATED
FISCAL YEAR RENTAL PAYMENTS
------------------------- --------------------
1997 $4,500,000
1998 $5,000,000
1999 $5,500,000
2000 $6,000,000
2001 $6,500,000
2002 $7,000,000
7.10 SALES AND LEASE-BACKS.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become liable as lessee or as a guarantor or other
surety with respect to any lease, whether an Operating Lease or a Capital Lease,
of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or
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(ii) which Company or any of its Subsidiaries intends to use for substantially
the same purpose as any other property which has been or is to be sold or
transferred by Company or any of its Subsidiaries to any Person (other than
Company or any of its Subsidiaries) in connection with such lease; PROVIDED that
Company and its Subsidiaries may become liable as lessee, guarantor or other
surety with respect to any such lease if and to the extent that Company or any
of its Subsidiaries would be permitted to enter into, and remain liable under,
such lease under subsection 7.9.
7.11 SALE OR DISCOUNT OF RECEIVABLES.
Other than as permitted pursuant to subsection 7.1(vii) with respect
to Company's Foreign Subsidiaries, Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, sell with recourse, or discount
or otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of equity Securities of
Company or with any Affiliate of Company or of any such holder, on terms that
are less favorable to Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; PROVIDED that the foregoing restriction shall not apply to (i) any
transaction between Company and any of its wholly-owned Subsidiaries or between
any of its wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
members of the Boards of Directors of Company and its Subsidiaries,
(iii) issuances of stock, payments of bonuses and other transactions pursuant to
employment or compensation agreements, stock option agreements, indemnification
agreements, severance agreements and other arrangements, in each case as in
effect as of the Closing Date, and such substantially similar agreements as may
hereafter become effective, in each case with officers or directors who are
Affiliates of Company or any of its Subsidiaries, (iv) payment of customary
consulting and other fees and expenses to Arranger and its Affiliates in
connection with the Recapitalization Transactions, including without limitation
under this Agreement or in connection with the Senior Subordinated Notes,
(v) transactions pursuant to the Distribution Agreement, dated April 23, 1996,
and the Technical Collaboration Agreement, dated as of April 23, 1996, each
between Company or one of its Subsidiaries and Yokogawa Electric Corporation, to
the extent that such transactions are on terms that are at least as favorable as
those that could reasonably be expected to be obtained by Company or the
relevant Subsidiary in a comparable transaction by Company or such Subsidiary
with an unrelated Person, (vi) lease payments, renewals and extensions under the
lease agreement, dated June 29, 1996, between Company and Toyon Investments, a
corporation controlled by Gooding, to the extent that aggregate annual lease
payments do not exceed $585,000 per year, plus
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annual consumer price index adjustments, not to exceed 3% per annum, (vii) the
exercise by Gooding of his option to purchase Company's executive offices at
11995 El Camino Road, San Diego, California, including all the leasehold
improvements and fixed assets therein pursuant to the terms set forth in the
resolution of Company adopted on September 19, 1995 and (viii) Restricted Junior
Payments permitted pursuant to subsection 7.5.
7.13 DISPOSAL OF SUBSIDIARY STOCK; RESTRICTIONS ON SUBSIDIARIES.
A. DISPOSAL OF STOCK. Except for any sale of 100% of the capital stock
or other equity Securities of any of its Subsidiaries in compliance with the
provisions of subsection 7.7(vi), Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Company, another wholly-owned Domestic
Subsidiary of Company, or to qualify directors if required by applicable
law.
B. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER
SUBSIDIARIES. Except as provided herein or in the Subordinated Note Indenture,
Company will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(i) pay dividends or make any other distributions on any of such Subsidiary's
capital stock owned by Company or any other Subsidiary of Company, (ii) repay or
prepay any Indebtedness owed by such Subsidiary to Company or any other
Subsidiary of Company, (iii) make loans or advances to Company or any other
Subsidiary of Company, or (iv) transfer any of its property or assets to Company
or any other Subsidiary of Company.
7.14 CONDUCT OF BUSINESS.
From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than (i) the
test instrumentation business engaged in by Company and its Subsidiaries on the
Closing Date and businesses reasonably related thereto and (ii) such other lines
of business as may be consented to by Requisite Lenders.
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7.15 AMENDMENTS OF CERTAIN DOCUMENTS; DESIGNATION OF "DESIGNATED SENIOR DEBT."
A. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. Company shall
not, and shall not permit any of its Subsidiaries to, amend, waive any of its
rights under, or otherwise change the terms of any of the Related Agreements
(other than the Related Financing Documents) in each case as in effect on the
Closing Date, without the prior written consent of the Requisite Lenders, if
such amendment, waiver or change would increase materially the obligations of
Company or any of its Subsidiaries or confer additional rights on any other
party to any such agreement which would be adverse in any material respect to
Company or any of its Subsidiaries or to the Lenders.
B. AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
Company shall not, and shall not permit any of its Subsidiaries to, amend or
otherwise change the terms of any of the Senior Subordinated Notes or the Senior
Subordinated Note Indenture (collectively, "RESTRICTED AGREEMENTS"), or make any
payment consistent with an amendment thereof or change thereto, if the effect of
such amendment or change is to increase the interest rate on any such Restricted
Agreements, change any dates upon which payments of principal or interest are
due thereon, change any of the covenants with respect thereto in a manner which
is more restrictive to Company or any of its Subsidiaries, change any event of
default or condition to an event of default with respect thereto, change the
redemption, prepayment or defeasance provisions thereof, change the
subordination provisions thereof (or of any guaranty thereof), or if the effect
of such amendment or change, together with all other amendments or changes made,
is to increase the obligations of the obligor thereunder or to confer any
additional rights on the holders of any such Restricted Agreements (or a trustee
or other representative on their behalf) which would be adverse to any Loan
Party or Lenders.
C. DESIGNATION OF "DESIGNATED SENIOR DEBT." Company shall not designate
any Indebtedness as "Designated Senior Debt" (as defined in the Senior
Subordinated Note Indenture) for purposes of the Senior Subordinated Note
Indenture without the prior written consent of Requisite Lenders.
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 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 an Issuing Lender in reimbursement of any drawing
under
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a Letter of Credit; or failure by Company to pay any interest on any 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) or Contingent Obligations with respect to any Indebtedness in either an
individual or an aggregate principal amount of $5,000,000 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 or Contingent Obligations with respect to
any 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 or Contingent Obligation(s),
if the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf
of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may be
(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 subsection 2.5 or 6.2 or Section 7 of this Agreement; 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 or in connection herewith or therewith shall be 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 twenty Business 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 notice from
any Agent or any Lender of such default; or
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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 Subsidiaries
(other than an Immaterial Subsidiary) 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
Subsidiaries (other than an Immaterial Subsidiary) 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
Subsidiaries (other than an Immaterial Subsidiary), or over all or a substantial
part of its property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
Company or any of its Subsidiaries (other than an Immaterial Subsidiary) 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 Subsidiaries (other than an Immaterial
Subsidiary), 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 Subsidiaries (other than an Immaterial
Subsidiary) 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 Subsidiaries (other than an Immaterial Subsidiary) shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries (other than an Immaterial Subsidiary) 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
Subsidiaries (other than an Immaterial Subsidiary) (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 either in any individual case or in the aggregate at any time an
amount in excess of $5,000,000 (in either case not adequately covered by
insurance as to which a
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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 in any event later than five days prior to the date
of any proposed sale thereunder); or
8.9 DISSOLUTION.
Any order, judgment or decree shall be entered against Company or any
of its Subsidiaries (other than an Immaterial Subsidiary) decreeing the
dissolution or split up of Company or that Subsidiary and such order shall
remain undischarged or unstayed for a period in excess of 30 days; or
8.10 EMPLOYEE BENEFIT PLANS.
There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of Company, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $500,000 during the term of this Agreement; 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 (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $500,000; or
8.11 CHANGE OF CONTROL.
A Change of Control shall have occurred; or
8.12 INVALIDITY OF SUBSIDIARY GUARANTY.
Upon execution and delivery thereof, the Subsidiary Guaranty for any
reason, other than the satisfaction in full of all Obligations, ceases to be in
full force and effect (other than in accordance with its terms) or is declared
to be null and void, or any Loan Party denies that it has any further liability,
including without limitation with respect to future advances by Lenders, under
any Loan Document to which it is a party, or gives notice to such effect; or
8.13 FAILURE OF SECURITY.
Any Collateral Document shall, at any time, cease to be in full force
and effect (other than by reason of a release of Collateral in accordance with
the terms thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or Agent shall not
have or cease to have a valid and perfected first priority security interest in
any significant part of the Collateral
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(other than as a direct result of a breach by Agent of any obligation imposed on
Agent under the Collateral Documents); or
8.14 FAILURE TO CONSUMMATE THE RECAPITALIZATION TRANSACTIONS.
The Recapitalization Transactions (i) shall not be consummated in
accordance with the Loan Documents and the Related Agreements prior to or
concurrently with or immediately after the making of the initial Loans (and in
any event on the Closing Date), or (ii) shall be unwound, reversed or otherwise
rescinded or modified in whole or in part for any reason; or
8.15 ACTION UNDER RELATED FINANCING DOCUMENTS.
Any holder of any Indebtedness evidenced by the Related Financing
Documents shall file an action seeking the rescission thereof or damages or
injunctive relief relating thereto; or any event shall occur which, under the
terms of any Related Financing Documents, shall require Company or any of its
Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire all or any portion of any Indebtedness evidenced by
the Related Financing Documents; or Company or any of its Subsidiaries shall for
any other reason purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire, or make any other payments in respect of, all or
any portion of any Indebtedness evidenced by the Related Financing Documents,
except to the extent expressly permitted by subsection 7.5:
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
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 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 Loan (including
the obligation of Swing Line Lender to make any Swing Line Loans and of Offshore
Currency Funding Lender to make any Offshore Currency Loans), the obligation of
Administrative Agent 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 Loan (including the obligation of Swing
Line Lender to make any Swing Line Loans and of Offshore Currency Funding Lender
to make any Offshore Currency Loans), the obligation of Administrative
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Agent to issue any Letter of Credit hereunder shall thereupon terminate;
PROVIDED that the foregoing shall not affect in any way the obligations of
Revolving Lenders to purchase participations in Letters of Credit as provided in
subsection 3.3C or the obligations of Lenders to purchase participations in any
unpaid Swing Line Loans as provided in subsection 2.1A(iii) or any unpaid
Offshore Currency Loans as provided in subsection 2.1A(iv).
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 Loans pursuant to
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 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 to benefit Company and do
not grant Company the right to require Lenders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.
SECTION 9. THE AGENTS
9.1 APPOINTMENT.
A. APPOINTMENT OF AGENTS. Fleet 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. DLJ is hereby appointed Syndication
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes Syndication Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each of Syndication Agent and
Administrative Agent 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 each of Syndication Agent and
Administrative Agent, 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
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Agreement, each of Syndication Agent and Administrative 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.
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 Administrative 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 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
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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, perfection 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 such Agent to Lenders or by or on
behalf of Company to such 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 such 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 Loans or the use of the Letters of Credit 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 Loans or the Letter of Credit Usage
or the component amounts thereof.
C. EXCULPATORY PROVISIONS. Neither of the Agents nor any of their
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by any such 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
connection with this Agreement or any of the other Loan Documents or from the
exercise of any power,
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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. AGENTS 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 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 such 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 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
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its possession before the making of the 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.
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
Administrative Agent or Syndication Agent, as the case may be, 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 any Agent's gross negligence or willful
misconduct as determined by a court of competent jurisdiction. 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.
9.5 SUCCESSOR AGENTS, SWING LINE LENDER AND OFFSHORE CURRENCY FUNDING LENDER.
A. SUCCESSOR AGENTS. The Syndication Agent may resign at any time upon
one Business Days' prior notice thereof to Company and Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior written
notice thereof to Syndication Agent, 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 of
Syndication Agent or Administrative Agent or any such removal of Administrative
Agent, Requisite Lenders shall have the right, upon five Business Days' notice
to Company, to appoint a successor Syndication Agent or Administrative Agent, as
the case may be. Upon the acceptance of any appointment as Administrative Agent
or Syndication Agent, as the case may be, hereunder by a successor
Administrative Agent or Syndication Agent, as the case may be, that successor
Administrative Agent or Syndication Agent, as the case may be, shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent or Syndication Agent, as the
case may be, and the retiring or removed Administrative Agent or Syndication
Agent, as the case may be, shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's or
Syndication Agent's resignation or removal hereunder as Administrative Agent or
Syndication Agent, as the case may be, the provisions of this Section 9 shall
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inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent or Syndication Agent, as the case may be, under this
Agreement.
B. SUCCESSOR SWING LINE LENDER. The Swing Line Lender may resign at any
time upon one Business Days' prior notice thereof to Company, Lenders and
Administrative Agent, and Swing Line Lender may be removed at any time with
or without cause by an instrument or concurrent instruments in writing
delivered to Company and Swing Line Lender and signed by Requisite Lenders.
Upon any such notice of resignation of Swing Line Lender or any such removal
of Swing Line Lender, Requisite Lenders shall have the right, upon five
Business Days' notice to Company, to appoint a successor Swing Line Lender.
After any retiring or removed Swing Line Lender's resignation or removal
hereunder, 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 Swing Line Lender
under this Agreement. Upon the acceptance of any appointment as Swing Line
Lender hereunder by a successor Swing Line Lender, that successor Swing Line
Lender shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring or removed Swing Line Lender,
and the retiring or removed Swing Line Lender shall be discharged from its
duties and obligations under this Agreement. In such event (i) Company shall
prepay any outstanding Swing Line Loans made by the retiring or removed Swing
Line Lender in its capacity as Swing Line Lender, (ii) upon such prepayment,
the retiring or removed Swing Line Lender shall surrender the Swing Line Note
held by it to Company for cancellation, and (iii) Company shall issue a new
Swing Line Note to the successor Swing Line Lender substantially in the form
of EXHIBIT VI annexed hereto, in the principal amount of the Swing Line Loan
Commitment then in effect and with other appropriate insertions.
C. SUCCESSOR OFFSHORE CURRENCY FUNDING LENDER. The Offshore Currency
Funding Lender may resign at any time upon one Business Days' prior notice
thereof to Company, Lenders and Administrative Agent, and Offshore Currency
Funding Lender may be removed at any time with or without cause by an instrument
or concurrent instruments in writing delivered to Company and Offshore Currency
Funding Lender and signed by Requisite Lenders. Upon any such notice of
resignation of Offshore Currency Funding Lender or any such removal of Offshore
Currency Funding Lender, Requisite Lenders shall have the right, upon five
Business Days' notice to Company, to appoint a successor Offshore Currency
Funding Lender. After any retiring or removed Offshore Currency Funding
Lender's resignation or removal hereunder, 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 Offshore Currency Funding Lender under this Agreement. Upon the
acceptance of any appointment as Offshore Currency Funding Lender hereunder by a
successor Offshore Currency Funding Lender, that successor Offshore Currency
Funding Lender shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring or removed Offshore Currency
Funding Lender, and the retiring or removed Offshore
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Currency Funding Lender shall be discharged from its duties and obligations
under this Agreement. In such event (i) Company shall prepay any outstanding
Offshore Currency Loans made by the retiring or removed Offshore Currency
Funding Lender, (ii) upon such prepayment, the retiring or removed Offshore
Currency Funding Lender shall surrender the Offshore Currency Note held by it to
Company for cancellation, and (iii) Company shall issue a new Offshore Currency
Note to the successor Offshore Currency Funding Lender substantially in the form
of EXHIBIT XXV annexed hereto, in the principal amount of the Offshore Currency
Loan Commitment then in effect and with other appropriate insertions.
9.6 COLLATERAL DOCUMENTS AND SUBSIDIARY GUARANTY.
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 for and representative of Lenders under each
Guaranty, and each Lender agrees to be bound by the terms of each Collateral
Document and 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 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. Anything contained in any of the Loan Documents to the
contrary notwithstanding, Company, each Agent and each Lender hereby agree that
(X) no Lender shall have any right individually to realize upon any of the
Collateral under any Collateral Document or to enforce any Guaranty, it being
understood and agreed that all 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
(Y) in the event of a foreclosure by Administrative Agent on any of the
Collateral pursuant to a public or private sale, any 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
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any of the Obligations as a credit on account of the purchase price for any
collateral payable by Administrative Agent at such sale.
9.7 OTHER TITLES.
None of the Lenders identified on the facing page or signature pages
of this Agreement as a "syndication agent," "co-agent", "lead manager" or
"arranger" or other similar title or capacity shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none
of the Lenders so identified as a "syndication agent," "co-agent", "lead
manager" or "arranger" or other similar title or capacity shall have or be
deemed to have any fiduciary relationship with any Lender. Each Lender
acknowledges that it has not relied, and will not rely, on any of the Lenders so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
SECTION 10. MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN 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 Loan or Loans made by it 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 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 same percentage in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and PROVIDED, FURTHER that,
anything contained herein to the contrary notwithstanding, the Swing Line Loan
Commitment and the Swing Line Loans of Swing Line Lender and the Offshore
Currency Loan Commitment and the Offshore Currency Loans of Offshore Currency
Funding Lender may not be sold, assigned or transferred as described in clause
(i) above to any Person other than a successor Swing Line Lender or Offshore
Currency Funding Lender to the extent contemplated by subsection 9.5. Except as
otherwise provided in this subsection 10.1, no Lender shall, as between Company
and such
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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 Loans, the Letters of Credit or participations
therein, or the other Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) AMOUNTS AND TERMS OF ASSIGNMENTS. Each Commitment, 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 in the case of Lenders other than DLJ and $3,000,000
in the case of DLJ (or in either case such lesser amount as shall
constitute the aggregate amount of the Commitments, Loans, Letters of
Credit and participations therein, and other Obligations of the assigning
Lender or as may be consented to by Company and Agents) to any other
Eligible Assignee with the consent of Company (which consent shall only
be required so long as no Event of Default has occurred and is
continuing) and, with respect to all Lenders other than DLJ, Syndication
Agent and Administrative Agent (which consent of Company, Syndication
Agent and 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, 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 $3,500 (to be assessed at Administrative Agent's
election) 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 in such Assignment Agreement, (y) 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 (z) 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
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Documents to the contrary notwithstanding, if such Lender is the Issuing
Lender with respect to any outstanding Letters of Credit such Lender
shall continue to have all rights and obligations of an 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 the Notes hereunder, the assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as
practicable, surrender its applicable Notes to Administrative Agent for
cancellation, and thereupon new Notes shall be issued to the assignee and
to the assigning Lender, substantially in the form of EXHIBIT IV, EXHIBIT
V, EXHIBIT VI or EXHIBIT XXV annexed hereto, as the case may be, with
appropriate insertions, to reflect the new Commitments and/or outstanding
Term Loans, as the case may be, of the assignee and 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 Agents and
Company have consented to the assignment evidenced thereby (in each case
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
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation,
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
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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 Loans, the
other Obligations owed to such Lender, and its 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 10.20.
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 (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such 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 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 costs of
furnishing all opinions by counsel for Company (including any opinions requested
by Agents or 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 confirming compliance with environmental, insurance
and solvency requirements; (iii) the reasonable fees, expenses and disbursements
of counsel to Arranger and Syndication Agent (including allocated costs of
internal counsel) in
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connection with the negotiation, preparation and execution of the Loan Documents
and after the Closing Date, the reasonable fees, expenses and disbursements of
counsel to Agents in connection with the administration of the Loan Documents
and with respect to any consents, amendments, waivers or other modifications to
the Loan Documents and any other documents or matters requested by Company;
(iv) all the actual costs and reasonable 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 each of Syndication
Agent and Administrative Agent and of counsel providing any opinions that
Syndication Agent, Administrative Agent or Requisite Lenders may request in
respect of the Collateral Documents or the Liens created pursuant thereto;
(v) all the actual costs and reasonable 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
Syndication Agent, Administrative Agent or their respective counsel) of
obtaining and reviewing any environmental audits or reports provided for under
subsection 6.9B(viii); (vi) the custody or preservation of any of the
Collateral; (vii) all other actual and reasonable costs and expenses incurred by
Arranger, Syndication Agent 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 allocated costs of internal counsel) and costs of
settlement, incurred by Agents 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.
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 Arranger, Agents and Lenders, and the officers,
directors, trustees, employees, agents and affiliates of Arranger, 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 hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of
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that Indemnitee as determined by a final judgment of a court of competent
jurisdiction.
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
transactions contemplated hereby or thereby (including Lenders' agreement to
make the 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.
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.
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 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,
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whether matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender to or for the credit or
the account of Company against and on account of the obligations and liabilities
of Company 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 (i) that Lender shall have made any demand
hereunder or (ii) the principal of or the interest on the Loans or any amounts
in respect of the Letters of Credit or any other amounts due hereunder shall
have become due and payable pursuant to Section 8 and although said obligations
and liabilities, or any of them, may be contingent or unmatured.
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 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.
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10.6 AMENDMENTS AND WAIVERS.
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; PROVIDED that any such amendment, modification, termination,
waiver or consent which: increases the amount of any of the Commitments or
reduces the principal amount of any of the Loans; increases the maximum amount
of Letters of Credit or of Commercial Letters of Credit or Standby Letters of
Credit; changes in any manner the definition of "Pro Rata Share" or the
definition of "Requisite Lenders"; changes in any manner any provision of this
Agreement which, by its terms, expressly requires the approval or concurrence of
all Lenders; postpones the scheduled final maturity date (but not the date of
any scheduled installment of principal) of any of the Loans; postpones the date
on which any interest or any fees are payable; decreases the interest rate borne
by any of the Loans (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any
fees payable hereunder; increases the maximum duration of Interest Periods
permitted hereunder; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; releases any Lien granted in
favor of Administrative Agent with respect to 25% or more in aggregate fair
market value of the Collateral, other than in accordance with the Loan
Documents; releases any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty, in each case other than in accordance with the terms of the
Loan Documents; or changes in any manner the provisions contained in subsection
8.1 or this subsection 10.6 shall be effective only if evidenced by a writing
signed by or on behalf of all Lenders. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 4 shall be effective only if evidenced by a writing signed by or on
behalf of Agents and Requisite Lenders, (ii) no amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the Lender which is the holder of that Note, (iii) no
amendment, modification, termination or waiver of any provision of
subsection 2.1A(iv) or of any other provision of this Agreement relating to the
Offshore Currency Loan Commitment or the Offshore Currency Loans shall be
effective without the written concurrence of the Offshore Currency Funding
Lender, (iv) no amendment, modification, termination or waiver of any provision
of subsection 2.1A(iii) or of any other provision of this Agreement relating to
the Swing Line Loan Commitment or the Swing Line Loans shall be effective
without the written concurrence of Swing Line Lender, and (v) no amendment,
modification, termination or waiver of any provision of Section 9 or of any
other provision of this Agreement which, by its terms, expressly requires the
approval or concurrence of Agents shall be effective without the written
concurrence of Agents. 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
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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, if signed by Company, on
Company.
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 or sent by telefacsimile or United States mail or
courier service, to the address or number, as the case may be, specified on
SCHEDULE 1.1, and shall be deemed to have been given when delivered in person or
by courier service, upon receipt of telefacsimile, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; PROVIDED that notices to Agents shall not be effective until
received; PROVIDED FURTHER that any matter transmitted by Company by
telefacsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 1.1, and (ii) shall be followed
promptly by delivery of a hard copy original thereof. 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, on Schedule 1.1 annexed hereto or (i) as to
Company and Agents, 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 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 and 10.5 shall survive the payment of the Loans, the cancellation or
expiration of the
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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 any Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document 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 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.
None of Agents or Lenders 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 any of Agents 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
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
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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.
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;
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(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.
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/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,
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RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE 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 JUDGMENT.
If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or any other Loan Document in one
currency into another currency, the rate of exchange used shall be that at which
in accordance with normal banking procedures Administrative Agent could purchase
the first currency with such other currency on the Business Day preceding that
on which final judgment is given. The obligation of Company in respect of any
such sum due from it to Administrative Agent hereunder or under the other Loan
Documents shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in accordance with
the applicable provisions of this Agreement (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by
Administrative Agent of any sum adjudged to be so due in the Judgment Currency,
Administrative Agent may in accordance with normal banking procedures purchase
the Agreement Currency with the Judgment Currency. If the amount of the
Agreement Currency so purchased is less than the sum originally due to
Administrative Agent in the Agreement Currency, Company agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify Administrative
Agent or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement currency so purchased is greater than the sum originally
due to Administrative Agent in such currency, Administrative Agent agrees to
return the amount of any excess to Company (or to any other Person who may be
entitled thereto under applicable law).
10.20 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Company that in any event a
Lender may make disclosures to Affiliates and professional advisors of such
Lender or disclosures reasonably required by (a) any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of any Loans or any participations therein or (b) by any
direct or indirect contractual counterparties in swap agreements or such
contractual counterparties' professional advisors provided that such contractual
counterparty or professional advisor to such contractual counterparty agrees in
writing to keep such information confidential to the same extent required of the
Lenders hereunder, or disclosures
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required or requested by any governmental agency or representative thereof 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.
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
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.
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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:
WAVETEK CORPORATION
By: /s/ Vickie L. Capps
--------------------------------------
Name: Vickie L. Capps
--------------------------------
Title: Chief Financial Officer
-------------------------------
Notice Address: 11995 El Camino Real
Suite 301
San Diego, CA 92130
Tel: (619) 793-2300
Fax: (619) 793-2310
S-1
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LENDERS:
DLJ CAPITAL FUNDING, INC., individually and as
Syndication Agent
By: /s/ Eric Swanson
----------------------------------------
Title: Managing Director
----------------------------------------
Notice Address: 2121 Avenue of the Stars
Los Angeles, CA 90067-5014
Attention: Eric Swanson
Tel: (310) 282-7447
Fax: (310) 282-6178
S-2
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FLEET NATIONAL BANK
individually and as Administrative Agent
By: /s/ Eric Van Der Mel
------------------------------------------
Title: Vice President
------------------------------------------
Notice Address: One Federal Street
Boston, MA 02110
Attention: Eric Van der Mel
Tel: (617) 346-4853
Fax: (617) 346-4806
S-3
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IMPERIAL BANK
By: /s/ John Farrace
--------------------------------------
Title: Senior Vice President
--------------------------------------
Notice Address: 9920 S. La Cienega
Los Angeles, CA 90301
Attention: John Farrace
Tel: (310) 417-5676
Fax: (310) 417-5997
S-4
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UNION BANK OF CALIFORNIA
By: /s/ Richard Petrie
-------------------------------------
Title: Vice President
-------------------------------------
Notice Address: 530 B Street, 4th Floor
San Diego, CA 92101
Attention: Dick Petrie
Tel: (619) 230-3754
Fax: (619) 230-3766
S-5
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CREDITANSTALT BANKVEREIN
By: /s/ Patrick J. Rounds
-------------------------------------
Title: Vice President
-------------------------------------
By: /s/ Martin Mittag
-------------------------------------
Title: Deputy Chief Executive Officer
-------------------------------------
Notice Address: 4 Embarcadero Center
Suite 630
San Francisco, CA 94111
Attention: Pat Rounds
Tel: (415) 788-1371
Fax: (415) 781-0622
S-6
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of this 11th day of June, 1997,
is by and among Wavetek Corporation, a Delaware corporation (the "COMPANY"), DLJ
Merchant Banking Partners II, L.P. ("DLJMB"), DLJ Offshore Partners II, C.V.,
DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan 1997
Partners, DLJ First ESC L.L.C, DLJ EAB Partners, L.P. and DLJ Millennium
Partners, L.P. (collectively, and together with DLJMB, the "DLJ INVESTORS"),
Green Equity Investors II, L.P. ("GEI"), Schroder UK Venture Fund III, L.P.,
Schroder UK Venture Fund III, L.P.2, Schroder UK Venture Fund III Trust
(collectively, "SCHRODER"), Yokogawa Electric Corporation ("YOKOGAWA", and
together with the DLJ Investors, GEI and Schroder, the "INSTITUTIONAL
INVESTORS"), Dr. Terence J. Gooding ("GOODING"), and the management Stockholders
listed on Schedule I hereto (the "MANAGEMENT STOCKHOLDERS" and together with the
Institutional Investors and Gooding, the "STOCKHOLDERS").
RECITALS
A. WHEREAS, pursuant to the terms of the Stock Purchase and
Recapitalization Agreement dated as of May 23, 1997 (the "RECAPITALIZATION
AGREEMENT") by and among the Company, the DLJ Investors, GEI, and certain
stockholders of the Company, the DLJ Investors and GEI will purchase from the
Company 1,674,810 and 753,660 shares, respectively, of Common Stock (as defined
below) representing 34.28% and 15.43%, respectively, of the outstanding shares
of Common Stock immediately after the transactions contemplated by the
Recapitalization Agreement.
B. WHEREAS, the Company and the Stockholders are concurrently
entering into a Registration Rights Agreement to provide for piggy-back and
demand registration rights for the benefit of the Stockholders (the
"REGISTRATION RIGHTS AGREEMENT").
C. WHEREAS, the Company and the Stockholders desire to enter into
this Agreement for the purpose of regulating certain aspects of the
Stockholders' relationships with regard to each other and the Company.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties agree as
follows:
<PAGE>
ARTICLE 1
DEFINITIONS
As used herein, the terms below shall have the following meanings.
Any such term, unless the context otherwise requires, may be used in the
singular or plural, depending upon reference.
"ACT" shall mean the Securities Act of 1933, as amended.
"AFFILIATE" shall mean, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, ownership of 10% or
more of the voting common equity of a Person shall be deemed to be control of
such Person.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON STOCK" shall mean the Common Stock, $.01 par value per share, of
the Company.
"DLJSC" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.
"EXEMPT TRANSFER" shall mean (i) transfers by a Stockholder to its
Permitted Transferees; or (ii) transfers by a Stockholder who is an employee of
the Company of his or her Shares to the Company in connection with the
termination of employment by such employee; PROVIDED, HOWEVER, that no such
transfer pursuant to the foregoing clause (i) shall be an Exempt Transfer unless
the transferee agrees in writing to be bound by this Agreement as if such
transferee were a Stockholder with respect to such transferred Shares, after
which such transferee shall be deemed a "Stockholder" for all purposes under
this Agreement.
"PERMITTED TRANSFEREE" means any of the following who agrees to be bound by
and become a party to this Agreement: (i) with respect to transfers by the
Institutional Investors, any Affiliates thereof, and (ii) with respect to
transfers by Gooding or the Management Stockholders, a spouse, child,
grandchild, stepchild or a child of a stepchild thereof or a trust as to which
Gooding, the Management Stockholder or such spouse, child, grandchild, stepchild
or child of a stepchild thereof exercises substantial control over the
investment of the trust assets. Upon (i) execution and delivery by a Permitted
Transferee of this Agreement and (ii) receipt of Shares of Common Stock from the
transferring Stockholder, the Permitted Transferee shall be deemed to be a
"Stockholder" for all purposes under this Agreement.
"PERSON" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"PROPOSED SALE" shall have the meaning set forth in Section 4.1.
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<PAGE>
"QUALIFIED IPO" shall mean the initial underwritten offering by the Company
of Common Stock registered with the Commission under the Act (i) after which the
Common Stock is included for quotation on the Nasdaq National Market or listed
on a national securities exchange and (ii) having an aggregate offering price to
the public (before underwriters' discounts and commissions) of at least
$20,000,000.
"SELLING STOCKHOLDER" shall have the meaning set forth in Section 4.1.
"SECURITIES" shall have the meaning set forth in Section 4.3.
"SHARES" shall mean the shares of Common Stock now owned and hereafter
acquired by the Stockholders.
"STOCKHOLDER'S PERCENTAGE SHARE" shall mean, as applied to any transaction
covered by Section 4.1, a fraction, the numerator of which is the number of
shares of Common Stock held by such Stockholder, and the denominator of which is
the number of shares of Common Stock held by all Stockholders other than the
Stockholder(s) participating in the transaction which gave rise to the
first-offer right contained in Section 4.1.
"TAG-ALONG NOTICE" shall have the meaning set forth in Section 4.2.
"TAG-ALONG RIGHT" shall have the meaning set forth in Section 4.2.
"TAG-ALONG STOCKHOLDERS" shall have the meaning set forth in Section 4.2.
ARTICLE 2
GOVERNANCE
2.1 BOARD OF DIRECTORS.
(a) The Stockholders hereby agree to take, at any time and from time
to time, all action necessary (including, without limitation, voting the Shares
owned by them, calling special meetings of stockholders and executing and
delivering written consents) such that the Board of Directors of the Company
shall consist of up to nine directors, who shall be designated as follows: (i)
two (or three if an additional director is designated pursuant to the last
sentence of this Section 2.1(a)) of such members shall be persons designated by
DLJMB for as long as the DLJ Investors and/or their Permitted Transferees shall
own at least 20% of the outstanding Common Stock of the Company; (ii) one of
such members shall be a person designated by GEI for as long as GEI and/or its
Permitted Transferees shall own at least 5% of the outstanding Common Stock of
the Company; (iii) three (or four if an additional director is designated
pursuant to the last sentence of this Section 2.1(a)) of such members shall be
persons designated by Gooding for as long as Gooding and/or his Permitted
Transferees shall own at least 10% of the outstanding Common Stock of the
Company; and (iv) one of such members shall be a person designated by Gooding
for as long as Gooding and/or his Permitted Transferees shall own at
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<PAGE>
least 10% of the outstanding Common Stock of the Company, subject to approval
by DLJMB for as long as the DLJ Investors and/or their Permitted Transferees
own at least 20% of the outstanding Common Stock of the Company. It is
agreed that, as of the effective date of this Agreement, the directors
initially designated in clause (i) shall be Kenneth D. Moelis and David B.
Wilson; the director initially designated in clause (ii) shall be Peter J.
Nolan; the directors initially designated in clause (iii) shall be Gooding,
Derek T. Morikawa and Ben J. Constantini;
and the director initially designated in clause (iv) shall be Kenneth Baker. In
the event the DLJ Investors and/or their Permitted Transferees own at least 10%
but less than 20% of the outstanding Common Stock of the Company, DLJMB shall
have the right to appoint only two directors. In the event the DLJ Investors
and/or their Permitted Transferees own at least 5% but less than 10% of the
outstanding Common Stock of the Company, DLJMB shall have the right to appoint
only one director. In the event Gooding and/or his Permitted Transferees own at
least 5% but less than 10% of the outstanding Common Stock of the Company,
Gooding shall have the right to appoint only two directors. Prior to a
Qualified IPO, each of DLJMB and Gooding may designate an additional director
pursuant to clause (i) or (iii) above.
(b) Upon the consummation of a Qualified IPO, the parties hereto
agree that the size of the Board of Directors shall consist of nine members, at
least two of which shall be "independent directors" (or the legal equivalent)
under the rules and regulations of the New York Stock Exchange, Inc. or other
principal securities exchange on which the Common Stock is listed or traded.
(c) If a director has been designated by a Stockholder and elected
pursuant to this Section 2.1 and if such Stockholder requests that such director
be removed (with or without cause) by written notice thereof to the other
Stockholders of the Company, then such director shall be removed, upon the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock, and each Stockholder hereby agrees to vote all Shares owned or held of
record by such persons or entities to effect such removal upon such request.
(d) In the event a vacancy is created on the Board of Directors at
any time by the death, disability, retirement, resignation or removal of a
director or otherwise, the Stockholder who originally designated such director
shall nominate a replacement director, and each Stockholder agrees to cause the
director(s) designated by such Stockholder to vote for such nominated individual
to fill such vacancy.
(e) If neither DLJMB, GEI nor Gooding has the right to designate any
one of the directors, the right to designate such director shall devolve on all
holders of the Common Stock.
2.2 APPROVAL OF CERTAIN TRANSACTIONS. In addition to any approval of the
Board of Directors required by applicable law, the following transactions shall
require the specific approval of (i) DLJMB for as long as the DLJ Investors
and/or their Permitted Transferees shall own at least 20% of the outstanding
Common Stock of the Company and (ii) Gooding for as long as Gooding and/or his
Permitted Transferees shall own at least 20% of the outstanding Common Stock of
the Company:
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(a) any direct or indirect investment by the Company in, or purchase
or other acquisition by the Company of, in one or a series of transactions, any
business, assets, securities or other property of another person, which
transaction or series of transactions has an aggregate value in excess of
$10,000,000;
(b) any sale, lease, exchange or other disposition of any material
asset or assets of the Company having an aggregate fair market value in excess
of $10,000,000;
(c) any merger, consolidation or sale of all, or substantially all,
of the assets of the Company;
(d) any incurrence by the Company or its subsidiaries of indebtedness
in excess of $10,000,000 other than the incurrence of debt to finance working
capital in the ordinary course of business and other than refinancing of
indebtedness existing at the date of this Agreement;
(e) any issuance by the Company of equity securities other than (i)
pursuant to agreements in existence as of the date of this Agreement (ii)
pursuant to any stock option or other incentive-based plan for employees of the
Company and (iii) in connection with a transaction described in clause (a) or
(b) above with a value of $10,000,000 or less;
(f) the engagement of any investment banking firm by the Company in
connection with an offering of securities or any other transaction;
(g) any significant change in or expansion of the Company's business
outside of the test instrument industry or any business reasonably related
thereto;
(h) the appointment of any chief executive officer who succeeds
Gooding to such position;
(i) any agreement or transaction between the Company and any
Affiliate of the Company involving the transfer of any consideration (whether
cash, securities, property or otherwise) between the Company and such Affiliate;
PROVIDED, HOWEVER, that the foregoing shall not restrict (A) transactions
between the Company and any of its subsidiaries, or among any of such
subsidiaries, (B) payments or advances to employees of the Company or its
subsidiaries in the ordinary course of business, (C) transactions pursuant to
any stock option or other incentive-based plan for employees of the Company or
its subsidiaries that is approved by the Board of Directors, (D) transactions
contemplated by this Agreement or agreements entered into in connection with the
closing of the Recapitalization Agreement and (E) transactions pursuant to any
arrangements existing on the date hereof; and
(j) any action to amend or repeal any provision of the Company's
Articles of Incorporation or By-laws.
2.3 QUORUM. For so long as DLJMB shall have the right under this
Agreement to designate any directors, in regard to a meeting of the Board of
Directors, a quorum of the Board
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shall not be deemed to exist unless there is a majority of the members of the
Board of Directors present and at least one director designated by DLJMB is a
part of such quorum; PROVIDED, HOWEVER, if there would have otherwise been a
quorum but for the absence of all of the directors designated by DLJMB, a
majority of directors present for such meeting may adjourn the meeting and
send a special notice to the directors designated by DLJMB and the other
directors not in attendance at the meeting setting a date for reconvening the
meeting of the Board of Directors at least three business days after the
meeting as to which no quorum existed by virtue of the absence of all of the
directors designated by DLJMB was adjourned, and the Board of Directors may
reconvene at such time and conduct business if a quorum is otherwise present,
regardless of whether a director designated by DLJMB is in attendance.
2.4 NOTICE. The Stockholders agree to cause the Bylaws of the Company to
provide that the Board of Directors will not take any action at a meeting unless
notice of such meeting shall have been given to each director at least ten days
prior thereto.
ARTICLE 3
TRANSFER RESTRICTIONS
3.1 FIRST YEAR ANNIVERSARY. Prior to the earlier of the first anniversary
of this Agreement and the consummation of a Qualified IPO, no Stockholder may
transfer or pledge any Shares other than in connection with an Exempt Transfer.
3.2 SECOND THROUGH FIFTH YEAR ANNIVERSARIES. From and after the first
anniversary of this Agreement until the earlier of the fifth year anniversary of
this Agreement and the consummation of a Qualified IPO:
(a) the Institutional Investors may transfer their Shares subject to
the other Stockholders' rights of first offer under Section 4.1 and Tag-Along
Rights under Section 4.2;
(b) the Management Stockholders (other than Gooding) may transfer
their Shares only pursuant to exercise of the Tag-Along Rights granted to them
in Sections 4.2;
(c) Gooding may transfer (i) such number of Shares of Common Stock
such that, after such transfer, Gooding owns Shares representing not less than
20% of the number of Shares outstanding at the time of this Agreement, subject
to the other Stockholders' rights of first offer under Section 4.1 and Tag-Along
Rights under Section 4.2 and (ii) the remainder of his Shares only pursuant to
exercise of the Tag-Along Rights granted to him in Sections 4.2; PROVIDED,
HOWEVER, that in the event Gooding is no longer the chief executive officer of
the Company, Gooding may transfer all of his Shares of Common Stock pursuant to
clause (i) of this Section 3.2(c); and
(d) any Stockholder may transfer its Shares in an Exempt Transfer.
3.3 FIFTH THROUGH TENTH YEAR ANNIVERSARIES. From and after the fifth
anniversary of this Agreement until the earlier of the tenth year anniversary of
this and the consummation of
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a Qualified IPO, any Stockholder may transfer its Shares subject to the other
Stockholders' rights of first offer under Section 4.1 and Tag-Along Rights
under Section 4.2.
3.4 RELEASE OF TRANSFER RESTRICTIONS IN CONNECTION WITH QUALIFIED IPO.
In addition, Stockholders may transfer Shares in connection with a
Qualified IPO in accordance with the following provisions:
(a) If the Company elects to offer Common Stock pursuant to a
Qualified IPO
or is required to make a registration that would constitute a Qualified IPO, the
Board of Directors shall deliver a written notice to each of the Stockholders at
least 30 days prior to the filing of the initial registration statement in
connection with such Qualified IPO (the "IPO Notice"). Within 10 days of
receipt of such notice, the DLJ Investors may elect to participate in such
Qualified IPO as a selling Stockholder by delivering to the Company and each
other Stockholder, a notice stating (i) the DLJ Investors' bona fide intention
of participating in such Qualified IPO and (ii) and the number of Shares the DLJ
Investors wish to sell in such Qualified IPO. The number of Shares that the DLJ
Investors may include in the Qualified IPO will be determined in accordance with
the Registration Rights Agreement.
(b) If the DLJ Investors elect to participate in the Qualified IPO in
accordance with Section 3.4(a) above, the other Institutional Investors may also
elect to participate in such Qualified IPO by delivering a notice to the Company
and each of the other Stockholders within 20 days of receipt of the IPO Notice,
which notice shall state (i) such Stockholder's bona fide intention of
participating in such Qualified IPO and (ii) and the number of Shares such
Stockholder wishes to sell in such Qualified IPO; PROVIDED, HOWEVER, that the
maximum number of Shares a Stockholder may sell in a Qualified IPO is the total
number of Shares owned by such Stockholder MULTIPLIED BY a fraction, the
numerator of which is the number of Shares to be sold by the DLJ Investors in
the Qualified IPO and the denominator of which is the total number of Shares
owned by the DLJ Investors, subject to the provisions of Sections 2(d) and 3(b)
of the Registration Rights Agreement (the "IPO PORTION").
(c) If the DLJ Investors elect to participate in the Qualified IPO in
accordance with Section 3.4(a) above, Gooding and the Management Stockholders
may sell such number of Shares, if any, in the Qualified IPO as the managing
underwriter for such Qualified IPO approve; PROVIDED, HOWEVER, that the maximum
number of Shares Gooding and each Management Stockholder may sell in a Qualified
IPO is such Stockholder's IPO Portion; PROVIDED, further, that if Gooding is no
longer Chief Executive Officer of the Company, he shall have the rights of an
Institutional Investor pursuant to Section 3.4(b) above.
(d) If the DLJ Investors do not elect to participate in a Qualified
IPO, no other Stockholder may participate in the offering unless such Qualified
IPO has been demanded by the Stockholders holding at least 40% of the
outstanding Common Stock of the Company in accordance with the provisions of
Section 2(c) of the Registration Rights Agreement. If the Offering has been
demanded in accordance with such provisions of the Registration Rights
Agreement, the Stockholders demanding such registration shall have the right to
participate in the Qualified IPO.
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3.5 NO FURTHER TRANSFER RESTRICTIONS. The Stockholders shall no longer be
bound by the transfer restrictions of this Article III following the first to
occur of (i) the consummation of a Qualified IPO, (ii) the later of the date
upon which the DLJ Investors and their Permitted Transferees own less than 5% of
the outstanding Shares of Common Stock or the date on which Gooding and his
Permitted Transferees own less than 5% of the outstanding shares of Common
Stock, or (iii) the ten year anniversary of this Agreement.
ARTICLE 4
RIGHT OF FIRST OFFER; TAG-ALONG RIGHTS;
CERTAIN PURCHASE RIGHTS; SHARES SUBJECT TO THIS AGREEMENT
4.1. RIGHT OF FIRST OFFER.
(a) GENERAL. If, prior to the consummation of a Qualified IPO, a
Stockholder ("Selling Stockholder") proposes to sell Shares to a third party
other than pursuant to an Exempt Transfer (a "PROPOSED SALE"), the Selling
Stockholder must first comply with the procedures set forth in this Section 4.1
and in Section 4.2.
(i) The consideration for the Proposed Sale shall consist
solely of cash.
(ii) The Selling Stockholder shall deliver a notice (the
"OFFERING NOTICE") to the Company and to each of the Stockholders
stating (1) the Selling Stockholder's bona fide intention to sell
Shares in the Proposed Sale; (2) the number of Shares it proposes to
sell; and (3) the price and terms of the Proposed Sale.
(iii) Within 20 days after the Offering Notice is given, the
Company may elect by written notice to the Selling Stockholder to
purchase from the Selling Stockholder, at the price and on the terms
specified in the Offering Notice, any or all of the Shares proposed to
be sold in the Proposed Sale; PROVIDED, HOWEVER, that in the event the
Company elects to purchase some but not all of the Shares proposed to
be sold in the Proposed Sale, the Company's right to purchase such
Shares will be conditioned upon the purchase of the remainder of such
Shares by the Stockholders pursuant to Section 4.1(a)(v) and (vi).
(iv) Subject to Subsection 4.1(a)(vi), the purchase of such
Shares by the Company shall take place within 20 days after the date
of the Company's notice.
(v) In the event the Company does not elect to purchase all of
the Shares offered in the Offering Notice, the Company shall give
written notice to each of the Stockholders (the "REOFFER NOTICE"), of
the number of Shares available for purchase (the "REOFFERED SHARES")
on or before the final day of such 20-day period and the right to
purchase such Reoffered Shares shall pass automatically to each of
such Stockholders. Each such Stockholder shall initially
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be entitled to purchase such Stockholder's Percentage Share of the
Reoffered Shares. In the event that any Shares remain after such
allocation and Stockholders remain who desire to purchase additional
Shares in excess of their Stockholder's Percentage Share, all of the
remaining Shares which such Stockholders have elected to purchase shall
be allocated to them PRO RATA based on the number of Shares held by
them, or otherwise as agreed to among such remaining Stockholders.
Each Stockholder will have 20 days from receipt of the Reoffer Notice
to exercise its purchase rights under this Section 4.1 by written
notice to the Selling Stockholder and to the Company. The closing of
any purchase and sale under this subsection shall be held within 20
days following the exercise by such Stockholder of the purchase
rights hereunder.
(vi) Such purchase rights shall only apply if the Company and
the Stockholders, collectively, acquire all, but not less than all,
of the Shares proposed to be sold in the Offering Notice. In the
event the Company elects to acquire some but not all of the Shares
proposed to be sold in the Offer Notice, the Company's purchase of
Shares shall occur simultaneously with the purchase of Shares by the
Stockholders.
(vii) In the event that the rights of first offer set forth in
Section 4.1 are not exercised, and the Selling Stockholder, to the
extent applicable, has complied with Section 4.2 below, the Selling
Stockholder may sell, at any time within 120 days from the date of
the Reoffer Notice, the number of Shares it proposed to sell in the
Proposed Sale on price and terms no less favorable to the purchaser
than those of the Proposed Sale, provided that the Selling
Stockholder may not sell such Shares to a Person if the Board of
Directors has determined that such Person is reasonably likely to be
a competitor of the Company or a person whose interests would be
adverse to the Company.
4.2. TAG-ALONG RIGHT. In the event that the rights of first offer set
forth in Section 4.1 are not exercised, each of the other Stockholders (the
"TAG-ALONG STOCKHOLDERS") shall have the right (the "TAG-ALONG RIGHT") to
include up to the following number of its Shares in the Proposed Sale: the
total number of Shares proposed to be sold by the Selling Stockholder in the
Proposed Sale MULTIPLIED BY a fraction the numerator of which is the number of
Shares owned by such Tag-Along Stockholder and the denominator of which is the
aggregate number of Shares owned by such Selling Stockholder and by all
Tag-Along Stockholders exercising their Tag-Along Rights hereunder. Any Shares
purchased from such Stockholders pursuant to this Section 4.2 shall be at the
same price per Share and upon the same terms and conditions as such Proposed
Sale. The Selling Stockholder shall, not less than 30 days prior to each
Proposed Sale, notify, or cause to be notified, each Stockholder in writing of
each such Proposed Sale. Such notice shall set forth: (A) the name of the
Selling Stockholder and the number of Shares proposed to be sold, (B) the name
and address of the proposed purchaser, (C) the proposed per share purchase price
(which must be payable in cash) and the terms and conditions of payment offered
by such proposed purchaser, and (D) that the proposed purchaser has been
informed of the Tag-Along Right provided for in this Section 4.2 and has agreed
to purchase Shares in accordance with the terms hereof.
9
<PAGE>
The Tag-Along Right may be exercised by any Stockholder by delivery
of a written notice to the Selling Stockholder (the "TAG-ALONG NOTICE") within
15 business days following its receipt of the notice specified in the last
sentence of the preceding paragraph. The Tag-Along Notice shall state the
number of Shares that such Stockholder proposes to include in such transfer to
the proposed purchaser determined as aforesaid.
The Company agrees not to effect any transfer of Shares by any
Stockholder until it has received evidence reasonably satisfactory to it that
the Tag-Along Right, if applicable to such transfer, has been complied with.
Notwithstanding the foregoing, (i) only GEI is entitled to exercise
Tag-Along Rights with respect to the first 335,000 Shares transferred by the DLJ
Investors and (ii) only the DLJ Investors are entitled to exercise Tag-Along
Rights with respect to the first 150,000 Shares transferred by GEI.
4.3. CERTAIN PREEMPTIVE RIGHTS. If prior to a Qualified IPO the Company
proposes to issue, sell, or grant securities convertible into shares of Common
Stock (collectively, the "Securities"), then the Company shall, no later than
30 days prior to the consummation of such issuance, give written notice to all
Stockholders of such proposed issuance. Such notice shall describe the proposed
issuance, and contain an offer to each of the Stockholders to sell to such
Stockholder, at the same price and for the same consideration to be paid by the
proposed purchasers, such Stockholder's pro rata portion (which shall be a
percentage equal to the percentage of the outstanding Common Stock held by such
Stockholder before such proposed issuance; PROVIDED, HOWEVER, that if the use of
proceeds of such Securities issuance shall include the repurchase of Common
Stock, then such percentage shall be calculated assuming the consummation of
such repurchase) of the Securities to be sold. If any such Stockholder fails to
accept such offer by written notice within 25 days after its receipt of the
Company's notice, the Company may proceed with such proposed issuance, free of
any right on the part of such Stockholder under this Section 4.3 in respect
thereof. This Section 4.3 shall not apply to: (i) issuances to employees or
pursuant to employee benefit or stock option plans which shall not exceed 10% in
the aggregate of the shares of capital stock of the Company, on a fully diluted
basis; (ii) Securities distributed or set aside to all holders of Common Stock
on a per share equivalent basis; (iii) any other issuance of Securities pursuant
to or as a result of the transactions contemplated by the Recapitalization
Agreement or issuance of Securities upon the conversion, exercise or exchange of
such Securities or (iv) Securities issued in a business combination or
acquisition approved pursuant to Section 2.2.
4.4 SHARES SUBJECT TO THIS AGREEMENT. If, prior to a Qualified IPO, the
Company shall issue any Securities in a transaction as to which the rights under
Section 4.3 apply, or any Stockholder shall transfer Shares in a transaction
subject to Sections 4.1 and 4.2, the purchaser of such Securities shall execute
a copy of this Agreement and such purchaser shall be subject to this Agreement.
10
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ARTICLE 5
MISCELLANEOUS
5.1 LEGEND. The certificates representing the Common Stock to be
purchased by each of the Stockholders shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
(A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF A STOCKHOLDERS
AGREEMENT DATED AS OF JUNE 11, 1997. SUCH SECURITIES ARE ALSO SUBJECT TO
A REGISTRATION RIGHTS AGREEMENT DATED JUNE 11, 1997. ANY TRANSFEREE OF
THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENTS, COPIES OF
WHICH ARE ON FILE WITH THE COMPANY.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EXEMPTION THEREFROM UNDER THE ACT OR LAW OR THE RULES AND
REGULATIONS PROMULGATED THEREUNDER."
Each of the parties hereto agrees that it will not transfer any Shares
without complying with each of the restrictions set forth herein and agrees that
in connection with any such transfer it will, if requested by the Company,
deliver at its expense to the Company an opinion of counsel (including in-house
or special counsel), in form and substance reasonably satisfactory to the
Company and counsel for the Company, that such transfer is not in violation of
the securities laws of the United States of America or any state thereof;
PROVIDED, HOWEVER, that in case of any sale or other transfer of Shares to any
person or entity who is an "accredited investor" (as such term is defined and
used in Rule 501 of Regulation D under the Act), no opinion of counsel shall be
required if the transferor obtains a representation from such person or entity
that it is an accredited investor and is acquiring such Shares for its own
account and with no intention of distributing or reselling said Shares or any
part thereof, or interest therein, in any transaction that would violate the
securities laws of the United States of America or any state thereof, without
prejudice, however, to such person's or entity's right at all times to sell or
otherwise dispose of all or any part of said Shares pursuant to an effective
registration statement under the Act or any exemption from such registration
available under the Act, and subject, nevertheless, to such person's or entity's
disposition of its property being at all times within its control.
5.2 TERMINATION OF SUCCESSION PLAN. Upon the effective date of this
Agreement, the succession plan in the event of Gooding's death adopted by the
Company pursuant to a Board resolution dated as of June 27, 1994 shall terminate
and be of no further effect.
11
<PAGE>
5.3 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, legatees, successors and assigns including any party to
which any Stockholder has transferred or sold his or its Shares. Except as
provided herein, each transferee of Shares from a party hereto or a Permitted
Transferee thereof shall take such Shares subject to the same restrictions as
existed in the hands of the transferor; PROVIDED that if Gooding or an
Institutional Investor transfers Shares, the transferee shall only have rights
as a Stockholder hereunder and not the rights of Gooding or such Institutional
Investor.
5.4 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (E.G., Federal Express);
and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
If to the Company addressed to:
Wavetek Corporation
11995 El Camino Real, Suite 301
San Diego, California 92130
Telecopy No.: (619) 793-2310
Attention: Chief Executive Officer
If to any Stockholder to such Stockholder at the address indicated on
Schedule II hereto.
5.5 RECAPITALIZATIONS, ETC. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to the Shares, to any
and all shares of capital stock of the Company or any capital stock, partnership
units or any other security evidencing ownership interests in any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for, or in substitution
of the Common Stock by reason of any stock dividend, split, reverse split,
combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise.
5.6 LEAD UNDERWRITER. As long as the DLJ Investors own 5% or more of the
outstanding Shares, DLJSC shall have the right but not the obligation to act as
the lead underwriter in a Qualified IPO. If requested, the Stockholders agree
to vote in favor of such engagement.
5.7 INSPECTION AND COMPLIANCE WITH LAW. Copies of this Agreement will be
available for inspection or copying by any Stockholder at the offices of the
Company through the Secretary of the Company.
12
<PAGE>
5.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS OF DELAWARE LAW).
5.9 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of the Stockholders
holding at least two-thirds of the outstanding Shares. However, no amendment,
supplement, modification or waiver of this Agreement diminishing a Stockholder's
right of first offer pursuant to Section 4.1 or Tag-Along Rights pursuant to
Section 4.2 hereof shall be binding unless executed in writing by each such
Stockholder affected. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
5.10 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.11 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement.
5.12 TITLES. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
5.13 CUMULATIVE REMEDIES. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
5.14 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. ANY OF THE
PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 5.13
WITH ANY COURT AS WRITTEN
13
<PAGE>
EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF HIS OR
ITS RIGHT TO TRIAL BY JURY.
5.15 ASSUMPTION OF THIS AGREEMENT. In the event any Stockholder sells,
transfers or otherwise disposes of any of his or its Shares to a Permitted
Transferee such transferee shall execute an assumption agreement in the form of
Exhibit A hereto pursuant to which such transferee agrees to assume the rights
and obligations of such transfer pursuant to this Agreement. In addition, in
the event any Stockholder or any of his or its Permitted Transferees sells,
transfers or otherwise disposes of his or its Shares to a person or entity other
than a Permitted Transferee, such person or entity shall execute an assumption
agreement pursuant to which such person or entity agrees to assume the
obligations of such or such Permitted Transferee.
5.16 TERM. Unless earlier terminated by mutual agreement among the
parties hereto, the provisions of Articles 3 and 4 shall terminate upon the
earlier to occur of a Qualified IPO or upon the tenth year anniversary of this
Agreement and all other provisions of this Agreement shall terminate upon the
tenth year anniversary of this Agreement. Notwithstanding the foregoing, this
Agreement shall in any event terminate with respect to any Stockholder and its
Permitted Transferees when such Stockholder and its Permitted Transferees no
longer own any shares of Registrable Securities (except if such shares are
transferred in violation of this Agreement).
5.17 TERMINATION OF OLD STOCKHOLDERS AGREEMENTS. This Agreement
supersedes and replaces the following agreements, which as of this date shall be
deemed null and void and without further effect: (i) the Stockholders' Agreement
dated April 23, 1996 and the Supplemental Stockholders' Agreement dated April
23, 1996 with Yokogawa Electric Corporation and (ii) the Stock Purchase
Agreement dated June 26, 1991, the Supplemental Stockholders' Agreement dated
October 25, 1994 and Addenda Number One to the Stockholders Agreement dated
April 23, 1996 with Schroder UK Venture Fund III L.P., Schroder UK Venture Fund
III L.P. 2 and Schroder UK Venture Fund III Trust.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first written above.
WAVETEK CORPORATION
By: /s/ Terence J. Gooding
---------------------------------------------
Name: Dr. Terence J. Gooding
Title: Chief Executive Officer
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
DLJ OFFSHORE PARTNERS II, C.V.
By: DLJ Merchant Banking II, L.P.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ Diversified Partners, Inc.
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
15
<PAGE>
DLJMB FUNDING II, INC.
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
UK INVESTMENT PLAN 1997 PARTNERS
By: Donaldson, Lufkin & Jenrette, Inc.
General Partner
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management Corporation
As Manager
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
DLJ EAB PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
16
<PAGE>
DLJ MILLENNIUM PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
Grand Avenue Capital Corporation,
its general partner
By: /s/ Peter Nolan
---------------------------------------------
Name:
Title:
DR. TERENCE J. GOODING
/s/ Terence J. Gooding
-------------------------------------------------
Dr. Terence J. Gooding
SCHRODER UK VENTURE FUND III
A Group consisting of three entities:
Schroder UK Venture Fund III Trust
Schroder UK Venture Fund III L.P.
Schroder UK Venture Fund III L.P. 2
By: SCHRODER VENTURE MANAGERS LIMITED,
Manager
By: /s/ Peter L. Everson
---------------------------
Peter L. Everson, Director of
the Manager of each of the
three entities comprising the
Fund
17
<PAGE>
YOKOGAWA ELECTRIC CORPORATION
By: /s/ Tetsuji Ishizuka
---------------------------------------------
Name: Tetsuji Ishizuka
Title: General Counsel
BARBARA A. GOODING
TERENCE J. AND BARABARA A. GOODING CRUT
TERENCE J. GOODING GRAT 1
TERENCE J. GOODING GRAT 2
BARBARA A. GOODING GRAT
GOODING FAMILY FOUNDATION
GOODING INVESTMENTS, INC.
ANTHONY P. GOODING
ANTHONY P. GOODING CRUT
TERENCE J. GOODING, JR.
TERENCE J. GOODING, JR. CRUT
PAUL L. GOODING
PAUL L. GOODING CRUT
KATHRYN A. VALVERDE
KATHRYN A. VALVERDE CRUT
MATTHEW T. LONDON
MATTHEW T. LONDON CRUT
REBECCA J. BELLATI
REBECCA J. BELLATI CRUT
VICTORIA L. GOODING
VICTORIA L. GOODING CRUT
KYLE L. GOODING INTER VIVOS TRUST
AMANDA L. GOODING INTER VIVOS TRUST
PATRICK A. GOODING INTER VIVOS TRUST
AMANDA N. MCPHERSON INTER VIVOS TRUST
CODY C. MCPHERSON INTER VIVOS TRUST
TERENCE M. LONDON INTER VIVOS TRUST
TERENCE J. GOODING 1994 TRUST
BARBARA A. GOODING 1994 TRUST
IVERNA REDMOND
MAUREEN WISCHHUSEN
MARGARET GOODING
MARY J. OLSON
YVONNE DUGGER
DARREL WEBLEY
DUANE WEBLEY
DEBORAH SPARKS
SNOW HILL TRUSTEES
RICHARD J. BERRY
18
<PAGE>
GERALDINE MARY BERRY
PAUL STEVENSON
SUZANNE EVE STEVENSON
PHILIP J. COOKE
By: /s/ Terence J. Gooding
----------------------------------------
Terence J. Gooding, as Attorney-in-Fact
BEN J. CONSTANTINI
By: /s/ Ben J. Constantini
----------------------------------------
Ben J. Constantini
DEREK T. MORIKAWA
/s/ Derek T. Morikawa
-----------------------------
Derek T. Morikawa
MEGAN MORIKAWA INTER VIVOS TRUST
EVAN MORIKAWA INTER VIVOS TRUST
By: /s/ Derek T. Morikawa
-------------------------------------------
Derek T. Morikawa, Attorney-in-Fact
ROD BALLARD
KEITH BARGROFF
RICHARD BERRY
PAT BONFILS
JOSEPH A. BUDANO
VICKIE L. CAPPS
CHARLES CITRON
BEN J. CONSTANTINI
DANIEL FISH
BRUCE GOULD
MICHAEL HUFF
RICHARD JAWORSKI
RONALD JENT
BARRY KITAEN
MICHAEL LATHAM
ANN LITTLE
JOSEPH MATIBAG
NORMAN MILLER
DEREK T. MORIKAWA
ERNEY NIKOU
JEFFREY PERRIN
19
<PAGE>
MICHAEL RICHARDSON
MICHAEL SCIULLI
BRYAN WHATLEY
PAUL ASHTIANI
ANTHON EDWARD BAYLY
DAVID COOPER
PAUL ROBERTS
RICHARD RODDIS
PAUL STEVENSON
DAVID WALKER
STEVEN MANNING
KOON ENG TAN
YONG CHANG YANG
ULRICH DIEHL
ROL KAINDL
WINFRIED LENNE
PETER MASSAM
JOUKE RIJPSTRA
KLAUS ROMANEK
SOREN SCHNAPKA
DIETER SCHWEISTHAL
NORBERT STADHOUDERS
WIELAND WEIGLER
MICHEL BOUQUAIN
ENZO DI LUIGI
OLIVIER MASSELIN
FRANCOIS PLAZANET
FREDERICK TROJANI
LUKA RADOMIROV
By: /s/ Terence J. Gooding
-----------------------------------------------
Terence J. Gooding, as Attorney-in-Fact
20
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as of June
11, 1997, is by and among Wavetek Corporation, a Delaware corporation (the
"COMPANY"), DLJ Merchant Banking Partners II, L.P., DLJ Offshore Partners II,
C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan
1997 Partners, DLJ First ESC L.L.C., DLJ EAB Partners, L.P., DLJ Millennium
Partners, L.P. (collectively, the "DLJ INVESTORS"), Green Equity Investors II,
L.P. ("GEI") and the other Stockholders (as defined below).
RECITALS
A. WHEREAS, pursuant to the terms of the Stock Purchase and
Recapitalization Agreement dated as of May 23, 1997 (the "RECAPITALIZATION
AGREEMENT") by and among the Company, the DLJ Investors, GEI and certain
stockholders of the Company, the DLJ Investors and GEI will purchase from the
Company 1,674,810 and 753,660 shares, respectively, of Common Stock (as defined
below) representing 34.28% and 15.43%, respectively, of the outstanding shares
of Common Stock immediately after the transactions contemplated by the
Recapitalization Agreement.
B. WHEREAS, the Company and the Stockholders are concurrently
entering into a Stockholders Agreement (the "STOCKHOLDERS AGREEMENT") for the
purpose of regulating certain aspects of the Stockholders' relationships with
regard to each other and the Company.
C. WHEREAS, the Stockholders own or have the right to purchase or
otherwise acquire shares of the Common Stock of the Company. The Company and
the Stockholders (as defined below) deem it to be in their respective best
interests to enter into this Agreement to set forth the rights of the
Stockholders in connection with public offerings and sales of the Common Stock.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Company and the
Stockholders hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings:
"AFFILIATE" shall mean with respect to any Person, any Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For
<PAGE>
purposes of this definition, ownership of 10% or more of the voting common
equity of a person or entity shall be deemed to be control of such person or
entity.
"BOARD" means the Board of Directors of the Company.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"COMMISSION" means the Securities and Exchange Commission or any other
governmental body or agency succeeding to the functions thereof.
"COMMON STOCK" means the common stock, $.01 par value, of the Company.
"DEMAND REGISTRATION" means a registration requested by a Stockholder
or group of stockholders pursuant to Section 2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"INSTITUTIONAL STOCKHOLDERS" means the DLJ Investors, GEI, Schroder UK
Venture Fund III L.P., Schroder UK Venture Fund III L.P.2, Schroder UK Venture
Fund III Trust (collectively, "Schroder"), Yokogawa Electric Corporation
("Yokogawa") and Gooding if he is not the Chief Executive Officer of the
Company.
"MAJORITY OF REGISTERING STOCKHOLDERS" means, with respect to a
registration that includes Registrable Shares, those Stockholders who, at the
time in question, hold at least a majority of the Registrable Shares included or
proposed to be included in such registration.
"MATERIAL TRANSACTION" means any material transaction in which the
Company or any of its Subsidiaries proposes to engage or is engaged, including a
purchase or sale of assets or securities, financing, merger, consolidation,
tender offer, or other material corporate development, and with respect to which
the Board reasonably has determined in good faith that compliance with this
Agreement may reasonably be expected to either materially interfere with the
Company's or such Subsidiary's ability to consummate such transaction in a
timely fashion or require the Company to disclose material, non-public
information or such material corporate development prior to such time as it
would otherwise be required to be disclosed.
"OTHER SECURITIES" means at any time shares of Common Stock (or other
securities convertible into, or exchangeable for, shares of Common Stock) which
do not constitute Registrable Shares and which are owned by Persons who are
entitled to registration rights under other agreements.
"PERMITTED TRANSFEREE" means any of the following who agrees to be
bound by and become a party to the Stockholders Agreement: (i) with respect to
transfers by the Institutional Stockholders, any Affiliates thereof and (ii)
with respect to transfers by Gooding or
2
<PAGE>
the Management Stockholders, a spouse, child, grandchild, stepchild or a child
of a stepchild thereof or a trust as to which Gooding, the Management
Stockholder or such spouse, child, grandchild, stepchild or child of a stepchild
thereof exercises substantial control over the investment of the trust assets.
Upon (i) execution and delivery by a Permitted Transferee of the Stockholders
Agreement and (ii) receipt of shares of Common Stock from the transferring
Stockholder, the Permitted Transferee shall be deemed to be a "Stockholder" for
all purposes under this Agreement.
"PERSON" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"PRIMARY SHARES" means at any time the authorized but unissued shares
of Common Stock and shares of Common Stock held by the Company in its treasury
or any security convertible into or exchangeable for unissued shares of Common
Stock.
"PROSPECTUS" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"PUBLIC OFFERING" means the closing of a public offering of Common
Stock pursuant to a Registration Statement declared effective under the
Securities Act, except that a Public Offering shall not include an offering of
securities to be issued as consideration in connection with a business
acquisition or an offering of securities issuable pursuant to an employee
benefit plan.
"QUALIFIED IPO" means the initial underwritten Public Offering by the
Company of Common Stock registered with the Commission under the Act (i) after
which the Common Stock is included for quotation on the Nasdaq National Market
or listed on a national securities exchange and (ii) having an aggregate
offering price to the public (before underwriters' discounts and commissions) of
at least $20,000,000.
"REGISTRABLE SHARES" means Restricted Shares that constitute Common
Stock.
"REGISTRABLE DATE" means the date upon which the Registration
Statement pursuant to which the Company shall have initially registered shares
of Common Stock under the Securities Act for sale in a Public Offering shall
have been declared effective by the Commission.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Registrable Shares and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the
3
<PAGE>
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"RESTRICTED SHARES" means shares of Common Stock held by the
Stockholders, including (i) shares of Common Stock which may be issued as a
dividend or distribution, (ii) any other securities which by their terms are
exercisable or exchangeable for or convertible into Common Stock, and (iii) any
securities received in respect of such shares of Common Stock (including
securities described in Section 13). Restricted Shares shall cease to be
Restricted Shares when (A) they have been registered under the Securities Act,
the Registration Statement in connection therewith has been declared effective
and they have been disposed of pursuant to and in the manner described in such
effective Registration Statement, (B) they are sold or distributed pursuant to
Rule 144 or may be sold or distributed by the holder thereof pursuant to Rule
144(k), (C) they may be sold or distributed pursuant to Rule 144 by such
Stockholder within a three-month period, (D) they have been otherwise
transferred and new certificates or other evidences of ownership for them not
bearing a restrictive legend and not subject to any stop transfer order or other
restriction on transfer have been delivered by the Company or the issuer of
other securities issued in exchange for the Restricted Shares, or (E) they have
ceased to be outstanding.
"RULE 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto.
"SECURITIES ACT" means the Securities Act of 1933 or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
"STOCKHOLDERS" means the DLJ Investors, the Institutional
Stockholders, Dr. Terence J. Gooding ("Gooding"), and the members of management
who own shares in the Company ("the Management Stockholders"), and each of their
respective Permitted Transferees.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of
June 11, 1997, among the Company and the Stockholders named therein, as the same
may be amended, supplemented, modified or restated.
"SUBSIDIARY" means, with respect to any Person, any other Person of
which the securities having a majority of the ordinary voting power in electing
the board of directors (or other governing body), at the time as of which any
determination is being made, are owned by such first Person either directly or
through one or more of its Subsidiaries.
2. DEMAND REGISTRATION.
(a) From and after the one year anniversary of the date of the
Stockholders Agreement, if the Company shall be requested by the DLJ
Investors or their Permitted Transferees at any time to effect the
registration under the Securities Act of all or a portion of their
Registrable Shares, the Company shall use its best efforts promptly to
effect such registration in accordance with the provisions of
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this Agreement. The number of shares required to be registered must,
in the good faith judgment of the DLJ Investors, have a fair market
value of at least $20,000,000 if the Demand Registration would
constitute a Qualified IPO, and a market value of $10,000,000 in all
other cases. The DLJ Investors shall have the right to request three
such Demand Registrations.
(b) After the consummation of a Qualified IPO, (i) any Stockholder other
than the DLJ Investors or their Permitted Transferrees holding 10% or
more of the outstanding Common Stock shall have the right to request
two Demand Registrations from the Company, and (ii) any other
Stockholder shall have the right to request one Demand Registration
from the Company; PROVIDED in each case that the number of Registrable
Shares to be registered must have, in the reasonable opinion of the
proposed managing underwriter, a fair market value of at least
$10,000,000.
(c) From and after the two year anniversary of this Agreement,
Stockholders holding in the aggregate 40% or more of the outstanding
Common Stock shall have the right jointly to request one Demand
Registration from the Company at any time, if such registration would
constitute a Qualified IPO.
(d) If such Demand Registration pursuant to Section 2(a), 2(b) or 2(c)
above would constitute a Qualified IPO, the provisions of the
Stockholders' Agreement would govern. Promptly after receiving
request for a Demand Registration that does not constitute a Qualified
IPO pursuant to Section 2(a), 2(b) or 2(c) above, the Company shall
provide written notice thereof to all Stockholders. Any Stockholder
who has the right at such time to transfer shares of Common Stock
under Article III of the Stockholders Agreement may, within 15
Business Days of the receipt of the notice from the Company, give
written notice to the Company that such Stockholder wishes to
participate in the proposed Demand Registration, which notice shall
specify the number of Registrable Shares such Stockholder desires to,
and under the Stockholders Agreement is permitted to, include in such
registration.
(e) Anything contained in Section 2(a), 2(b) or 2(c) to the contrary
notwithstanding, the Company shall not be obligated to effect any
Demand Registration under the Securities Act pursuant to Section 2(a),
2(b) or 2(c), except in accordance with the following provisions:
(i) the Company shall not be obligated to use its best efforts
to file and cause to become effective any Registration Statement
during any period in which any other Registration Statement
(other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which
Primary Shares are to be or were sold has been
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filed and not withdrawn or has been declared effective within the
prior 180 days;
(ii) the Company may delay the filing or effectiveness of any
Registration Statement for a period of up to 180 days after the
date of a request for registration pursuant to this Section 2 if
a Material Transaction exists at such time;
(iii) at any time prior to the effectiveness of a Registration
Statement, the Company may, in its sole discretion, convert a
Demand Registration pursuant to Section 2 into a registration
pursuant to Section 3, in which case the provisions (including
those governing inclusion of shares) set forth in Section 3 shall
apply and such registration so converted will not count as a
Demand Registration pursuant to this Section 2;
(iv) with respect to any Demand Registration pursuant to this
Section 2, the Company may include in such registration any
Primary Shares, Other Securities and/or other securities;
PROVIDED, HOWEVER, that if the managing underwriter advises the
Company that the inclusion of all Registrable Shares, Primary
Shares, Other Securities and/or other securities proposed to be
included in such registration would interfere with the successful
marketing (including pricing) of the Registrable Shares that are
the subject of such Demand Registration, then the number of
Registrable Shares, Primary Shares, Other Securities and/or other
securities proposed to be included in such registration shall be
included in the following order:
(A) FIRST, all Registrable Shares requested to be
included in such Demand Registration by the Stockholders
who requested such registration pursuant to Section 2(a),
2(b) or 2(c) and all Registrable Shares requested to be
included by other Stockholders pursuant to Section 2(d),
PRO RATA among all such Stockholders based on the number
of Registrable Shares owned.
(B) SECOND, the Primary Shares; and
(C) THIRD, the Other Securities.
(v) at any time before the Registration Statement covering
Registrable Shares becomes effective, the Stockholder or group of
Stockholders which requested such registration pursuant to this
Section may request the Company to withdraw or not to file the
Registration Statement; and
(vi) the Company may, at its sole option, elect to satisfy a
request for a Demand Registration pursuant to this Section on
Form S-2 or Form S-3
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promulgated under the Securities Act (or any successor forms
thereto), if such forms are then available to the Company.
(f) The Company will not be required to effect more than one Demand
Registration in any twelve-month period.
3. PIGGYBACK REGISTRATION.
(a) If the Company at any time proposes for any reason to register
(whether for itself or others or whether pursuant to a conversion of a
Demand Registration under Section 2(d)(iii)) any of its securities
under the Securities Act (other than (i) on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto or
(ii) in connection with a Qualified IPO, in which case the provisions
of the Stockholders' Agreement shall govern), it shall promptly give
written notice to the Stockholders of its intention to so register
such securities.
(b) Any Stockholder who may transfer shares of Common Stock under the
Stockholders Agreement may deliver to the Company within 20 Business
Days after delivery of such notice of the proposed offering by the
Company, a written request to include in the registration all or a
portion of such Stockholder's Registrable Shares (which request shall
specify the number of Registrable Shares proposed to be included in
such registration). The Company shall use its best efforts to cause
all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in
such registration; PROVIDED, HOWEVER, that if the managing underwriter
advises the Company that the inclusion of any or all Registrable
Shares and the Other Securities other securities requested to be
included in such registration would materially interfere with the
successful marketing (including pricing) of the Primary Shares or
other securities proposed to be registered by the Company, then the
number of Primary Shares, Registrable Shares, Other Securities and
other securities proposed to be included in such registration shall be
included in the following order:
(i) FIRST, the Primary Shares proposed by the Company to be
sold for its own account,
(ii) SECOND,
(A) in the case of a Demand Registration converted by
the Company pursuant to 2(e)(iii), the Registrable Shares
requested to be registered by the requesting Stockholder;
and
(B) such Registrable Shares requested by Stockholders
to be included in such registration pursuant to this
Section 3, PRO RATA among the Stockholders referred to in
this paragraph 3(b)(ii) based on the number of Registrable
Shares owned; and
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(iii) THIRD, the Other Securities.
The Company shall have the right to withdraw a registration initially
proposed by it, in which case all related requests for Piggyback Registration
will be terminated.
4. HOLDBACK AGREEMENT.
(a) If the Company at any time shall register its securities under the
Securities Act for sale to the public pursuant to an underwritten
offering to the extent the following restrictions are legally
permitted, the Stockholders and their respective Permitted Transferees
shall not sell publicly, make any short sale of, grant any option for
the purchase of, or otherwise dispose publicly of, any securities of
the Company similar to those being registered (other than securities
included in such registration) without the prior written consent of
the Company, for a period designated by the Company in writing to the
Stockholders, which period shall not begin earlier than 14 days prior
to the effectiveness of the Registration Statement pursuant to which
such public offering shall be made and shall not last more than (i)
180 days, or (ii) a shorter period agreed upon by the Company and the
managing underwriters of an underwritten offering, in each case after
the closing of the sale of securities pursuant to such Registration
Statement. The Company shall obtain the agreement of any Person
(other than a Stockholder) permitted to sell securities in a
registration to be bound by and to comply with this Section 4 with
respect to such registration as if such Person was a Stockholder
hereunder.
5. PREPARATION AND FILING.
(a) If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the
registration of, and keep effective a Registration Statement for, any
Registrable Shares, the Company shall, as expeditiously as
practicable:
(i) use its best efforts to cause a Registration Statement
that registers such Registrable Shares to become and remain
effective for a period of 90 days (extended for such period of
time as the Stockholders are required to discontinue disposition
of Registrable Shares pursuant to Section 5(b) below) or until
all of such Registrable Shares have been disposed of (if
earlier);
(ii) furnish, at least five Business Days before the initial
filing of a Registration Statement that relates to the
registration of such Registrable Shares, to one counsel (the
"Stockholders' Counsel") selected by a Majority of Registering
Stockholders, copies of all such documents proposed to be filed
(it being understood that such five-Business-Day period need not
apply to a Prospectus relating thereto or any amendments or
supplements relating to such a Registration Statement or
Prospectus, proposed to be filed so long as such drafts are
supplied to the
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Stockholders' Counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the
circumstances);
(iii) notify the Stockholders whose Registrable Shares are
included therein of the effectiveness of such Registration
Statement and prepare and promptly file with the Commission such
amendments and supplements to such Registration Statement and the
Prospectus used in connection therewith as may be necessary to
(A) keep such Registration Statement effective for at least a
period of 90 days (extended for such period of time as
Stockholders are required to discontinue disposition of
Registrable Shares pursuant to Section 5(b) below) or until all
of such Registrable Shares have been disposed of (if earlier),
(B) correct any statements or omissions if any event with respect
to the Company shall have occurred as a result of which any such
Registration Statement or Prospectus as then in effect would
include an untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not
misleading, and (C) comply with the provisions of the Securities
Act with respect to the sale or other disposition of such
Registrable Shares;
(iv) notify in writing the Stockholders' Counsel, and the
Stockholders whose Registrable Shares may be included in such
Registration Statement, promptly of (A) the receipt by the
Company of any notification with respect to any comments by the
Commission with respect to such Registration Statement or
Prospectus or any amendment or supplement thereto or any request
by the Commission for the amending or supplementing thereof or
for additional information with respect thereto, (B) the receipt
by the Company of any notification or written information with
respect to the issuance or threatened issuance by the Commission
of any stop order suspending the effectiveness of such
Registration Statement or Prospectus or any amendment or
supplement thereto or the initiation or threatening of any
proceeding for that purpose (and the Company shall use its best
efforts to prevent the issuance thereof or, if issued, to obtain
its withdrawal) and (C) the receipt by the Company of any
notification with respect to the suspension of the qualification
of such Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws
of such jurisdictions as the Stockholders reasonably request and
do any and all other acts and things which may be reasonably
necessary or advisable to enable the Stockholders to consummate
the disposition in such jurisdictions of the Registrable Shares
owned by the Stockholders; PROVIDED, HOWEVER, that the Company
will not be required to qualify generally to do business, subject
itself to general taxation or consent to general service of
process in any
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jurisdiction where it would not otherwise be required to do so
but for this clause (v) or to provide any material undertaking or
make any changes in its By-laws or Certificate of Incorporation
which the Board determines to be contrary to the best interests
of the Company;
(vi) furnish to the Stockholders holding such Registrable
Shares such number of copies of a summary Prospectus, if any, or
any other Prospectus, including a Preliminary Prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as such Stockholders may legally require and may
reasonably request in order to facilitate the public sale or
other disposition of such Registrable Shares;
(vii) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Stockholders
holding such Registrable Shares to consummate the disposition of
such Registrable Shares;
(viii) notify the Stockholders holding such Registrable Shares
on a timely basis at any time when a Prospectus relating to such
Registrable Shares is required to be delivered under the
Securities Act within the appropriate period mentioned in
clause (i) of this Section 5(a), of the happening of any event 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 a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, and prepare and furnish to such Stockholders a
reasonable number of copies of, and file with the Commission, a
supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the offerees of
such shares, 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, in light of the circumstances under which they were
made, not misleading;
(ix) subject to the execution of confidentiality agreements in
form and substance satisfactory to the Company, make available
upon reasonable notice and during normal business hours, for
inspection by the Stockholders holding Registrable Shares
requested to be included in such registration, any underwriter
participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by
the Stockholders or underwriter (collectively the "Inspectors"),
all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the
"Records"), and cause the Company's officers, directors an
employees to supply all information
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(together with the Records, the "Information") reasonably
requested by any such Inspector, in each case as shall be
reasonably necessary to enable them to exercise their due
diligence responsibility in connection with such Registration
Statement; PROVIDED, HOWEVER, that any of the Information that
the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, shall not be
disclosed by the Inspector unless (A) the disclosure of such
Information is necessary to avoid or correct a misstatement or
omission in the Registration Statement or Prospectus, (B) the
release of such Information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or, upon the
written advice of counsel, is otherwise required by law, or (C)
such Information has been made generally available to the public,
and the Stockholders agree that they will, upon learning that
disclosure of such Information is sought in a court or competent
jurisdiction, give notice to the Company and allow the Company,
at the Company's expense, to undertake appropriate action to
prevent disclosure of the Information deemed confidential;
(x) use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary
form and at customary times and covering matters of the type
customarily covered by cold comfort letters;
(xi) use its best efforts to obtain from its counsel an
opinion or opinions in customary form naming the Stockholders as
additional addressees or parties who may rely thereon;
(xii) provide a transfer agent and registrar (which may be the
same entity and which may be the Company) for such Registrable
Shares;
(xiii) issue to any underwriter to which the Stockholders
holding such Registrable Shares may sell shares in such offering
certificates evidencing such Registrable Shares;
(xiv) list such Registrable Shares on any national securities
exchange on which any shares of the Common Stock are listed or,
if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable Shares
for inclusion on the Nasdaq National Market;
(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make
available to its securityholders, as soon as reasonably
practicable, earning statements (which need not be audited)
covering a period of 12 months beginning within three months
after the effective date of the Registration Statement, which
earning statements shall satisfy the provisions of Section 11(a)
of the Securities Act; and
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<PAGE>
(xvi) use its best efforts to take all other steps to necessary
to effect the registration of, and maintain an effective
Registration Statement with respect to, such Registrable Shares
contemplated hereby.
(b) Each holder of the Registrable Shares, upon receipt of any notice
from the Company of any event of the kind described in Section
5(a)(viii) or Section 6 hereof, shall forthwith discontinue
disposition of the Registrable Shares pursuant to the
Registration Statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(a)(viii) hereof,
and, if so directed by the Company, such holder shall deliver to
the Company all copies, other than permanent file copies then in
such holder's possession, of the most recent Prospectus covering
such Registrable Shares at the time of the receipt of such
notice.
6. SUSPENSION.
Anything contained in this Agreement to the contrary notwithstanding,
the Company may, by notice in writing to each holder of Registrable Shares to
which a Prospectus relates, require such holder to suspend, for up to 90 days
(the "Suspension Period"), the use of any Prospectus included in a Registration
Statement filed under Section 2 or 3 hereof if a Material Transaction exists
that would require an amendment to such Registration Statement or supplement to
such Prospectus (including any amendment or supplement made through
incorporation by reference to a report filed under the Exchange Act). The
Company may (but shall not be obligated to) withdraw the effectiveness of any
Registration Statement subject to this provision.
7. EXPENSES.
All expenses (other than underwriting discounts and commissions
relating to the Registrable Shares, as provided in the last sentence of this
Section 7) incurred by the Company in complying with Section 5, including,
without limitation, all registration and filing fees (including all expenses
incident to filings with the National Association of Securities Dealers, Inc.),
fees and expenses of complying with securities and blue sky laws, printing
expenses, fees and expenses of the Company's counsel and accountants and fees
and expenses of the Stockholders' Counsel (up to a maximum of $25,000), shall be
paid by the Company; PROVIDED, HOWEVER, that all underwriting discounts and
selling commissions applicable to the Registrable Shares and Other Shares shall
be borne by the holders selling such Registrable Shares and Other Shares, in
proportion to the number of Registrable Shares and Other Shares sold by each
such holder.
8. INDEMNIFICATION.
(a) In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless, to the fullest extent permitted by law,
each holder of Registrable Shares, each underwriter, broker or any
other Person acting on behalf of the holders of Registrable Shares and
each other Person, if any, who controls any of the
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foregoing Persons within the meaning of the Securities Act (each such
indemnified Person being referred to herein as an "Indemnified
Person") against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which any of the foregoing
Persons 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
allegedly untrue statement of a material fact contained in or
incorporated by reference in the Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary Prospectus or final Prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of
any Registrable Shares, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading or, with respect to any Prospectus, necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the
Company and relating to action or inaction required of the Company in
connection with such registration or qualification under such state
securities or blue laws; and shall promptly reimburse the Indemnified
Persons for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to any such Indemnified
Person to the extent that any such loss, claim, damage, liability or
action (including any legal or other expenses incurred) arises out of
or is based upon an untrue statement or allegedly untrue statement or
omission or alleged omission made in said Registration Statement,
preliminary Prospectus, final Prospectus, amendment, supplement or
document incident to registration or qualification of any Registrable
Shares in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Indemnified Person
specifically for use in the preparation thereof; PROVIDED FURTHER,
HOWEVER, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any untrue statement,
allegedly untrue statement, omission or alleged omission made in any
preliminary Prospectus but eliminated or remedied in the final
Prospectus (filed pursuant to Rule 424 of the Securities Act), such
indemnity agreement shall not inure to the benefit of the any
Indemnified Person from whom the Person asserting any loss, claim,
damage, liability or expense purchased the Restricted Shares which are
the subject thereof, if a copy of such final Prospectus had been made
available to such Indemnified Person and such final Prospectus was not
delivered to such Person with or prior to the written confirmation of
the sale of such Registrable Shares to such Person.
(b) In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each holder of Registrable
Shares being registered shall, severally and not jointly, to the
fullest extent permitted by law, indemnify
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and hold harmless (in the same manner and to the same extent as set
forth in Section 8(a) above) the Company, each director of the
Company, each officer of the Company who shall have signed such
Registration Statement, each agent, underwriter, broker or other
Person acting on behalf of the Company, each other holder of
Registrable Shares or Other Shares and each Person who controls any of
the foregoing Persons within the meaning of the Securities Act with
respect to any statement or omission from such Registration Statement,
any preliminary Prospectus or final Prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of
any Registrable Shares, if such statement or omission was made in
reliance upon and in conformity with written information furnished to
the Company or such underwriter by or on behalf of such holder
specifically for use in connection with the preparation of such
Registration Statement, preliminary Prospectus, final Prospectus,
amendment, supplement or document; PROVIDED, HOWEVER, that the maximum
amount of liability in respect of such indemnification shall be
limited, in the case of each holder of Registrable Shares, to an
amount equal to the net proceeds actually received by such holder from
the sale of Registrable Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in Section
8(a) or (b), such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action; PROVIDED, HOWEVER, that
the indemnified party's failure to give such notice shall not release,
relieve or in any way affect the indemnifying party's obligation
hereunder to indemnify the indemnified party unless and to the extent
that the rights of the indemnifying party are prejudiced thereby. In
case any such action is brought against an indemnified party, the
indemnifying party will 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, 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
responsible for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof;
PROVIDED, HOWEVER, that if any indemnified party shall have reasonably
concluded (based on the written advice of counsel) that there may be a
conflict of interest between the indemnified party and the
indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 8, the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such
indemnified party and any Person controlling such indemnified party
for that portion of the fees and expenses of any counsel retained by
the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section 8.
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(d) If the indemnification provided for in this Section 8 is held by a
court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or action
referred to herein (other than as a result of the applicability of the
two provisos in Section 8(a)), then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amounts paid or payable by such indemnified party as a result of such
loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on
the one hand and of the indemnifying party on the other in connection
with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of
the indemnified party 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 by the
indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.
9. UNDERWRITING AGREEMENT.
(a) Notwithstanding the provisions of Sections 4, 5, 7 and 8, to the
extent that the Company and at least the Majority of Registering
Stockholders shall enter into an underwriting or similar agreement
that contains provisions which conflict with any provision of any such
Sections, the provisions contained in such agreement shall control
with respect to such underwritten offering.
(b) If any registration pursuant to Section 2 is requested to be an
underwritten offering, the Company shall negotiate in good faith to
enter into a reasonable and customary underwriting agreement with the
underwriters thereof. The Company shall be entitled to receive
indemnities from lead institutions, underwriters, selling brokers,
dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such
Persons specifically for inclusion in any Prospectus or Registration
Statement and to the extent customarily given their role in such
distribution.
(c) No Stockholder may participate in any registration hereunder that is
underwritten unless such Stockholder agrees to (i) sell such
Stockholder's Registrable Shares proposed to be included therein on
the basis provided in any underwriting arrangements approved by the
Company and the Majority of Registering Stockholders (which approval
shall not be unreasonably withheld by such Stockholders) and (ii) as
expeditiously as possible, notify the Company of the occurrence of any
event concerning such Stockholder as a result of which the Prospectus
relating to such registration contains an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to
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make the statements therein, in light of the circumstances under which
they were made, not misleading.
10. NOMINEES FOR BENEFICIAL OWNERS.
In the event that any Registrable Shares are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election by
written notice to the Company effective upon receipt by the Company, be treated
as a Stockholder for purposes of any request or other action by any Stockholder
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Shares held by any Stockholder contemplated by this
Agreement. If the beneficial owner of any Registrable Shares so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Shares. Prior to receipt by the
Company of written notice contemplated hereby, any action taken by any nominee
shall be binding upon any such beneficial owner.
11. INFORMATION BY HOLDER.
The Stockholders shall furnish to the Company such written information
regarding the Stockholders and the distribution proposed by the Stockholders as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
12. EXCHANGE ACT COMPLIANCE.
From the Registration Date or such earlier date as a Registration
Statement filed by the Company pursuant to the Exchange Act relating to any
class of the Company's securities shall have become effective, the Company shall
comply with all of the reporting requirements of the Exchange Act applicable to
it and shall comply with all other public information reporting requirements of
the Commission which are conditions to the availability of Rule 144 for the sale
of the Common Stock. The Company shall cooperate with the Stockholders in
supplying such information as may be necessary for the Stockholders to complete
and file an information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
13. MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any merger,
consolidation, or reorganization in which the Company shall not be the surviving
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"Registrable Shares" shall be deemed to include the shares of common stock, if
any, that the Stockholders would be entitled to receive in exchange for Common
Stock under any such merger, consolidation or reorganization; PROVIDED, HOWEVER,
that, to the extent the Stockholders receive securities that are by their terms
convertible into shares of common stock of the issuer thereof, then only such
shares of common stock as are issued or
16
<PAGE>
issuable upon conversion of said convertible securities shall be included within
the definition of "Registrable Securities."
14. NEW CERTIFICATES.
As expeditiously as possible after the effectiveness of any Registration
Statement filed pursuant to this Agreement, the Company will deliver in exchange
for any legended certificate evidencing Restricted Shares so registered, new
stock certificates not bearing any restrictive legends, PROVIDED that in the
event less than all of the Restricted Shares evidenced by such legended
certificate are registered, the holder thereof agrees that a new certificate
evidencing such unregistered shares will be issued bearing the appropriate
restrictive legend.
15. SELECTION OF UNDERWRITER.
The Company shall not, at any time after the date hereof, grant any
registration rights that conflict with, or have any priority over, the
registration rights granted hereby. The DLJ Investors will have the right to
select the underwriters in any public offering resulting from an exercise by it
of a Demand Registration.
16. TERMINATION.
This Agreement shall terminate and be of no further force or effect
when there shall no longer be any Registrable Shares outstanding.
17. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Company and the Stockholders and, subject to Section
17(b), the respective successors and assigns of the Company and the
Stockholders. Except as otherwise expressly provided in Sections 2, 3
and 4, this Agreement is not intended to create any third party
beneficiaries.
(b) ASSIGNMENT. Each Stockholder may assign its rights hereunder to any
Permitted Transferee of Registrable Shares; PROVIDED, HOWEVER, that
such Permitted Transferee shall, as a condition to the effectiveness
of such assignment, be required to execute a counterpart to this
Agreement agreeing to be treated as a Stockholder, whereupon such
Permitted Transferee shall have the benefits of and shall be subject
to the restrictions contained in this Agreement as if such Permitted
Transferee was originally included in the definition of a Stockholder
and had originally been a party hereto.
(c) SEVERABILITY. It is the desire and intent of the parties hereto that
the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Agreement shall be adjudicated by a court
of competent jurisdiction to be invalid, prohibited or
17
<PAGE>
unenforceable for any reason, such provision, as to such jurisdiction,
shall be ineffective, without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing,
if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating
the remaining provisions of this Agreement or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto contain the entire agreement among
the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous arrangements or understandings
with respect hereto and thereto.
(e) NOTICES. All communications hereunder to any party shall be deemed to
be sufficient if contained in a written instrument delivered in person
or sent by telecopy, nationally-recognized overnight courier
guaranteeing next day delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such
party at its address below or such other address as such party may
hereafter designate in writing:
if to the Company to:
Wavetek Corporation
11995 El Camino Real, Suite 301
San Diego, CA 92130
Attention: Chief Executive Officer
Telecopier: (619) 793-2310
if to any Stockholder, to such
Stockholder at the address indicated
on SCHEDULE I hereto.
All such notices, requests, consents, and other communications shall
be deemed to have been given and received (i) in the case of personal delivery
or delivery by telecopy, on the date of such delivery, (ii) in the case of
dispatch by nationally-recognized overnight courier, on the next Business Day
following such dispatch and (iii) in the case of mailing, on the fifth Business
Day after the posting thereof.
(f) MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of this
Agreement may not be modified or amended, nor may any provision be
waived, except pursuant to a writing signed by the Company and the
Stockholders holding at least 85% of the outstanding Registrable
Shares; PROVIDED, HOWEVER, that no such modification, amendment or
waiver that would treat any Stockholder in a non-ratable,
discriminatory manner shall be made without the prior written
18
<PAGE>
consent of such Stockholder. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a
waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in
accordance with its terms. The Stockholders, to the fullest extent
permitted by applicable laws, release the members of the Board from
any and all claims for breach of fiduciary duty arising out of the
application of this Section 17(f).
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts shall constitute but
one agreement.
(h) HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE THAT
WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S
CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME
OTHER JURISDICTION WOULD ORDINARILY APPLY.
(j) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) NOUNS AND PRONOUNS. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or
neuter forms and the singular form of nouns and pronouns shall include
the plural and vice-versa.
CONSTRUCTION. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit, or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.
WAVETEK CORPORATION
By: /s/ Terence J. Gooding
---------------------------------
Name: Dr. Terence J. Gooding
Title: Chief Executive Officer
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------
Name: David B. Wilson
Title:
DLJ OFFSHORE PARTNERS II, C.V.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ Diversified Partners, Inc.
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
20
<PAGE>
DLJMB FUNDING II, INC.
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
UK INVESTMENT PLAN 1997 PARTNERS
By: Donaldson, Lufkin & Jenrette, Inc.
General Partner
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management
Corporation As Manager
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
DLJ EAB PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
21
<PAGE>
DLJ MILLENNIUM PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By: /s/ David B. Wilson
---------------------------------
Name:
Title:
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation,
its general partner
By: /s/ Peter Nolan
---------------------------------
Name:
Title:
DR. TERENCE J. GOODING
By: /s/ Terence J. Gooding
---------------------------------
Dr. Terence J. Gooding
SCHRODER UK VENTURE FUND III
A Group consisting of three entities:
Schroder UK Venture Fund III Trust
Schroder UK Venture Fund III L.P.
Schroder UK Venture Fund III L.P. 2
By: SCHRODER VENTURE MANAGERS LIMITED,
Manager
By: /s/ Peter L. Everson
----------------------------
Peter L. Everson, Director of the
Manager of each of the three
entities comprising the Fund
Title:
22
<PAGE>
YOKOGAWA ELECTRIC CORPORATION
By: /s/ Tetsuji Ishizuka
---------------------------------
Name: Tetsuji Ishizuka
Title: General Counsel
BARBARA A. GOODING
TERENCE J. AND BARBARA A. GOODING CRUT
TERENCE J. GOODING GRAT 1
TERENCE J. GOODING GRAT 2
BARBARA A. GOODING GRAT
GOODING FAMILY FOUNDATION
GOODING INVESTMENTS, INC.
ANTHONY P. GOODING
ANTHONY P. GOODING CRUT
TERENCE J. GOODING, JR.
TERENCE J. GOODING, JR. CRUT
PAUL L. GOODING
PAUL L. GOODING CRUT
KATHRYN A. VALVERDE
KATHRYN A. VALVERDE CRUT
MATTHEW T. LONDON
MATTHEW T. LONDON CRUT
REBECCA J. BELLATI
REBECCA J. BELLATI CRUT
VICTORIA L. GOODING
VICTORIA L. GOODING CRUT
KYLE L. GOODING INTER VIVOS TRUST
AMANDA L. GOODING INTER VIVOS TRUST
PATRICK A GOODING INTER VIVOS TRUST
AMANDA N. MCPHERSON INTER VIVOS TRUST
CODY C. MCPHERSON INTER VIVOS TRUST
TERENCE M. LONDON INTER VIVOS TRUST
TERENCE J. GOODING 1994 TRUST
BARBARA A. GOODING 1994 TRUST
IVERNA REDMOND
MAUREEN WISCHHUSEN
MARGARET GOODING
MARY J. OLSON
YVONNE DUGGER
DARREL WEBLEY
DUANE WEBLEY
23
<PAGE>
DEBORAH SPARKS
SNOW HILL TRUSTEES
RICHARD J. BERRY
GERALDINE MARY BERRY
PAUL STEVENSON
SUSAN EVE STEVENSON
PHILIP J. COOKE
By: /s/ Terence J. Gooding
------------------------------------------
Terence J. Gooding as Attorney-in-Fact
BEN J. CONSTANTINI
By: /s/ Ben J. Constantini
---------------------------------
Ben J. Constantini
DEREK T. MORIKAWA
By: /s/ Derek T. Morikawa
---------------------------------
Derek T. Morikawa
MEGAN MORIKAWA INTER VIVOS TRUST
EVAN MORIKAWA INTER VIVOS TRUST
By: /s/ Derek T. Morikawa
----------------------------------
Derek T. Morikawa, as Attorney-in-Fact
ROD BALLARD
KEITH BARGROFF
RICHARD BERRY
PAT BONFILS
JOSEPH A. BUDANO
VICKIE L. CAPPS
CHARLES CITRON
BEN J. CONSTANTINI
DANIEL FISH
24
<PAGE>
BRUCE GOULD
MICHAEL HUFF
RICHARD JAWORSKI
RONALD JENT
BARRY KITAEN
MICHAEL LATHAM
ANN LITTLE
JOSEPH MATIBAG
NORMAN MILLER
DEREK T. MORIKAWA
ERNEY NIKOU
JEFFREY PERRIN
MICHAEL RICHARDSON
MICHAEL SCIULLI
BRYAN WHATLEY
PAUL ASHTIANI
ANTHONY EDWARD BAYLY
DAVID COOPER
PAUL ROBERTS
RICHARD RODDIS
PAUL STEVENSON
DAVID WALKER
STEVEN MANNING
KOON ENG TAN
YONG CHANG YANG
ULRICH DIEHL
ROLF KAINDL
WINFRIED LENNE
PETER MASSAM
JOUKE RIJPSTRA
KLAUS ROMANEK
SOREN SCHNAPKA
DIETER SCHWEISTHAL
NORBERT STADHOUDERS
WIELAND WEIGLER
MICHEL BOUQUAIN
ENZO DI LUIGI
OLIVER MASSELIN
FRANCOIS PLAZANET
FREDERICK TROJANI
LUKA RADOMIROV
By: /s/ Terence J. Gooding
-------------------------------------------
Terence J. Gooding, as Attorney-in-Fact
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12.1
SCHEDULE RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
Pro Forma
Twelve Twelve
Nine Months Ended Months Months
Fiscal Years Ended September 30, June 30, Ended Ended
--------------------------------------- ----------------- June 30, June 30,
1992 1993 1994 1995 1996 1996 1997 1997 1997
----- ----- ----- ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before provision for income taxes 2,952 3,794 4,532 3,685 14,440 13,329 7,179 8,290 (2,308)
Interest expense, including amortization
of debt issuance costs 966 676 645 1,190 762 616 948 1,094 11,692
Interest portion of rental expense 410 355 400 867 867 663 678 882 882
---------------------------------------- --------------- -----------------
Earnings 4,328 4,825 5,577 5,742 16,069 14,608 8,805 10,266 10,266
---------------------------------------- --------------- -----------------
---------------------------------------- --------------- -----------------
Interest expense, including amortization
of debt issuance costs 966 676 645 1,190 762 616 948 1,094 11,692
Interest portion of rental expense 410 355 400 867 867 663 678 882 882
---------------------------------------- --------------- -----------------
Fixed Charges 1,376 1,031 1,045 2,057 1,629 1,279 1,626 1,976 12,574
---------------------------------------- --------------- -----------------
---------------------------------------- --------------- -----------------
Ratio of Earnings to Fixed Charges 3.15 4.68 5.34 2.79 9.86 11.42 5.42 5.20 0.82
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated November 22, 1996, in the Registration Statement (Form
S-4) and related Prospectus of Wavetek Corporation and Wavetek U.S. Inc.
ERNST & YOUNG LLP
San Diego, California
July 23, 1997
<PAGE>
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) ____________
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip Code)
WAVETEK CORPORATION
and
WAVETEK U.S. INC.
(Exact name of obligor as specified in its charter)
Delaware 33-0457664 (Wavetek Corporation)
95-2263080 (Wavetek U.S. Inc.)
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
11995 El Camino Real, Suite 301
San Diego, CA 92130
(Address of principal executive offices) (Zip Code)
-------------------------
10 1/8% Senior Subordinated Notes due 2007, of Wavetek Corporation
Subsidiary Guarantee of Wavetek U.S. Inc.
(Title of the indenture securities)
<PAGE>
GENERAL
ITEM 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006,
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20549
New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers:
Yes.
ITEM 2. Affiliations with Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
-----------------------------
ITEM 16. List of Exhibits:
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit hereto, pursuant
to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of
the Commission's Rules of Practice.
1. - A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (See Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. - A copy of the existing By-laws of the Trustee. (See Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. - The consent of the Trustee required by Section 321(b) of the Act. (See
Exhibit 6 to Form T-1, Registration Statement No. 33-44051.)
7. - A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority. (See Exhibit 7 to Form T-1, Registration Statement
No. 33- 55379.)
1
<PAGE>
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base responsive answer to Item 2, the answer to
said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
---------------------------
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 24th day of July, 1997.
The Bank of New York
By: /s/ MaryBeth A. Lewicki
---------------------------
MaryBeth A. Lewicki
Assistant Vice President
2
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, NY 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System at
the close of business March 31, 1997, published in accordance with a call made
by the Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act.
<TABLE>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest bearing balances and currency and coin......... $8,249,820
Interest-bearing balances................................... 1,031,026
Securities:
Held-to-maturity securities................................. 1,118,463
Available-for-sale securities............................... 3,005,838
Federal Funds sold and Securities purchased under
agreements to resell......................................... 3,100,281
Loans and lease financing receivables:
Loans and leases, net unearned income.............32,895,077
LESS: Allowance for loan and lease losses............633,877
LESS: Allocated transfer risk reserve...................429
Loans and leases, net of unearned income,
allowance and reserve...................................... 32,260,771
Assets held in trading accounts............................. 1,715,214
Premises and fixed assets (including capitalized leases).... 684,704
Other real estate owned..................................... 21,738
Investments in unconsolidated subsidiaries and associated
companies................................................... 195,761
Customers' liability to this bank on acceptances outstanding 1,152,899
Intangible assets........................................... 683,503
Other assets................................................ 1,526,113
---------
Total assets................................................ $54,746,131
-----------
-----------
LIABILITIES
Deposits:
In domestic
offices..................................................... 25,614,961
Noninterest-bearing..............................10,564,652
Interest-bearing.................................15,050,309
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................... 15,103,615
Noninterest-bearing.................................560,944
Interestbearing..................................14,542,671
Federal Funds purchased and Securities sold under
agreements to repurchase.................................... 2,093,286
Demand notes issued to the U.S. Treasury.................... 239,354
Trading liabilities......................................... 1,399,064
Other borrowed money:
With remaining maturity of one year or less................ 2,075,092
With remaining maturity of more than one year.............. 20,679
Bank's liability on acceptances executed and outstanding.... 1,160,012
Subordinated notes and debentures........................... 1,014,400
Other liabilities........................................... 1,840,245
---------
Total liablities............................................ 50,560,708
----------
<PAGE>
EQUITY CAPITAL
Common Stock................................................ 942,284
Surplus..................................................... 731,319
Undivided profits and capital reserves...................... 2,544,303
Net unrealized holding gains (losses) on
available-for-sale securities............................... (19,449)
Cumulative foreign currency translation adjustments......... (13,034)
-------
Total equity capital........................................ 4,185,423
---------
Total liabilities and equity capital........................ $54,746,131
-----------
-----------
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named
bank do hereby declare that is Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith }
J. Carter Bacot }Directors
Thomas A. Renyi }
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
SEPTEMBER 30, 1996 AND AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-END> SEP-30-1996 JUN-30-1997
<CASH> 6,126 4,059
<SECURITIES> 0 3,000
<RECEIVABLES> 22,889 27,334
<ALLOWANCES> 2,023 2,054
<INVENTORY> 19,308 18,202
<CURRENT-ASSETS> 51,993 57,241
<PP&E> 19,008 23,630
<DEPRECIATION> 6,814 8,857
<TOTAL-ASSETS> 68,852 79,963
<CURRENT-LIABILITIES> 30,530 38,477
<BONDS> 5,073 113,995
0 0
0 0
<COMMON> 11 49
<OTHER-SE> 5,637 43,748
<TOTAL-LIABILITY-AND-EQUITY> 68,852 79,963
<SALES> 150,993 118,700
<TOTAL-REVENUES> 150,993 118,700
<CGS> 72,364 55,479
<TOTAL-COSTS> 134,922 109,966
<OTHER-EXPENSES> 1,036 861
<LOSS-PROVISION> 1,542 252
<INTEREST-EXPENSE> 762 948
<INCOME-PRETAX> 14,440 7,179
<INCOME-TAX> 965 2,728
<INCOME-CONTINUING> 13,475 4,451
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,475 4,451
<EPS-PRIMARY> 1.17 0.40
<EPS-DILUTED> 1.17 0.40
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
WAVETEK CORPORATION
OFFER TO EXCHANGE ITS
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ITS OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007,
PURSUANT TO THE PROSPECTUS
DATED , 1997
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
TO: THE BANK OF NEW YORK, AS EXCHANGE AGENT
<TABLE>
<S> <C> <C>
BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL:
The Bank of New York Confirm: (212) 815-5789 The Bank of New York
101 Barclay Street, 7E Facsimile: (212) 101 Barclay Street
New York, NY 10286 815-6339 Corporate Trust Services Window
Attn: Shilpa Privedi Ground Level
Reorganization Section New York, NY 10286
Attn: Shilpa Privedi
Reorganization Section
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) if either (i) Old Notes are to be forwarded herewith or (ii)
tenders of Old Notes are to be made by book-entry transfer to an account
maintained by The Bank of New York (the "Exchange Agent") at The Depository
Trust Company ("DTC") pursuant to the procedures set forth under "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus and an Agent's
Message (as defined herein) is not delivered.
Holders of Old Notes whose certificates (the "Certificates") for such 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 (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes--Guaranteed Delivery" in the
Prospectus.
<PAGE>
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
2
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
----------------------------------------------------------------------------------------------------
PRINCIPAL
PRINCIPAL AMOUNT OF OLD
AMOUNT NOTES TENDERED
OF OLD NOTES (IF LESS THAN
NAME AND ADDRESS OF TENDERED (IF ALL
REGISTERED HOLDER (PLEASE CERTIFICATE ALL ARE ARE
FILL IN IF BLANK) NUMBERS* TENDERED) TENDERED)**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
$ $
----------------------------------------------
TOTAL AMOUNT TENDERED: $ $
- --------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS.
- ------------------------------------------------------------------------------------------------------
</TABLE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in Instruction 1)
ONLY)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
DTC Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY 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 of Registered Holder: _________________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution: _____________________________________________
DTC Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND NON-
EXCHANGED OR UNTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC
ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
Area Code and Telephone Number: ____________________________________________
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Wavetek Corporation (the "Company") the
above-described principal amount of the Company's 10 1/8% Subordinated Notes due
2007 (the "Old Notes") in exchange for a like principal amount of the Company's
10 1/8% Subordinated Notes due 2007 (the "New Notes" and together with the Old
Notes, the "Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated , 1997 (as the same may
be amended or supplemented from time to time, the "Prospectus"), receipt of
which is acknowledged, and in this Letter of Transmittal (which together with
the Prospectus constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby exchanges, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and transfer
the Old Notes on the books of the company, and (iii) receive for the account of
the Company all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms and conditions of
the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF
ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES
TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY
OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED
WILL COMPLY WITH ANY OBLIGATIONS IT MAY HAVE UNDER THE REGISTRATION RIGHTS
AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name and address of the registered holder of the Old Notes tendered
hereby should be printed above, if they are not already set forth above, as they
appear on the certificates representing such Old Notes. The certificate numbers
and the principal amount of the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if certificates are submitted for more Old Notes than are
tendered or accepted for exchange, certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one of
the procedures described under "The Exchange Offer--Procedures for Tendering Old
Notes" in the Prospectus and in the instructions herein will, upon the Company's
acceptance for exchange of such tendered Old Notes, constitute a binding
agreement among the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer. The undersigned
4
<PAGE>
recognizes that, under certain circumstances set forth in the Prospectus, the
Company may not be required to accept for exchange any of the Old Notes tendered
hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name of the undersigned or, in the case of a book-entry transfer of Old
Notes, that such New Notes be credited to the account indicated above maintained
at DTC. If applicable, substitute certificates representing Old Notes not
exchanged or not accepted for exchange will be issued to the undersigned or, in
the case of a book-entry transfer of Old Notes, will be credited to the account
indicated above maintained at DTC. Similarly, unless otherwise indicated under
"Special Delivery Instructions" below, please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES
ACT, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN
THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE
OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT
WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF
CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES,
THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW
NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH
BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE
MEANING OF THE SECURITIES ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE 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 FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING ONE
YEAR FROM THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT IS
DECLARED EFFECTIVE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES).
IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, BY
TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT,
UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE
DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE
PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF
5
<PAGE>
CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE
PROSPECTUS UNTIL THE COMPANY HAS SUPPLEMENTED OR AMENDED THE PROSPECTUS AND HAS
FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY
BE RESUMED, AS THE CASE MAY BE.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the New
Notes, such interest to be payable with the first interest payment on the New
Notes, but will not receive any payment in respect of interest on the Old Notes
accrued after the issuance of the New Notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by to be necessary or desirable to complete
the sale, assignment and transfer of the Old Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX.
6
<PAGE>
- --------------------------------------------------------------------------------
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 14)
(NOTE: SIGNATURES MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder exactly as name appears on
certificates for the Old Notes hereby tendered or on a security position
listing, or by any person authorized to become the registered holder by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the
Company or the Exchange Agent to comply with the restrictions on transfer
applicable to the Old Notes). If signature is by an attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or
another acting in a fiduciary capacity or representative capacity, please
set forth the signer's full title. See Instruction 5.
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE OF HOLDER)
Date: ______________, 1997
Name: ______________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
Tax Identification or Social Security Number: ______________________________
GUARANTEE OF SIGNATURE
(SEE INSTRUCTIONS 2 AND 5)
____________________________________________________________________________
(AUTHORIZED SIGNATURE)
Date: ______________, 1997
Name of Firm: ______________________________________________________________
Capacity (full title): _____________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
----------------------------------------------------------------------------
7
<PAGE>
----------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes and/or any Old Notes that are not
tendered are to be issued in the name of someone other than the registered
holder of the Old Notes whose name appears above.
Issue
/ / New Notes
/ / Old Notes not tendered
to:
Name: ______________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
Tax Identification or
Social Security Number: ____________________________________________________
- ------------------------------------------------
- ------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes and/or any Old Notes that are not
tendered are to be sent to someone other than the registered holder of the
Old Notes whose name appears above, or to such registered holder at an
address other than that shown above.
Mail
/ / New Notes
/ / Old Notes not tendered
to:
Name: ______________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
Tax Identification or
Social Security Number: ____________________________________________________
- ------------------------------------------
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and an
Agent's Message is not delivered. Certificates, or book-entry confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC,
as well as this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu of this Letter of Transmittal. The term "book-entry
confirmation" means a timely confirmation of book-entry transfer of Old Notes
into the Exchange Agent's account at DTC. The term "Agent's Message" means a
message, transmitted by DTC to and received by the Exchange Agent and forming a
part of a book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by the Letter of
Transmittal (including the representations contained herein) and that the
Company may enforce the Letter of Transmittal against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on or prior to the Expiration Date, may tender their Old
Notes by properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth under "The Exchange
Offer-- Procedures for Tendering Old Notes--Guaranteed Delivery" in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution (as defined below); (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
accompanying this letter of Transmittal, must be received by the Exchange Agent
on or prior to the Expiration Date; and (iii) the certificates (or a book-entry
confirmation (as defined in the Prospectus)) representing all tendered Old
Notes, in proper form for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for
Tendering Old Notes--Guaranteed Delivery" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF THE NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE DELIVERY ON OR PRIOR TO THE
EXPIRATION DATE.
9
<PAGE>
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the Old
Notes) of Old Notes tendered herewith, unless such holder has completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature on
this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the certificate numbers and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "principal
amount of Old Notes Tendered (If Less than All are Tendered)." In such case, a
new certificate for the remainder of the Old Notes that were evidenced by your
old certificate will be sent to the holder of the Old Notes, promptly after the
Expiration Date unless the appropriate boxes on this Letter of Transmittal are
completed. All Old Notes represented by certificates delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective, a written, telegraphic, telex or facsimile transmission of such
notice of withdrawal must be received by the Exchange Agent at its address set
forth above or in the Prospectus on or prior to the Expiration Date. Any such
notice of withdrawal must specify the name of the person who tendered the Old
Notes to be withdrawn, the aggregate principal amount of Old Notes to be
withdrawn, and (if certificates for Old Notes have been tendered) the name of
the registered holder of the Old Notes as set forth on the certificates for the
Old Notes, if different from that of the person who tendered such Old Notes. If
certificates for the Old Notes have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such certificates for
the Old Notes, the tendering holder must submit the serial numbers shown on the
particular certificates for the Old Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Old Notes tendered for the account of an Eligible Institution. If
Old Notes have been tendered pursuant to the procedures for book-entry transfer
set forth in the Prospectus under "The Exchange Offer-- Procedures for Tendering
Old Notes," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Old Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission on or prior to the
Expiration Date. Withdrawals of tenders of Old Notes may not be rescinded and
Old Notes properly withdrawn will not be deemed validly tendered for purposes of
the Exchange Offer, but may be retendered at any subsequent time on or prior to
the Expiration Date by following any of the procedures described in the
Prospectus under "The Exchange Offer--Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, or the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn on or prior to the Expiration Date will be returned to
the holder thereof without cost to such holder promptly after withdrawal.
10
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal 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 alteration, enlargement or any change
whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
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
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of certificates.
If this Letter of Transmittal 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 must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
so to act.
When this Letter of Transmittal is signed by the registered holder of the
Old Notes listed and transmitted hereby, no endorsement of certificates or
separate bond powers are required unless New Notes are to be issued in the name
of a person other than the registered holder. Signatures on such certificates or
bond powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the Old Notes listed, the certificates must be endorsed or
accompanied by appropriate bond powers, signed exactly as the name of the
registered holder appears on the certificates, and also must be accompanied by
such opinions of counsel, certifications and other information as the Company or
the Exchange Agent may require in accordance with the restrictions on transfer
applicable to the Old Notes. Signatures on such certificates or bond powers must
be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the registered holder, or if New Notes
are to be sent to someone other than the registered holder or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Certificates for Old Notes not exchanged will be returned
by mail or, if tendered by book-entry transfer, by crediting the account
indicated above maintained at DTC unless the appropriate boxes on this Letter of
Transmittal are completed. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by either of them
not to be in proper form or the acceptance of which, or exchange for, may, in
the view of counsel to the company, be unlawful. The Company also reserves the
absolute right, subject to applicable law, to waive any of the conditions of the
Exchange Offer set forth in the Prospectus under "The Exchange Offer--Conditions
to the Exchange Offer" or any conditions or irregularity in any tender of Old
Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding. No
tender of Old Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. Neither
the Company, any affiliates or assigns of the Company or the Exchange Agent nor
any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
11
<PAGE>
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on the Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificates
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the certificates. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificates have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (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.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
12
<PAGE>
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social security number OR Employer
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY identification number
BY SIGNING AND DATING BELOW. -------------------------------------
------------------------------------------------------------------------
DEPARTMENT OF THE
TREASURY Part 2]CERTIFICATION Under penalties of perjury, I certify that:
INTERNAL REVENUE SERVICE
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
PAYER'S REQUEST FOR (2) I am not subject to backup withholding either because: (a) I am
TAXPAYER IDENTIFICATION exempt from backup withholding, or (b) I have not been notified by the
NUMBER (TIN) 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.
------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return. However, if after
being notified by the IRS that you are subject to
backup withholding, you received another
notification from the IRS that you are no longer
subject to backup withholding, do not cross out
such item (2).
PART 3--
AWAITING TIN / /
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
SIGNATURE --------------------DATE ---------
NAME (Please Print)
ADDRESS (Please Print)
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
13
<PAGE>
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 (1) 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 (2)
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 payment, 31%
of all reportable payments made to me will be withheld, but that such amounts
will be refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature
- --------------------------------------------------------- Date
- -------------------------
Name (Please Print)
- --------------------------------------------------------------------------------
Address (Please Print)
- --------------------------------------------------------------------------------
14
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
OF WAVETEK CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 10 1/8% Senior Subordinated
Notes due 2007 (the "Old Notes") are not immediately available, (ii) Old Notes,
the Letter of Transmittal and all other required documents cannot be delivered
to The Bank of New York (the "Exchange Agent") on or prior to the Expiration
Date (as defined in the Prospectus referred to below) or (iii) the procedures
for delivery by book-entry transfer cannot be completed on or prior to the
Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent on or prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
TO: THE BANK OF NEW YORK, AS EXCHANGE AGENT
<TABLE>
<S> <C> <C>
BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL:
The Bank of New York Confirm: (212) 815-5789 The Bank of New York
101 Barclay Street, 7E Facsimile: (212) 101 Barclay Street
New York, NY 10286 815-6339 Corporate Trust Services Window
Attn: Shilpa Privedi Ground Level
Reorganization Section New York, NY 10286
Attn: Shilpa Privedi
Reorganization Section
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Wavetek Corporation, upon the terms and
subject to the conditions set forth in the Prospectus dated , 1997
(as the same may be amended or supplemented from time to time, the
"Prospectus"), and the related Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Procedures for Tendering Old Notes."
<TABLE>
<S> <C>
Aggregate Principal Name of
Amount Tendered: ---------------------- Registered Holder: ---------------------
Certificate Nos. Address: ------------------------------
(if available): ---------------------------------------
- --------------------------
Area Code and
Telephone Number: ---------------------
</TABLE>
If Old Notes will be tendered by book-entry transfer, provide the following
information:
Signature:
- --------------------------------------------------------------------------------
DTC Account Number:
- ---------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institition," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depository
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letters of Transmittal (or facsimile thereof) and
any other required documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letters of Transmittal
and the Old Notes tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in a financial loss to
the undersigned.
Name of Firm
- ------------------------------------------------------------------------------
(Authorized Signature)
- -----------------------------------------------------------------------
(Title)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ------------------------------------------------------------
Date
- ---------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
3
<PAGE>
EXHIBIT 99.3
WAVETEK CORPORATION
OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Wavetek Corporation (the "Company") is offering, upon the terms and subject
to the conditions set forth in the Prospectus dated , 1997 (the
"Prospectus") and the accompanying Letter of Transmittal enclosed herewith
(which together constitute the "Exchange Offer"), to exchange its 10 1/8% Senior
Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its
outstanding 10 1/8% Senior Subordinated Notes due 2007 (the "Old Notes"). As set
forth in the Prospectus, the terms of the New Notes are identical in all
material respects to the Old Notes, except that the New Notes have been
registered under the Securities Act of 1933, as amended, and therefore will not
be subject to certain restrictions on their transfer and will not be entitled to
registration rights.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE EXCHANGE
OFFER--CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. the Prospectus, dated , 1997;
2. the Letter of Transmittal for your use and for the information of
your clients (facsimile copies of the Letter of Transmittal may be used to
tender Old Notes);
3. a form of letter which may be sent to your clients for whose
accounts you hold Old Notes registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
4. a Notice of Guaranteed Delivery; and
5. a return envelope addressed to The Bank of New York, the Exchange
Agent.
YOUR PROMPT ACTION IS REQUESTED, PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR
WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE
AS QUICKLY AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(a) certificates representing such Old Notes, or a book-entry confirmation (as
defined in the Prospectus), as the case may be, (b) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, or an Agent's
Message (as defined in the Prospectus) and (c) any other required documents.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message and any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth under
the caption "The Exchange Offer--Procedures for Tendering Old Notes--Guaranteed
Delivery" in the Prospectus.
<PAGE>
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction.
The Company will not make any payments to brokers, dealers or other persons
for soliciting acceptances of the Exchange Offer. The Company will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. The Company
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 11 of the Letter of
Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for copies of the Prospectus and Letter of Transmittal may be directed to the
Exchange Agent at its address set forth in the Prospectus or at 1-(212)
815-6333.
Very truly yours,
WAVETEK CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR ANY AFFILIATE THEREOF, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT 99.4
WAVETEK CORPORATION
OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, DUE 2007, FOR ITS
OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1997 (the
"Prospectus") and a Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by Wavetek Corporation (the "Company")
to exchange its 10 1/8% Senior Subordinated Notes due 2007, which have been
registered under the Securities Act of 1933 (the "New Notes"), for a like
principal amount of its outstanding 10 1/8% Senior Subordinated Notes due 2007
(the "Old Notes"). As set forth in the Prospectus, the terms of the New Notes
are identical in all material respects to the Old Notes, except that the New
Notes have been registered under the Securities Act of 1933, as amended, and
therefore will not be subject to certain restrictions on their transfer and will
not be entitled to registration rights.
The enclosed material is being forwarded to you as the beneficial owner of
Old Notes held by us for your account or benefit but not registered in your
name. An exchange of any Old Notes may only be made by us as the registered
holder and pursuant to your instructions. Therefore, the Company urges
beneficial owners of Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such holder promptly
if they wish to exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to exchange
any or all such Old Notes held by us for your account or benefit, pursuant to
the terms and conditions set forth in the Prospectus and Letter of Transmittal.
We urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to exchange Old notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New
York City time, on , 1997, unless extended. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the
Exchange Offer is extended as provided in the Prospectus, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. A tender of Old Notes may be withdrawn at any time prior to
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 the exchange of New Notes for Old Notes.
$85,000,000 aggregate principal amount of the Old Notes was outstanding as
of , 1997.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE
EXCHANGE OFFER--CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on , 1997, unless extended.
4. The company has agreed to pay certain of the expenses of the
Exchange Offer. Any transfer taxes incident to the transfer of Old Notes
from the tendering holder to the Company will be paid by the Company, except
as provided in the Prospectus and the Letter of Transmittal. See "The
Exchange Offer--Fees and Expenses" in the Prospectus.
<PAGE>
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of New Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
If you wish us to tender any or all of your Old Notes held by us for your
account or benefit, please so instruct us by completing, executing and returning
to us the attached instruction form. THE ACCOMPANYING LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO
EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR
BENEFIT.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Wavetek
Corporation.
This will instruct you to tender for exchange the aggregate principal amount
of Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the undersigned,
pursuant to the terms of and conditions set forth in the Prospectus and the
Letter of Transmittal.
Aggregate principal amount of Old Notes to be tendered for exchange
$___________________
*I (we) understand that if I (we)
sign this instruction form without
indicating an aggregate principal
amount of Old Notes in the space
above, all Old Notes held by you for
my (our) account will be tendered
for exchange.
--------------------------------------
--------------------------------------
Signature(s)
--------------------------------------
Capacity (full title), if signing in a
fiduciary or representative capacity
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Name(s) and address, including zip
code
Date:
--------------------------------------
--------------------------------------
Area Code and Telephone Number
--------------------------------------
Taxpayer Identification or Social
Security No.
