"THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON SEPTEMBER 15, 1998
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION."
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-2537
[OCLI LOGO]
OPTICAL COATING LABORATORY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 68-0164244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
(Address of principal executive offices) (Zip code)
707-545-6440
(Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes __X__No___
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
TITLE OUTSTANDING
------ -----------
Common Stock, $.01 par value 12,039,858 at August 31, 1998
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
JULY 31, OCTOBER 31,
ASSETS 1998 1997
(Dollars in thousands, except per share amounts)
CURRENT Cash and cash equivalents.............. $13,249 $15,217
ASSETS
Accounts receivable, net of allowance
for Doubtful accounts of $2,122 and
$1,884................................ 37,125 34,923
Inventories............................ 27,626 22,829
Income taxes receivable................ 620 504
Deferred income tax assets............. 6,946 6,853
Other current assets................... 1,861 1,707
-------- --------
Total Current Assets............... 87,427 82,033
OTHER ASSETS Other assets and investments........... 8,010 8,243
PROPERTY, Land and improvements.................. 9,214 9,225
PLANT AND Buildings and improvements............. 41,710 41,944
EQUIPMENT Machinery and equipment................ 131,441 121,717
Construction-in-progress............... 10,369 9,525
-------- --------
192,734 182,411
Less accumulated depreciation.......... (97,343) (89,194)
-------- --------
Property, plant and equipment-net...... 95,391 93,217
-------- --------
Total Assets....................... $190,828 $183,493
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT Accounts payable....................... $9,171 $14,301
LIABILITIES Accrued expenses....................... 8,570 6,854
Accrued compensation expenses.......... 7,885 8,752
Income taxes payable................... 1,663 339
Current maturities on long-term debt... 14,920 7,888
Notes payable.......................... 120 381
Deferred revenue....................... 1,794 900
-------- --------
Total Current Liabilities.......... 44,123 39,415
NONCURRENT Accrued postretirement health benefits
LIABILITIES and pension liabilities............ 2,164 2,040
Deferred income tax liabilities........ 2,656 785
Long-term debt......................... 28,912 40,975
Minority interest...................... 12,012 13,315
STOCKHOLDERS' Preferred stock-Series C;
EQUITY 8% cumulative, convertible, redeemable;
issued and Outstanding 6,250 shares
at October 31, 1997................. 5,559
Common stock, $.01 par value;
authorized 30,000,000
shares; issued and outstanding
12,033,000 and 10,599,000 shares..... 120 106
Paid-in capital........................ 69,431 55,723
Retained earnings...................... 32,678 26,217
Cumulative foreign currency translation
adjustment........................... (1,268) (642)
-------- --------
Common Stockholders' Equity............ 100,961 86,963
Total Liabilities and -------- --------
Stockholders' Equity............. $190,828 $183,493
======== ========
The accompanying notes are an integral part of these financial statements.
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three and nine months ended July 31, 1998 and 1997
(Amounts in thousands, except per share amounts)
THREE MONTHS NINE MONTHS
1998 1997 1998 1997
REVENUES Revenues.................... $67,393 $59,997 $185,111 $159,233
Cost of Sales............... 44,462 40,207 123,181 105,248
------- ------- -------- --------
Gross Profit........... 22,931 19,790 61,930 53,985
COSTS AND Operating Expenses:
EXPENSES Research and development.. 4,222 3,943 12,069 10,456
Selling and administrative 12,131 10,774 32,790 31,822
Amortization ofintangibles 200 232 598 712
------- ------- ------- -------
Total Operating Expenses 16,553 14,949 45,457 42,990
------- ------- ------- -------
Income from Operations 6,378 4,841 16,473 10,995
Nonoperating Income (Expense):
Interest income........... 117 78 282 335
Interest expense.......... (796) (1,007) (2,531) (3,086)
------- ------- ------- -------
EARNINGS Income Before Provision for
Income Taxes and Minority
Interest.................. 5,699 3,912 14,224 8,244
Provision for income taxes.. 2,246 1,568 5,571 3,301
Minority interest........... 32 350 587 529
------- ------- ------- -------
Net Income............. 3,421 1,994 8,066 4,414
Dividend on convertible
redeemable preferred stock 141 250 568
Net Income Applicable ------- ------- ------- -------
to Common Stock.......... $ 3,421 $ 1,853 $ 7,816 $ 3,846
======= ======= ======= =======
Net Income Per Share,
Basic....................... $ 0.28 $ 0.18 $ 0.70 $ 0.38
Net Income Per Share, ======= ======= ======= =======
Diluted..................... $ 0.27 $ 0.17 $ 0.66 $ 0.36
======= ======= ======= =======
Weighted average number of
common shares used to compute
basic earnings per share.... 12,009 10,372 11,169 10,076
======= ======= ======= =======
Weighted average number of
common shares used to compute
diluted earnings per share.. 12,546 11,135 11,822 10,574
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three and nine months ended July 31, 1998 and 1997
THREE MONTHS NINE MONTHS
(Amounts in thousands) 1998 1997 1998 1997
OPERATIONS Cash Flows From Operations:
Cash received from
customers................... $60,379 $49,548 $156,649 $138,100
Interest received............ 120 111 238 346
Cash paid to suppliers an
employees................... (52,404) (46,697) (142,795)(127,744)
Cash paid to OCLI 401(k)/ESOP
Plan........................ (121) (125) (362) (272)
Interest paid................ (1,193) (1,425) (2,614) (3,875)
Income taxes paid, net of
refunds..................... (187) (391) (41) (1,298)
------ ------ ------- -------
Net Cash Provided by
Operations............... 6,594 1,021 11,075 5,257
------ ------ ------- -------
INVESTMENTS Cash Flows From Investments:
Purchase of plant
and equipment............. (3,313) (5,237) (11,639) (11,862)
------- ------- -------- -------
Net Cash Used For
Investments.............. (3,313) (5,237) (11,639) (11,862)
------- ------- -------- -------
FINANCING Cash Flows From Financing:
Proceeds from long-term
debt...................... 14,810 1,998 24,628 1,998
Repayment of long-term
debt...................... (16,094) (998) (29,344) (2,916)
Proceeds from notes
payable................... 101 108
Repayment of notes
payable................... (239) (298) (248) (1,949)
Proceeds from exercise of
stock options............. 559 1,343 6,970 1,510
Collection of note
receivable from officer... 5,772
Proceeds from note to
minority stockholder....... 640 800 1,124
Purchase of note from
minority stockholder...... (2,601)
Investment by minority
stockholder............... 426 1,443
Payment of dividend on
preferred stock........... (141) (208) (568)
Payment of dividend on
common stock.............. (719) (613) (1,355) (1,199)
Net Cash Provided by (Used ------- ------- ------- -------
For) Financing............ 4,089 2,458 (1,358) (449)
Effect of exchange rate ------- ------- ------- -------
changes on cash........... 29 117 (46) (152)
------- ------- ------- -------
Increase (decrease) in cash
and short-term investments.. 7,399 (1,641) (1,968) (7,206)
Cash and cash equivalents at
beginning of period........ 5,850 10,462 15,217 16,027
------- ------- ------- -------
Cash and cash equivalents
at end of period........... $13,249 $ 8,821 $13,249 $ 8,821
======= ======= ======= =======
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the three and nine months
ended July 31, 1998 and 1997 THREE MONTHS NINE MONTHS
(Amounts in thousands) 1998 1997 1998 1997
ADJUSTMENTS Reconciliation of Net Income
to Cash Flows from Operations:
Net income................... $1,994 $3,421 $8,066 $4,414
Adjustments to reconcile net
income to net cash
provided by operations:
Depreciation and
amortization............... 3,384 3,113 9,499 9,425
Minority interest in earnings
of subsidiaries............ 32 350 587 529
Loss on disposal of
equipment.................. 78 (17) 607 193
Accrued postretirement
health benefits............ 40 (61) 120 25
Deferred income tax
liabilities................ 2,629 (2) 2,663 (1,054)
Other non-cash adjustments
to net income.............. (58) (37) 151 4
Change in:
Accounts receivable......... (397) (6,473) (2,974)(11,562)
Inventories................. (892) (612) (5,172) (4,676)
Income tax receivable....... 235 429 1,928 539
Deferred income tax assets.. (1,941) (24) (901) 924
Other current assets and
other assets and
investments................ 228 268 (722) (237)
Accounts payable, accrued
expenses and accrued
compensation expenses...... (815) 1,272 (5,008) 5,275
Deferred revenue............ (457) (16) 894 (547)
Income taxes payable........ 1,107 837 1,337 2,005
------ ------ ------- ------
Total adjustments......... 3,173 (973) 3,009 843
------ ------ ------- ------
Net Cash Provided By
Operations................ $6,594 $1,021 $11,075 $5,257
====== ====== ======= ======
The accompanying notes are an integral part of these financial statements.
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the nine months ended July 31, 1998
(Amounts in thousands)
<TABLE>
<CAPTION> Foreign
Preferred Stock Common Stock Paid-In Retained Currency
Shares Amount Shares Amount Capital Earnings Translation
------ ------ ------ ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 1, 6 $5,559 10,599 $106 $55,723 $26,217 ($642)
1997
Shares issued to
Employee Stock
Ownership Plan 39 1 555
Shares issued to
Outside Directors 5 86
Exercise of stock
options,including 791 7 7,472
tax benefit
Conversion of
preferred stock
to common stock (6) (5,559) 599 6 5,595
Foreign currency
translation
adjustment (626)
Net Income 8,066
Dividend on
preferred stock (250)
Dividend on
common stock (1,355)
----- ------- ------ ---- ------- ------- -------
BALANCE AT 0 0 12,033 $120 $69,431 $32,678 ($1,268)
JULY 31, 1998 ===== ======= ====== ==== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended July 31, 1998 and 1997
(Unaudited)
1. GENERAL
OCLI designs, develops and manufactures multi-layer thin film coatings
which control and enhance light by altering the transmission, reflection
and absorption of its various wavelengths to achieve a desired effect
such as anti-reflection, anti-glare, electromagnetic shielding,
electrical conductivity and abrasion resistance. OCLI markets and
distributes components to original equipment manufacturers ("OEMs") of
optical and electro-optical systems and sells its GlareGuard. brand
ergonomic computer display products through resellers and office
retailers. OCLI's products are found in many applications including
computer monitors, flat panel displays, telecommunication systems,
photocopiers, fax machines, medical/analytical equipment and instruments,
projection imaging systems, satellite power systems and aerospace and
defense systems. Through its 60% owned subsidiary, Flex Products, Inc.
("Flex Products"), the Company designs and manufactures thin film
coatings on flexible substrates using high vacuum roll-to-roll processes.
Flex Products supplies critical pigments for use in anti-counterfeiting
applications, energy conserving window film for residential, commercial,
and automotive applications, photoreceptor components for copiers and
ChromaFlair(R) light interference pigments for commercial paints.
The Condensed Consolidated Balance Sheet as of July 31, 1998, the
Condensed Consolidated Statements of Income for the three and nine month
periods ended July 31, 1998 and 1997, the Condensed Consolidated
Statement of Stockholders' Equity for the nine month period ended July
31, 1998 and the Condensed Consolidated Statements of Cash Flows for the
three and nine month periods ended July 31, 1998 and 1997, have been
prepared by the Company without audit. In the opinion of management, all
adjustments consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows at
July 31, 1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended October 31, 1997.
The results of operations for the period ended July 31, 1998 are not
necessarily indicative of the operating results anticipated for the full
year.
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," which required
the Company to replace its presentation of primary earnings per share
with a presentation of basic earnings per share and requires dual
presentation of basic and diluted earnings per share on the face of the
income statement. Basic earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding.
Diluted earnings per share under the new statement includes the potential
dilution of convertible securities, stock options and warrants. The
earnings per share presentation for 1997 was restated to conform to the
new statement.
2. FINANCIAL DERIVATIVES AND HEDGING
The Company, from time to time, enters into derivative transactions in
order to hedge foreign currency risk on existing commitments, open
receivables, payables and debt instruments when the currency risk is
considered material to the Company. In addition, the Company may enter
into interest rate swaps or similar instruments in order to reduce
interest rate risk on its debt instruments. The Company does not enter
into derivatives for trading purposes.
In the first nine months of 1998, the Company entered into foreign
currency forward contracts for the principal and interest payments under
a $3.9 million loan that is denominated in German Marks. The transaction
is designated as a hedge of a foreign currency commitment. Gains and
losses on the contract are recorded as a net reduction or increase to
interest expense over the life of the loan.
In the first nine months of 1998, the Company entered into an interest
rate swap for anticipated debt refinancing in the amount of $30 million.
The purpose of the swap was to fix the reference rate for the debt at
5.71% to eliminate the Company's exposure to interest rate fluctuations
until the loan refinance was completed. The Company had designated the
swap as a hedge of an anticipated transaction. The loan refinance was
completed after the balance sheet date resulting in a net payment of
$310,000 under the swap which will be recorded as an increase to interest
expense over the term of the notes.
The notional amounts, carrying amounts and fair values of the Company's
derivatives position at July 31, 1998 are included in the table below:
ESTIMATED
FAIR
VALUE OF
FOREIGN
NOTIONAL CARRYING EXCHANGE
AMOUNT AMOUNT CONTRACT
(Amounts in thousands)
Foreign currency forward
exchange contracts:
Deutsche marks $4,386 $4,386 $ 72
In June 1998, the Financial Accounting Standards Board issued SFAS NO.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires balance sheet
and income statement recognition of derivative transactions and provides
limitations and accounting requirements for hedging instruments. The
statement is effective for the first quarter of the Company's fiscal year
2000 with earlier application encouraged. As the Company's existing
derivative contracts and derivative contract policies require that cash
flows under financial derivatives match cash flows under existing firm
commitments, the Company does not expect adoption of FAS 133 to affect
its results of operations or cash flows but, as the statement requires
separate presentation of the fair value of derivative instruments, the
Company's Statement of Financial Position will be affected by adoption of
the statement.
3. NOTE RECEIVABLE FROM RELATED PARTY
In April 1998, the Company's Chairman of the Board and former Chief
Executive Officer exercised options for 770,666 shares of common stock of
the Company and turned in 117,296 shares for payment of withholding
taxes. The $5.8 million exercise price of the options was paid with a
three year, full recourse promissory note which was repaid with interest
at 7.5% in July 1998.
4. INVENTORIES
Inventories consisted of the following:
JULY 31, OCTOBER 31,
(Amounts in thousands) 1998 1997
(Unaudited)
Raw materials and supplies $ 8,223 $ 7,541
Work-in-process 14,364 12,308
Finished goods 5,039 2,980
------- -------
Total inventories $27,626 $22,829
======= =======
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
JULY 31, OCTOBER 31,
(Amounts in thousands) 1998 1997
(Unaudited)
Workers' compensation reserve $ 792 $ 555
Ground water remediation reserve 759 759
Other accrued liabilities 7,019 5,540
------ ------
$8,570 $6,854
====== ======
LONG-TERM DEBT (SUBSEQUENT EVENT)
In August 1998, the Company completed the sale of $30 million in
unsecured Senior Notes to a group of insurance companies. The Senior
Notes carry an interest rate of 6.69% and are due July 31, 2008. In
addition, the Company used a portion of the proceeds to repay the
existing $8 million balance of its bank line of credit and the $3.7
million balance of its 9.5% Scottish Development Agency building loan and
replaced its $20 million bank line of credit with a new $20 million line
of credit with more favorable interest rates. The new $20 million line
of credit carries a commitment fee of .20% per year on the unused portion
and expires on July 31, 2003.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF MATERIAL CHANGES IN
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THE INFORMATION CONTAINED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION INCLUDES FORWARD LOOKING
STATEMENTS WHICH ARE TYPICALLY IDENTIFIED BY THE WORDS "ANTICIPATES,"
"BELIEVES," "EXPECTS," "INTENDS," "FORECASTS," "PLANS," "FUTURE,"
"STRATEGY," OR WORDS OF SIMILAR IMPORT. VARIOUS IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN
THE FORWARD-LOOKING STATEMENTS ARE IDENTIFIED BELOW. ACTUAL RESULTS MAY
VARY SIGNIFICANTLY BASED ON A NUMBER OF FACTORS INCLUDING, BUT NOT
LIMITED TO, PRODUCT DEVELOPMENT, COMMERCIALIZATION AND TECHNOLOGICAL
DIFFICULTIES; MANUFACTURING COSTS AND YIELD ISSUES ASSOCIATED WITH
INITIATING PRODUCTION AT NEW FACILITIES; THE IMPACT OF COMPETITIVE
PRODUCTS AND PRICING; CHANGING CUSTOMER REQUIREMENTS; AND THE CHANGE IN
ECONOMIC CONDITIONS OF THE VARIOUS MARKETS THE COMPANY SERVES.
RESULTS OF OPERATIONS
REVENUE. Revenue for the third quarter of fiscal 1998 was $67.4 million,
an increase of $7.4 million or 12% over revenues of $60.0 million in the
third quarter of fiscal 1997. Revenue for the first nine months of fiscal
1998 was $185.1 million, an increase of $25.9 million or 16% over
revenues of $159.2 million in the first nine months of 1997. The quarter
and year-to-date revenue increase was heavily impacted by increased sales
in the Company's telecommunications markets ($10.0 million increase in
the third quarter of 1998, $29.5 million increase for the first nine
months of 1998) offset by decreased sales in the Company's office
automation markets ($1.7 million decrease in the third quarter of 1998,
$4.1 million decrease for the first nine months of 1998) and decreased
sales by the Company's 60% owned subsidiary, Flex Products, Inc. ($1.4
million decrease in the third quarter of 1998, $599,000 decrease for the
first nine months of 1998). Sales in the Company's display markets
decreased slightly in the third quarter of 1998 by $172,000 and increased
$1.0 million for the first nine months of 1998. All of the sales
increases and decreases were primarily due to changes in volume.
The increase in telecommunications sales is due to the Company's
participation with JDS FITEL Inc. (JDS) in the growing market for
wavelength division multiplexers (WDM's).
GROSS PROFIT. Gross profit for the third quarter of fiscal 1998 was
$22.9 million, or 34.0%, of revenue compared to $19.8 million, or 33.0%,
of revenue for the third quarter of fiscal 1997. Gross profit for the
first nine months of fiscal 1998 was $61.9 million, or 33.5%, of revenue
compared to $54.0 million, or 33.9%, of revenue for the first nine months
of fiscal 1997. The fiscal 1998 third quarter gross profit percentage
increase is primarily due to manufacturing efficiencies which resulted in
increased throughput.
RESEARCH AND DEVELOPMENT. Research and development expenditures in the
third quarter of 1998 were $4.2 million compared to $3.9 million in the
third quarter of 1997. Research and development expenditures for the
first nine months of 1998 were $12.1 million compared to $10.5 million
for the first nine months of 1997. The quarter and year-to-date 1998
dollar increases are consistent with increased revenues and are primarily
due to the development of new products for the telecommunication and
display markets.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses in the
third quarter of fiscal 1998 were $12.1 million, an increase of $1.4
million, or 13%, from selling and administrative expenses of $10.8
million for the third quarter of fiscal 1997. Selling and administrative
expenses for the first nine months of fiscal 1998 were $32.8 million, an
increase of $968,000, or 3%, from selling and administrative expenses of
$31.8 million for the first nine months of fiscal 1997. The year-to-date
1998 increase was due to increased legal expenses of approximately $1.8
million and increased selling and administrative expenses in Asia of
approximately $700,000 offset by decreased selling expenses in the U.S.
and Europe of approximately $1.5 million. The third quarter and year-to-
date legal expense increases resulted from the BASF and OCA litigation
discussed below. The year-to-date increase in expenses in Asia resulted
from a full nine months of expense versus 6 months of expense in the
corresponding period of 1997. The year-to-date decrease in selling
expenses in the U.S. and Europe resulted from rearrangement of Company
resources to reduce costs.
AMORTIZATION OF INTANGIBLES. The Company recorded amortization of
intangibles of $200,000 in the third quarter of 1998, $232,000 in the
third quarter of 1997, $598,000 for the first nine months of 1998 and
$712,000 for the first nine months of 1997 primarily resulting from
amortization of goodwill.
INCOME FROM OPERATIONS. As a result of the foregoing changes in
revenue, gross profit and operating expenses, the Company's income from
operations was $6.4 million for the third quarter of fiscal 1998 compared
to $4.8 million for the third quarter of fiscal 1997 and $16.5 million
for the first nine months of 1998 compared to $11.0 million for the first
nine months of 1997.
INTEREST INCOME AND EXPENSE. Interest income for the third quarter of
fiscal 1998 was $117,000 compared to interest income of $78,000 for the
third quarter of fiscal 1997. Interest income for the first nine months
of fiscal 1998 was $282,000 compared to $335,000 for the first nine
months of 1997. Interest expense, net of capitalized interest, for the
third quarter of 1998 was $796,000 compared to $1.0 million for the third
quarter of fiscal 1997. Interest expense, net of capitalized interest,
for the first nine months of 1998 was $2.5 million compared to $3.1
million for the first nine months of 1997. Capitalized interest for the
third quarter of 1998 was $158,000 compared to $79,000 for the third
quarter of fiscal 1997. Capitalized interest for the first nine months
of 1998 was $506,000 compared to $118,000 for the first nine months of
1997.
PROVISION FOR INCOME TAXES AND MINORITY INTEREST. The effective income
tax rate was 39.4% for the third quarter of 1998 and 39.2 % for the first
nine months of 1998 compared to 40.0% for the comparative periods of
1997. The change in the effective tax rate is primarily due to the
recognition of benefit from foreign sales corporations. Minority
interest was $32,000 in the third quarter of 1998 and $587,000 for the
first nine months of 1998 compared to $350,000 for the third quarter of
1997 and $529,000 for the first nine months of 1997. Minority interest
represents the share of net income of Flex Products accruing to its 40%
stockholder and the portion of operating results of OCLI Asia
attributable to its Japanese partner. The third quarter 1998 decrease is
due to losses at OCLI Asia.
NET INCOME APPLICABLE TO COMMON STOCK. The Company had net income
applicable to common stock of $3.4 million, or $.27 per share on a
diluted basis, for the third quarter of fiscal 1998 compared to $1.9
million, or $.17 per share on a diluted basis, for the third quarter of
fiscal 1997. The Company had net income applicable to common stock of
$7.8 million, or $.66 per share on a diluted basis, for the first nine
months of 1998 compared to $3.8 million, or $.36 per share on a diluted
basis, for the first nine months of 1997.
In 1998, the Company implemented Statement of Financial Accounting
Standards No. 128, which requires dual presentation of basic and diluted
earnings per share. Basic earnings per share do not reflect the dilution
of common stock equivalents such as stock options and warrants. Diluted
earnings per share include potential dilution of convertible securities,
stock options and warrants. The earnings per share presentation for 1997
was restated to reflect this change.
LITIGATION
In July of 1996, SICPA Holding, S.A. filed a lawsuit in Delaware
Chancery Court in order to block an attempted initial public offering by
Flex Products arguing that such an offering without SICPA's consent was
prohibited by Flex Products' articles of incorporation, as well as by
certain contractual provisions between the Company and SICPA. In 1998,
the Company announced that it had completed final negotiations for the
settlement of the litigation with SICPA. Under the terms of the
settlement, the Company and SICPA agreed to modify their co-ownership
agreement to enable OCLI to more effectively manage the day-to-day
operations of Flex Products, to allow for public financing of Flex
Products' operations and to modify the License and Supply Agreement
between Flex Products and SICPA to provide for more attractive scheduled
pricing discounts on higher volume purchases and to change the scheduled
order patterns to be consistent with the Company's fiscal quarters. In
addition, the Company purchased $2.6 million of Flex Products' working
capital loan from SICPA.
In 1997, Optical Corporation of America (OCA) and certain of its
directors and officers (Affiliates) commenced suit against the Company.
The complaint arises out of a letter of intent executed by the Company
and OCA in March 1996 and an ensuing merger agreement executed by the
Company and OCA in June 1996. Under the merger agreement, the Company
would acquire OCA. The complaint seeks damages for costs and expenses
incurred by OCA in pursuing the merger transaction with the Company due
to the Company's alleged negligent misrepresentations to OCA and
Affiliates and the Company's alleged breach of its letter of intent with
OCA. The Company has filed counterclaims against OCA and the Affiliates
based on OCA's breach of the merger agreement and seeking damages based
on the difference between the value of OCA's business to the Company and
the agreed upon purchase price under the merger agreement. The Company
does not believe that this litigation will have any material adverse
effect on its future operating results or financial condition.
In 1997, Flex Products filed a suit in United States District Court for
the Eastern District of Michigan alleging that BASF Corporation (BASF)
and BASF AG infringed Flex's patents covering optically variable thin
film flakes which, when mixed with paints and inks, produce color
shifting visual properties. The complaint requested that the Court
enjoin BASF from importing, making, using, selling or offering to sell
the infringing pigment in the United States. The complaint also sought
damages for the infringement, including treble damages if the
infringement is intentional. Both BASF companies requested that they be
awarded their attorney's fees and costs. In August 1998, a settlement
agreement was reached under which both BASF companies will pay Flex
Products a future royalty for the right to use Flex patents within a
limited color range in the field of commercial paints and excluding use
in inks.
IMPACT OF FOREIGN OPERATIONS, EXPORT SALES, FOREIGN CURRENCY AND HEDGING
The Company has significant investments in Germany, Scotland and Japan.
Changes in the value of those countries' currencies relative to the U.S.
dollar is recorded as direct charges or credits to equity. The Company
also has manufacturing operations in Germany, Scotland and Japan and
sales presence in other European and Asian countries. A significant
weakening of the currencies in Europe or Asia in relation to the U.S.
dollar could reduce the reported results of those operations. In
addition, a significant amount of the Company's sales are export sales
which could be subject to competitive price pressures if the U.S. dollar
was to strengthen compared to the currency of foreign competitors.
The Company does, from time to time, enter into purchase, sales or debt
arrangements denominated in currencies other than its functional currency
which exposes the Company to currency risk on open receivable and payable
balances. The Company is also exposed to exchange risk on open
intercompany balances that some of the foreign subsidiaries have with the
Company and other of its subsidiaries. The Company will, from time to
time, enter into currency contracts (such as forwards or options) in
order to manage the currency risk on open balances or commitments. See
FINANCIAL DERIVATIVES AND HEDGING TRANSACTIONS below.
For the first nine months of 1998, 25% of the Company's consolidated
sales constituted sales to customers in Europe and 13% of the Company's
consolidated sales constituted sales to customers in Asia. During 1998,
the Company has experienced an overall decline in sales mix from sales to
customers in Europe (from 35% of consolidated sales for the first nine
months of 1997 to 25% for the first nine months of 1998), and a decline
in sales mix from sales to customers in Asia (from 14% of consolidated
sales for the first nine months of 1997 to 13% for the first nine months
of 1998). The Company attributes the decline in the European and Asian
sales mix to a higher volume of telecommunications revenues as a
percentage of total revenues. Due to the Company's investments in Europe
and Asia and the geographic mix of the Company's sales, changes in
economic conditions in Europe and Asia could materially affect the
Company's future operations.
FINANCIAL DERIVATIVES AND HEDGING TRANSACTIONS
The Company, from time to time, enters into derivative transactions in
order to hedge foreign currency risk on existing commitments, open
receivables, payables and debt instruments when the currency risk is
considered material to the Company. In addition, the Company may enter
into interest rate swaps or similar instruments in order to reduce
interest rate risk on its debt instruments. The Company does not enter
into derivatives for trading purposes.
In the first nine months of 1998, the Company entered into foreign
currency forward contracts for the principal and interest payments under
a $3.9 million loan that is denominated in German Marks. The transaction
is designated as a hedge of a foreign currency commitment. Gains and
losses on the contract are recorded as a net reduction or increase to
interest expense over the life of the loan.
In June 1998, the Financial Accounting Standards Board issued SFAS NO.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires balance sheet
and income statement recognition of derivative transactions and provides
limitations and accounting requirements for hedging instruments. The
statement is effective for the first quarter of the Company's fiscal year
2000 with earlier application encouraged. As the Company's existing
derivative contracts and derivative contract policies require that cash
flows under financial derivatives match cash flows under existing firm
commitments, the Company does not expect adoption of FAS 133 to affect
its results of operations or cash flows but, as the statement requires
separate presentation of the fair value of derivative instruments, the
Company's Statement of Financial Position will be affected by adoption of
the statement.
FINANCIAL CONDITION
In fiscal 1998, the Company's cash and short-term investments decreased
by $2.0 million. $11.6 million was invested in plant and equipment, $5.0
million was used to pay down debt, $1.6 million was used to pay dividends
and $2.6 million was used to purchase a portion of Flex Products'
working capital loan from SICPA. These expenditures were offset by $11.1
million of cash generated by operations, stockholder investments of $6.9
million and working capital loans from SICPA to Flex Products of
$800,000.
In fiscal 1998, the Company's working capital, excluding cash and short-
term investments increased $2.7 million, primarily due to increased
accounts receivable ($2.2 million) and increased inventories ($4.8
million) offset by increased current liabilities of $4.7 million.
Approximately half of the increase in inventories results from inventory
increases in anticipation of new product demand. The remaining inventory
increase and the accounts receivable increase is due to increased sales
and bookings in 1998. The increase in current liabilities is due to
current maturities of long-term debt of $7.0 million offset by decreases
in other current liabilities of $2.3 million.
During the second quarter of 1998, the remaining outstanding shares of 8%
Series C Convertible Redeemable Preferred Stock were converted into
599,000 shares of common stock of the Company.
In August 1998, the Company announced the sale of $30 million in Senior
Notes to a group of insurance companies. The Senior Notes carry an
interest rate of 6.69% and are due July 31, 2008. In addition, the
Company used a portion of the proceeds to repay the $8 million balance of
its bank line of credit and the $3.7 million balance of its 9.5% Scottish
Development Agency building loan and replaced its bank line of credit
with a $20 million syndicated revolving credit facility with more
favorable interest rates. The Company intends to pay down other higher
interest rate credit facilities and to use the remaining proceeds for
general business purposes.
Management believes that the cash on hand at July 31, 1998, cash
anticipated to be generated from future operations, cash generated from
the refinancing transaction described above and the available funds from
revolving credit arrangements will be sufficient for the Company to meet
its near-term working capital needs, capital expenditures, debt service
requirements and payment of dividends as declared for at least the next
twelve months.
IMPACT OF YEAR 2000
The "Year 2000 Issue" is the result of computer programs that were
written using two digits rather than four to define the applicable year.
If the Company's computer programs with date-sensitive functions are not
Year 2000 compliant, they may recognize a date using "00" as the Year
1900 rather than the Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company has identified its Year 2000 risk in three categories:
internal business software; internal non-financial software and imbedded
chip technology; and external noncompliance by customers and suppliers.
INTERNAL BUSINESS SOFTWARE. During 1997, as part of a business
modernization program intended to reduce cycle time and improve
profitability, the Company purchased an Enterprise Resource Planning
System (ERP System) which the software vendor has indicated is Year 2000
compliant. The total estimated hardware, software and installation cost
of the ERP System is $3.7 million of which $3.3 million has been spent to
date. The Company is in the implementation phase for this system and
other ancillary financial systems with full implementation scheduled for
July 31, 1999. Based on this schedule, the Company expects to be in
full compliance with its internal financial systems before the year 2000.
However, if due to unforeseen circumstances, the implementation is not
completed on a timely basis, the Year 2000 could have a material impact
on the operations of the Company. Contingency plans have been
established in a few areas where the Company feels there is some risk
that the system will not be implemented before Year 2000. Those plans
include adapting some of the Company's currently existing systems to be
Year 2000 compliant. The cost of making those adaptations are not
expected to be material and will be expensed in the period incurred.
INTERNAL NON-FINANCIAL SOFTWARE AND IMBEDDED CHIP TECHNOLOGY. The
Company is in the data gathering phase with regard to non-financial
software and imbedded chip technology and is currently gathering data to
assess the impact of the Year 2000 on its non-financial systems such as
manufacturing equipment, security equipment, etc., with Year 2000
compliance scheduled for April 30, 1999. The Company does not, at this
time, have sufficient data to estimate the cost of achieving Year 2000
compliance for its non-financial systems. If the Company is unable to
achieve Year 2000 compliance for its major non-financial systems, the
Year 2000 could have a material impact on the operations of the Company.
Since the Company is in the information-gathering phase, the Company does
not currently have a contingency plan in place for its internal non-
financial software and imbedded chip technology.
EXTERNAL NONCOMPLIANCE BY CUSTOMERS AND SUPPLIERS. The Company is in the
process of identifying and contacting its critical suppliers, service
providers and contractors to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to
remedy their own Year 2000 issues. It is expected that full
identification will be completed by April 30, 1999. To the extent that
responses to Year 2000 readiness are unsatisfactory, the Company intends
to change suppliers, service providers or contractors to those who have
demonstrated Year 2000 readiness but cannot be assured that it will be
successful in finding such alternative suppliers, service providers and
contractors. The Company does not currently have any formal information
concerning the Year 2000 compliance status of its customers but has
received indications that most of its customers are working on Year 2000
compliance. In the event that any of the Company's significant customers
and suppliers do not successfully and timely achieve Year 2000
compliance, and the Company is unable to replace them with new customers
or alternate suppliers, the Company's business or operations could be
adversely affected.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1996
Except for historical information contained in this report, matters
discussed in this report are forward-looking statements that involve
risks and uncertainties. Actual results may vary significantly based on
a number of factors including, but not limited to, product development,
commercialization and technological difficulties, manufacturing costs and
yield issues associated with initiating production at new facilities, the
impact of competitive products and pricing, changing customer
requirements, the change in economic conditions of the various markets
the Company serves and Year 2000 issues.
INDEPENDENT ACCOUNTANTS' REVIEW
The July 31, 1998 condensed consolidated financial statements included in
this filing on Form 10-Q have been reviewed by Deloitte & Touche LLP,
independent accountants, in accordance with established professional
standards and procedures for such a review.
The report of Deloitte & Touche LLP commenting on their review follows.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
and Stockholders of
Optical Coating Laboratory, Inc.
Santa Rosa, California
We have reviewed the accompanying condensed consolidated balance sheet of
Optical Coating Laboratory, Inc. and subsidiaries as of July 31, 1998,
and the related condensed consolidated statements of income and cash
flows for the three-month and nine-month periods ended July 31, 1998 and
July 31, 1997 and the related condensed consolidated statement of
stockholders' equity for the nine-month period ended July 31, 1998.
These financial statements are the responsibility of the Company's
management. We were furnished with the report of other accountants on
their review of the interim financial information of Flex Products, Inc.
(a consolidated subsidiary), for the three-month and nine-month periods
ended July 31, 1997, whose total revenues constituted 20% and 18% of
consolidated total revenues for the three and nine-month periods ended
July 31, 1997.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists of applying analytical review procedures
to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review and the report of other accountants for the 1997
periods, we are not aware of any material modifications that should be
made to such condensed consolidated financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Optical Coating
Laboratory, Inc. and subsidiaries as of October 31, 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated
December 19, 1997, we expressed an unqualified opinion on those
consolidated financial statements based on our audit. In our opinion,
the information set forth in the accompanying condensed consolidated
balance sheet as of October 31, 1997 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
Deloitte & Touche LLP
San Jose, California
August 19, 1998
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
and Stockholders of
Flex Products, Inc.
Santa Rosa, California
We have reviewed the statements of operations and cash flows of Flex
Products, Inc. for the three-month and nine-month periods ended August 2,
1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
These financial statements have been prepared on a historical basis of
accounting and do not reflect any purchase accounting adjustments
recorded by Optical Coating Laboratory, Inc. as a result of their
acquisition of a majority interest in Flex Products, Inc. as of May 8,
1995.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
The balance sheet of Flex Products, Inc. as of November 2, 1997 (not
included herein) was audited by us, and we expressed an unqualified
opinion on it in our report dated November 26, 1997, but we have not
performed any auditing procedures since that date.
KPMG Peat Marwick LLP
San Francisco, California
August 15, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes in legal proceedings since
those reported in Registrant's Form 10-K for the year ended
October 31,1997.
ITEM 2. CHANGES IN SECURITIES
No disclosure required.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No disclosure required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No disclosure required.
ITEM 5. OTHER INFORMATION
No disclosure required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. (4.0)* Credit Agreement dated as of July 31, 1998 among the
Registrant, Bank of America National Trust and Savings
Association, as Agent, Letter of Credit Issuing Bank
and The Other Financial Institutions Party Thereto.
2. (4.1)* Form of Note Purchase Agreement dated as of July 30, 1998
for the private placement of $30 million of 6.69% Senior
Notes due July 31, 2008 with Modern Woodman of America,
American Life and Casualty Insurance Company, Massachusetts
Mutual Life Insurance Company, Baystate Health Systems, Inc.
and Principal Life Insurance Company.
3. (11)* Computation of earnings per share for the three and nine
month periods ended July 31, 1998 and 1997.
4. (15)* Letter of Deloitte & Touche LLP regarding unaudited
interim financial information.
5. (15.1)* Letter of KMPG Peat Marwick LLP regarding unaudited
interim financial information of Flex Products, Inc.
6. (27)* Financial Data Schedule for the three months ended
July 31, 1998.
Reports on Form 8-K filed for the three months ended July 31, 1998
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OPTICAL COATING LABORATORY, INC.
September 14, 1998
Date By: /s/CRAIG B. COLLINS
--------------------------------------
Craig B. Collins,
Vice President, Finance
and Chief Financial Officer
OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES
EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE
For the three and nine months
ended July 31, 1998 and 1997 Three Months Nine Months
(Amounts in thousands, --------------- ---------------
except per share amounts) 1998 1997 1998 1997
Basic Shares:
Average common shares outstanding 12,009 10,372 11,169 10,076
Net Income $3,421 $1,994 $7,816 $4,414
Less dividend on preferred stock (141) (568)
Net income applicable to common stock $3,421 $1,853 $7,816 $3,846
Net income per common share, basic $0.28 $0.18 $0.70 $0.38
Diluted Shares:
Average common shares outstanding 12,009 10,372 11,169 10,076
Dilutive effect of employee stock options 537 763 653 498
Potential dilution of preferred stock * * * *
------ ------ ------ ------
12,546 11,135 11,822 10,574
Net income applicable to common stock $3,421 $1,853 $7,816 $3,846
Add back dividend on preferred stock * * * *
Net income for calculating
diluted earnings per share $3,421 $1,853 $7,816 $3,846
Net income per share, diluted $0.27 $0.17 $0.66 $0.36
*Anti-dilutive
EXHIBIT 15. LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
To the Board of Directors and Stockholders
of Optical Coating Laboratory, Inc.
Santa Rosa, California
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited interim financial
information of Optical Coating Laboratory, Inc. and subsidiaries for the
periods ended July 31, 1998 and 1997 as indicated in our report dated
August 19, 1998. Because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended July 31, 1998, is
incorporated by reference in Registration Statements No. 33-41050,
No. 33-26271, No. 33-12276, No. 33-48808, No. 33-65132, No. 33-60891 and
No. 333-13013 on Forms S-8, Registration Statement No. 33-61177 and
No. 33-65319 on Form S-3.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
Deloitte & Touche LLP
San Jose, California
September 14, 1998
EXHIBIT 15. LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
To the Board of Directors and Stockholders
of Flex Products, Inc.
Santa Rosa, California
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited interim financial
information of Flex Products, Inc. for the three-month and nine-month
periods ended August 2, 1997 as indicated in our report dated August 15,
1997. Because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended July 31, 1998, is
incorporated by reference in Registration Statements No. 33-41050,
No. 33-26271, No. 33-12276, No. 33-48808, No. 33-65132, No. 33-60891 and
No. 333-13013 on Forms S-8, Registration Statement No. 33-61177 and
No. 33-65319 on Form S-3.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
KPMG Peat Marwick LLP
San Francisco, California
September 14, 1998
CREDIT AGREEMENT
Dated as of July 31, 1998
among
OPTICAL COATING LABORATORY, INC.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
and
Letter of Credit Issuing Bank
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS...................................................1
1.01 Certain Defined Terms........................................1
1.02 Other Interpretive Provisions...............................20
1.03 Accounting Principles.......................................21
ARTICLE II THE CREDITS.................................................21
2.01 Amounts and Terms of Commitments............................21
2.02 Loan Accounts...............................................22
2.03 Procedure for Borrowing.....................................22
2.04 Conversion and Continuation Elections.......................23
2.05 Voluntary Termination or Reduction of Commitments...........24
2.06 Optional Prepayments........................................24
2.07 Mandatory Prepayments of Loans..............................25
2.08 Repayment...................................................25
2.09 Interest....................................................25
2.10 Fees........................................................26
(a) Fees....................................................26
(b) Commitment Fees.........................................26
2.11 Computation of Fees and Interest............................27
2.12 Payments by the Company.....................................27
2.13 Payments by the Banks to the Agent..........................28
2.14 Sharing of Payments, Etc....................................28
ARTICLE III THE LETTERS OF CREDIT......................................29
3.01 The Letter of Credit Subfacility............................29
3.02 Issuance, Amendment and Renewal of Letters of Credit........30
3.03 Risk Participations, Drawings and Reimbursements............32
3.04 Repayment of Participations.................................34
3.05 Role of the Issuing Bank....................................34
3.06 Obligations Absolute........................................35
3.07 Cash Collateral Pledge......................................36
3.08 Letter of Credit Fees.......................................36
3.09 Uniform Customs and Practice................................37
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY......................37
4.01 Taxes.......................................................37
4.02 Illegality..................................................38
4.03 Increased Costs and Reduction of Return.....................39
4.04 Funding Losses..............................................40
4.05 Inability to Determine Rates................................40
4.06 Certificates of Banks.......................................41
4.07 Survival....................................................41
ARTICLE V CONDITIONS PRECEDENT.........................................41
5.01 Conditions of Initial Credit Extensions.....................41
(a)Credit Agreement .........................................41
(b)Resolutions; Incumbency ..................................42
(c)Legal Opinion ............................................42
(d)Payment of Fees ..........................................42
(e)Placement of Debt ........................................42
(f)Certificate ..............................................42
(g)Agreements ...............................................43
(h)Termination of Existing Syndicated Credit Agreement.......43
(i)Other Documents ..........................................43
5.02 Conditions to All Credit Extensions.........................43
(a)Notice of Borrowing or Conversion/Continuation;
Application...............................................43
(b)Continuation of Representations and Warranties............43
(c)No Existing Default ......................................43
ARTICLE VI REPRESENTATIONS AND WARRANTIES..............................44
6.01 Corporate Existence and Power...............................44
6.02 Corporate Authorization; No Contravention...................44
6.03 Governmental Authorization..................................44
6.04 Binding Effect..............................................45
6.05 Litigation..................................................45
6.06 No Default..................................................45
6.07 ERISA Compliance............................................46
6.08 Use of Proceeds; Margin Regulations.........................46
6.09 Title to Properties.........................................46
6.10 Taxes.......................................................47
6.11 Financial Condition.........................................47
6.12 Environmental Matters.......................................47
6.13 Regulated Entities..........................................47
6.14 No Burdensome Restrictions..................................48
6.15 Copyrights, Patents, Trademarks and Licenses, etc...........48
6.16 Subsidiaries................................................48
6.17 Insurance...................................................48
6.18 Swap Obligations............................................48
6.19 Year 2000...................................................48
6.20 Full Disclosure.............................................49
ARTICLE VII AFFIRMATIVE COVENANTS.....................................49
7.01 Financial Statements........................................49
7.02 Certificates; Other Information.............................50
7.03 Notices.....................................................51
7.04 Preservation of Corporate Existence, Etc....................52
7.05 Maintenance of Property.....................................52
7.06 Insurance...................................................52
7.07 Payment of Obligations......................................53
7.08 Compliance with Laws........................................53
7.09 Compliance with ERISA.......................................53
7.10 Inspection of Property and Books and Records................53
7.11 Environmental Laws..........................................54
7.12 Use of Proceeds.............................................54
ARTICLE VIII NEGATIVE COVENANTS.......................................54
8.01 Limitation on Liens.........................................54
8.02 Restrictions on Liens.......................................56
8.03 Disposition of Assets.......................................56
8.04 Consolidations and Mergers..................................57
8.05 Loans and Investments.......................................57
8.06 Limitation on Indebtedness..................................60
8.07 Transactions with Affiliates................................62
8.08 Use of Proceeds.............................................62
8.09 Contingent Obligations......................................62
8.10 Joint Ventures..............................................62
8.11 Lease Obligations...........................................62
8.12 Restricted Payments.........................................63
8.13 ERISA.......................................................63
8.14 Tangible Net Worth..........................................63
8.15 Leverage Ratio..............................................64
8.16 Fixed Charge Coverage Ratio.................................64
8.17 Change in Business..........................................64
8.18 Accounting Changes..........................................64
8.19 SICPA Agreements............................................64
ARTICLE IX EVENTS OF DEFAULT...........................................65
9.01 Event of Default............................................65
(a)Non-Payment ..............................................65
(b)Representation or Warranty................................65
(c)Specific Defaults ........................................65
(d)Other Defaults ...........................................66
(e)Cross-Default ............................................66
(f)Insolvency; Voluntary Proceedings.........................66
(g)Involuntary Proceedings...................................67
(h)ERISA ....................................................67
(i)Monetary Judgments .......................................67
(j)Non-Monetary Judgments ...................................67
(k)Change of Control ........................................68
(l)Loss of Licenses .........................................68
(m)Adverse Change ...........................................68
9.02 Remedies....................................................68
9.03 Rights Not Exclusive........................................69
9.04 Certain Financial Covenant Defaults.........................69
ARTICLE X THE AGENT....................................................69
10.01 Appointment and Authorization..............................69
10.02 Delegation of Duties.......................................70
10.03 Liability of Agent.........................................70
10.04 Reliance by Agent..........................................71
10.05 Notice of Default..........................................71
10.06 Credit Decision............................................71
10.07 Indemnification of Agent...................................71
10.08 Agent in Individual Capacity...............................71
10.09 Successor Agent............................................72
10.10 Withholding Tax............................................72
ARTICLE XI MISCELLANEOUS...............................................74
11.01 Amendments and Waivers.....................................74
11.02 Notices....................................................75
11.03 No Waiver; Cumulative Remedies.............................75
11.04 Costs and Expenses.........................................76
11.05 Company Indemnification....................................76
11.06 Payments Set Aside.........................................76
11.07 Successors and Assigns.....................................77
11.08 Assignments, Participations, etc...........................77
11.09 Confidentiality............................................78
11.10 Set-off....................................................79
11.11 Notification of Addresses, Lending Offices, Etc............79
11.12 Counterparts...............................................79
11.13 Severability...............................................79
11.14 No Third Parties Benefited.................................80
11.15 Governing Law and Jurisdiction.............................80
11.16 Waiver of Jury Trial.......................................80
11.17 Entire Agreement...........................................81
11.18 Automatic Debit of Fees....................................81
SCHEDULES
Schedule 2.01 Commitments
Schedule 6.05 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 8.01 Permitted Liens
Schedule 8.05 Certain Investments
Schedule 8.06 Certain Indebtedness
Schedule 8.09 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 31, 1998, among Optical
Coating Laboratory, Inc. a Delaware corporation (the "Company"), the several
financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and Bank of America
National Trust and Savings Association, as letter of credit issuing bank and
as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility with a letter of credit subfacility upon the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Acceptable Bank" means any commercial bank:
(a) that is organized under the laws of the United States or any
state thereof;
(b) that has capital, surplus and undivided profits aggregating
at least $100,000,000; and
(c) whose long-term unsecured debt obligations (or the long-term
unsecured debt obligations of the bank holding company owning all of the
capital stock of such bank) shall have been rated "A" or higher by
Standard & Poor's or "A2" or higher by Moody's.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the surviving
entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of the other Person, whether through the ownership of
voting securities, membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent arising
under Section 10.09 and any successor letter of credit issuing bank
hereunder, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set forth
on Schedule 11.02, or such other address as the Agent may from time to
time specify.
"Agreement" means this Credit Agreement.
"Applicable Fee Percentage" means 0.200%, and "Applicable Margin"
means 0.625% for Offshore Rate Advances and 0.00% for Base Rate
Advances, in each case until two Business Days after receipt by the
Agent of the Compliance Certificate delivered pursuant to subsection
7.02(b), together with the financial statements referred to in
subsection 7.01(a), for the Company's fiscal quarter ending July 31,
1998; thereafter the Applicable Fee Percentage and the Applicable Margin
shall mean the percentage specified below for each opposite the
applicable Leverage Ratio as set forth below:
Leverage Applicable Fee Applicable Margin
-------- -------------- -------------------
Ratio Percentage Offshore Rate Loan Base Rate Loan
----- ---------- ------------------ --------------
Less than 150 to 0.200% 0.625% 0.000%
1.00
Greater than or
equal to 1.50 to
1.00 but less than
2.00 to 1.00 0.250% 0.750% 0.000%
Greater than or
equal to 2.00 to
1.00 0.300% 1.000% 0.000%
Each subsequent change in the Applicable Margin shall take effect
two Business Days after receipt by the Agent of the Compliance
Certificate delivered pursuant to Section 7.02(b), together with the
financial statements referred to in subsection 7.01(a) or 7.01(b), as
applicable; provided, however, that if the Compliance Certificate
required to be delivered pursuant to subsection 7.02(b) and the
financial statements required to be delivered pursuant to subsection
7.01(a) or 7.01(b), as applicable, are not delivered when required
thereunder, the Leverage Ratio shall, until two Business Days after
receipt of such items, be deemed to be greater than or equal to 2.00 to
1.00.
"Assignee" has the meaning specified in subsection 11.08(a).
"Attorney Costs" means and includes all fees and disbursements of
any law firm or other external counsel, the allocated cost of internal
legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
References to the "Banks" shall include BofA, including in its capacity
as Issuing Bank; for purposes of clarification only, to the extent that
BofA may have any rights or obligations in addition to those of the
Banks due to its status as Issuing Bank, its status as such will be
specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978
(11 U.S.C. S101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in
San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan means a Revolving Loan or an L/C Advance that
bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of Revolving
Loans of the same Type made to the Company on the same day by the Banks
under Article II, and, other than in the case of Base Rate Loans, having
the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York or San Francisco,
California are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means such a
day on which dealings are carried on in the applicable offshore dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any Bank or of any
corporation controlling a Bank.
"Cash Collateralize" means to pledge and deposit with or deliver to
the Agent, for the benefit of the Agent, the Issuing Bank and the Banks,
as collateral for the L/C Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to the
Agent and the Issuing Bank (which documents are hereby consented to by
the Banks). Derivatives of such term shall have corresponding meaning.
The Company hereby grants the Agent, for the benefit of the Agent, the
Issuing Bank and the Banks, a security interest in all such cash and
deposit account balances. Cash collateral shall be maintained in
blocked, interest bearing deposit accounts at BofA. The types of, and
the rates of interest on, such accounts shall be determined by BofA and
such accounts shall be subject to BofA's standard terms and conditions
for such accounts.
"Closing Date" means the date on which all conditions precedent set
forth in Section 5.01 are satisfied or waived by all Banks (or, in the
case of subsection 5.01(d), waived by the Person entitled to receive such
payment).
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in Section
2.01.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit A, or in such other form as the Majority Banks may accept from
time-to-time.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter
of credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that Person
(i) to purchase, repurchase or otherwise acquire such primary obligations
or any security therefor, (ii) to advance or provide funds for the
payment or discharge of any such primary obligation, or to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation against
loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect
to any Surety Instrument (other than 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 payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or
for such services, shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered, or (d) in respect of any Swap
Contract. The amount of any Contingent Obligation shall, in the case of
Guaranty Obligations (unless otherwise specifically provided in such
Guaranty Obligations), be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the case of
other Contingent Obligations other than in respect of Swap Contracts,
shall be equal to the maximum reasonably anticipated liability in respect
thereof, and in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or
any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section
2.04, the Company (a) converts Loans of one Type to another Type, or (b)
continues as such, but with a new Interest Period, Offshore Rate Loans
having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Revolving
Loans hereunder, and (b) the Issuance of any Letters of Credit hereunder.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Distribution" means, without duplication, with respect to any
corporation:
(a) any dividend or other distribution, direct or indirect, on account
of any shares of capital stock of such corporation now or hereafter
outstanding, whether in cash or other property, except a dividend or
other distribution payable solely in shares of stock of such corporation;
and
(b) any redemption, retirement, purchase or other acquisition, direct
or indirect, of any shares of capital stock of such corporation now or
hereafter outstanding, including, without limitation, any deferred
payment made by such corporation in connection with the acquisition of
its capital stock, or of any warrants, rights or options to acquire any
shares of such stock.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"EBIT" means, for any period, as to a Person, on a consolidated
basis, earnings before interest income, interest expense, and taxes. As
used herein, "EBIT" shall also include the EBIT of any Person acquired by
the Company or by a Subsidiary in an Acquisition for the period prior to
the date of such Acquisition if the Agent and the Banks have been
furnished with audited financial statements satisfactory to them
confirming such items for the relevant periods prior to the date of such
Acquisition.
"EBITDA" means, for any period, as to a Person, on a consolidated
basis, earnings of such Person before interest income, interest expense,
taxes, depreciation, and amortization. As used herein, "EBITDA" shall
also include the EBITDA of any Person acquired by the Company or by a
Subsidiary in an Acquisition for the period prior to the date of such
Acquisition if the Agent and the Banks have been furnished with audited
financial statements satisfactory to them confirming such items for the
relevant periods prior to the date of such Acquisition.
"Effective Amount" means (i) with respect to any Revolving Loans on
any date, the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Revolving Loans
occurring on such date; and (ii) with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such date
after giving effect to any Issuances of Letters of Credit occurring on
such date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any reimbursements
of outstanding unpaid drawings under any Letters of Credit or any
reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date.
"Eligible Assignee means (i) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (ii) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (iii) a
Person that is primarily engaged in the business of commercial banking
and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of
which a Bank is a Subsidiary, or (C) a Person of which a Bank is a
Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental, health,
safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the
Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer
Plan; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV
of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Existing Syndicated Credit Agreement" means the credit agreement
dated as of May 24, 1995 among the Company, the financial institutions
party thereto, and BofA as agent for such financial institutions and
letter of credit issuing bank.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York on the
preceding Business Day opposite the caption "Federal Funds (Effective)";
or, if for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time)
on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
"Fixed Charge Coverage Ratio" means, for the date of determination,
the ratio of the Company's (i) EBIT for the four quarter period ending on
such date to (ii) the sum of its consolidated (x) net interest expense
for the four quarter period ending on such date plus (y) current portion
of long term debt, calculated on a prospective basis for the four quarter
period beginning on such date of determination. In calculating the Fixed
Charge Coverage Ratio, Indebtedness of Flex Products covered by Section
8.06(j) to the extent it is owed to SICPA or to a third person who is
making the credit extension in lieu of SICPA and the interest expense
allocated to such Indebtedness shall be excluded.
"Flex Products" means Flex Products, Inc., a Delaware corporation.
"Flex-SICPA Contract means the License and Supply Agreement by and
among Flex Products, Inc. and SICPA dated as of December 2, 1994, as
amended pursuant to the SICPA/OCLI Settlement Agreement by a First
Amendment thereto dated as of November 19, 1997, as in effect as of the
date of this Agreement.
"FRB" means the Board of Governors of the Federal Reserve System,
and any Governmental Authority succeeding to any of its principal
functions.
"Funded Debt" means, as of the date of determination, for the
Company and its Subsidiaries on a consolidated basis, without
duplication, all indebtedness for borrowed money, all non-contingent
reimbursement or payment obligations with respect to Surety Instruments,
all obligations with respect to capital leases, the current portion of
mandatory redeemable preferred stock, and all Guaranty Obligations in
respect of indebtedness or obligations of others of the foregoing kinds;
and shall exclude all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person
if the rights and remedies of the seller or bank under such agreement in
the event of default are limited to repossessions or sale of such
property.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are
applicable to the circumstances as of the date of determination.
"Governmental Authority means any nation or government, any state
or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government, and any corporation or other entity owned
or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Honor Date" has the meaning specified in subsection 3.03(b).
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken
or assumed as the deferred purchase price of property or services (other
than trade payables entered into in the ordinary course of business on
ordinary terms); (c) all non-contingent reimbursement or payment
obligations with respect to Surety Instruments; (d) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising
under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to property acquired
by the Person (excluding such indebtedness if the rights and remedies of
the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property); (f) all obligations
with respect to capital leases; (g) all indebtedness referred to in
clauses (a) through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and
contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (h)
all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (f) above. For
all purposes of this Agreement, the Indebtedness of any Person shall
include all recourse Indebtedness of any partnership or joint venture or
limited liability company in which such Person is a general partner or
joint venturer or member, to the extent that such Person may be held
liable for repayment thereof.
"Indemnified Liabilities" has the meaning specified in Section
11.05.
"Indemnified Person" has the meaning specified in Section 11.05.
"Independent Auditor" has the meaning specified in subsection
7.01(a).
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, as to any Offshore Rate Loan, the
last day of each Interest Period applicable to such Loan and, as to any
Base Rate Loan, the last Business Day of each January, April, July and
October (i.e., each fiscal quarter of the Company) and the Revolving
Termination Date, provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each Interest
Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day, unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the date set
forth in clause (a) of the definition of "Revolving Termination
Date."
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter
of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or more
Letters of Credit hereunder, together with any replacement letter of
credit issuer arising under subsection 10.01(b) or Section 10.09.
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal
arrangement (whether created by contract or conducted through a separate
legal entity) now or hereafter formed by the Company or any of its
Subsidiaries with another Person in order to conduct a common venture or
enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing
in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment
of outstanding standby or commercial documentary letters of credit as
shall at any time be in use at the Issuing Bank, as the Issuing Bank
shall request.
"L/C Application" means an application form for issuances of standby
or commercial documentary letters of credit as shall at any time be in
use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
under Section 3.03.
"L/C Commitment" means the commitment of the Issuing Bank to Issue,
and the commitments of the Banks severally to participate in Letters of
Credit from time to time Issued or outstanding under Article III, in an
aggregate amount not to exceed on any date the amount of $5,000,000, as
the same shall be reduced as a result of a reduction in the L/C
Commitment pursuant to Section 2.05; provided that the L/C Commitment is
a part of the Commitments, rather than a separate, independent
commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Lending Office" means, as to any Bank, the office or offices of
such Bank specified as its "Lending Office" or "Domestic Lending Office"
or "Offshore Lending Office", as the case may be, on Schedule 11.02, or
such other office or offices as such Bank may from time to time notify
the Company and the Agent.
"Letters of Credit" means any letters of credit (whether standby
letters of credit or commercial documentary letters of credit) Issued by
the Issuing Bank pursuant to Article III.
"Leverage Ratio means, for the date of determination, the ratio of
Funded Debt as such date to the Company's EBITDA for the four quarter
period ending on such date. In calculating the Leverage Ratio,
Indebtedness of Flex Products covered by Section 8.06(j) to the extent it
is owed to SICPA or to a third person who is making the credit extension
in lieu of SICPA and the interest expense allocated to such Indebtedness
shall be excluded.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preferential arrangement of any kind or
nature whatsoever in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of
the foregoing, or the filing of any financing statement naming the owner
of the asset to which such lien relates as debtor, under the Uniform
Commercial Code or any comparable law) and any contingent or other
agreement to provide any of the foregoing, but not including the interest
of a lessor under an operating lease.
"Loan" means a Revolving Loan made by a Bank to a Company under
Article II, or an L/C Advance under Article III.
"Loan Documents" means this Agreement, the Fee Letter, the L/C
Related Documents, and all other documents delivered to the Agent or any
Bank in connection herewith.
"Majority Banks" means at any time:
(a) both Banks if there are only two Banks party to this Agreement, or
(b) if there are more than two Banks party to this Agreement,
(i) and BofA holds in excess of 60% of the then aggregate unpaid
principal amount of the Loans or, if no such principal amount is
outstanding, has 60% of the combined Commitments, BofA and another
Bank, and
(ii) in all other cases, Banks then holding in excess of 60%
of the then aggregate unpaid principal amount of the Loans, or, if
no such principal amount is then outstanding, Banks then having in
excess of 60% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Company or the
Company and its Subsidiaries taken as a whole; (b) a material impairment
of the ability of the Company or any Subsidiary to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company or any Subsidiary of any Loan Document.
"Material Subsidiary" means Flex Products and, at any time, any
other Subsidiary of the Company having at such time either (i) total
(gross) revenues for the preceding four fiscal quarter period of 10% or
more of the total (gross) revenues of the Company on a consolidated
basis, or (ii) total assets, as of the last day of the preceding fiscal
quarter, having a net book value of 10% or more of the net book value of
the Company's consolidated total assets, in each case based upon the
Company's most recent annual or quarterly financial statements delivered
to the Agent under Section 7.01.
"Multiemployer Plan means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate makes, is making, or is obligated to make contributions or,
during the preceding three calendar years, has made, or been obligated to
make, contributions.
"1998 Senior Note Agreements" means, collectively, those certain
separate Note Purchase Agreements each dated as of July 30, 1998, each
containing identical terms and provisions, entered into by the Company
with Modern Woodmen of America, American Life and Casualty Insurance
Company, Massachusetts Mutual Life Insurance Company, MML Bay State Life
Insurance Company, and Principal Life Insurance Company.
"1998 Senior Notes" means those certain Senior Notes in the original
aggregate principal amount of $44,400,000 dated on or about July 31, 1998
issued pursuant to the 1998 Senior Note Agreements.
"Net Issuance Proceeds" means, as to any issuance of common stock by
any Person, cash proceeds received or receivable by such Person in
connection therewith, net of reasonable out-of-pocket costs and expenses
paid or incurred in connection therewith in favor of any Person not an
Affiliate of such Person. Net Issuance Proceeds shall not include cash
proceeds received in connection with (a) common stock issued by the
Company upon exercise of employee stock options, (b) common stock issued
by the Company to its employee stock ownership plan, and (c) common stock
issued by the Company upon the exercise of rights for which no additional
consideration is received by the Company.
"Notice of Borrowing" means a notice in substantially the form of
Exhibit B.
"Notice of Conversion/Continuation means a notice in substantially
the form of Exhibit C.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
to any Bank, the Agent, or any Indemnified Person, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/16th of 1%) determined
by the Agent as follows:
LIBOR
Offshore Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on such
day (whether or not applicable to any Bank) under regulations issued
from time to time by the FRB for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum determined by the
Agent (rounded upward to the next 1/16th of 1%) as the rate of
interest at which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or converted into, an
Offshore Rate Loan by BofA and having a maturity comparable to such
Interest Period would be offered by BofA to major banks in the
London interbank market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of such
Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Revolving Loan that bears interest
based on the Offshore Rate.
"Organization Documents" means, for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any
other Loan Documents; excluding, in the case of each Bank and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Bank's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Bank or the
Agent, as the case may be, is organized or maintains a lending office.
"Participant" has the meaning specified in subsection 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Repurchase Agreement" means any written agreement:
(a) that provides for
(i) the transfer of one or more United States
Governmental Securities to the Company or a Subsidiary from an
Acceptable Bank against a transfer of funds (the "transfer price")
by the Company or such Subsidiary to such Acceptable Bank, and
(ii) a simultaneous agreement by the Company or such
Subsidiary, in connection with such transfer of funds, to transfer
to such Acceptable Bank the same or substantially similar United
States Governmental Securities for a price not less than the
transfer price plus a reasonable return thereon at a date certain
not later than one year after such transfer of funds; and
(b) in respect of which the Company or such Subsidiary shall
have the right, whether by contract or pursuant to applicable law,
to liquidate such repurchase agreement upon the occurrence of any
default thereunder.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under
Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets held
by such Person, or changes in the value of securities issued by such
Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a
"market view;" and (b) such Swap Contracts do not contain any provision
("walk-away" provision) exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the
defaulting party.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place)
at such time of such Bank's Commitment divided by the Commitments of all
the Banks.
"Redeemable Stock means, with respect to any Person, each share of
such Person's capital stock that is:
(a) redeemable, payable or required to be purchased or otherwise
retired or extinguished, or convertible into indebtedness of
such Person:
(1) at a fixed or determinable date, whether by operation of a
sinking fund or otherwise,
(2) at the option of any Person other than such Person, or
(3) upon the occurrence of a condition not solely within the
control of such Person; or
(b) convertible into other Redeemable Stock.
"Reportable Event" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or
of a Governmental Authority, in each case applicable to or binding upon
the Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of the
Company, or any other officer having substantially the same authority and
responsibility.
"Restricted Payment" means any Distribution (other than on account
of capital stock of a Subsidiary owned legally and beneficially by the
Company or another Subsidiary) including, without limitation, any
Distribution resulting in the acquisition by the Company of securities
which would constitute treasury stock.
"Revolving Loan" means an extension of credit by a Bank to the
Company under Article II, and may be a Base Rate Loan or an Offshore Rate
Loan, each, a "Type" of Loan).
"Revolving Termination Date" means the earliest to occur of:
(a) July 31, 2003; and
(b) the date on which the Commitments otherwise terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"SICPA" means SICPA Holding, S.A., a company organized and existing
under the laws of Switzerland.
"SICPA Agreements" means the SICPA/OCLI Joint Acquisition Agreement,
the Flex-SICPA Contract, and the SICPA/OCLI Settlement Agreement.
"SICPA/OCLI Joint Acquisition Agreement" means that certain
agreement between the Company and SICPA dated as of December 13, 1994 and
amended by Addendum No. 1 thereto dated May 1, 1995 and Addendum No. 2
thereto dated as of September 23, 1997, and as further amended pursuant
to the terms of the SICPA/OCLI Settlement Agreement, as in effect as of
the date of this Agreement, pursuant to which SICPA and the Company have
agreed to acquire from ICI Americas, Inc. all of ICI Americas, Inc.'s
interest in Flex Products and to acquire jointly from ICI American
Holdings Inc. all of ICI American Holdings Inc.'s interest in Flex
Products' promissory note payable to the order of ICI American Holdings
Inc. dated April 30, 1995, evidencing a revolving credit and in the face
amount of $15,000,000.
"SICPA/OCLI Settlement Agreement" means that certain Settlement
Agreement dated as of November 19, 1997, by and among SICPA, the Company,
Flex Products, the OCLI Designated Directors (as defined therein) and the
SICPA Designated Directors (as defined therein).
"Stock and Note Purchase Agreement" means that certain Stock and
Note Purchase Agreement among the Company, SICPA, ICI Americas, Inc., and
ICI American Holdings, Inc. dated May 1, 1995, as in effect as of the
date of this Agreement, pursuant to which the Company and SICPA effect
the transactions contemplated in the SICPA/OCLI Joint Acquisition
Agreement.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the Company.
A "Subsidiary" of the Company shall also include any Person which, under
GAAP, is required to be consolidated in the consolidated financial
statements of the Company.
"Surety Instruments" means all letters of credit (including standby
and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or bill option, interest rate option,
forward foreign exchange transaction, cap, collar or floor transaction,
currency swap, cross-currency rate swap, swaption, currency option or
any other, similar transaction (including any option to enter into any
of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Swap Contracts, as determined based upon one or more mid-market
or other readily available quotations provided by any recognized dealer
in such Swap Contracts (which may include any Bank).
"Tangible Net Worth" means, for the Company and its Subsidiaries on a
consolidated basis, net worth minus goodwill.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured
by each Bank's net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent, as
the case may be, is organized or maintains a lending office.
"Type" has the meaning specified in the definition of "Revolving Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used
for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"United States" and "U.S." each means the United States of America.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' qualifying shares required by law) 100% of the capital stock
of each class having ordinary voting power, and 100% of the capital stock
of every other class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of record, by the
Company, or by one or more of the other Wholly-Owned Subsidiaries, or
both.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are
to this Agreement unless otherwise specified.
(c) (1) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(2) The term "including" is not limiting and means "including
without limitation."
(3) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word
"through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent
merely because of the Agent's or Banks' involvement in their preparation.
1.03Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01Amounts and Terms of Commitments. Each Bank severally agrees, on
the terms and conditions set forth herein, to make Revolving Loans to the
Company from time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date, in an aggregate amount not to
exceed at any time outstanding, the amount set forth on Schedule 2.01 (such
amount, as it may be reduced under Section 2.05 or reduced or increased as a
result of one or more assignments under Section 11.08, the Bank's
"Commitment"); provided, however, that, after giving effect to any Borrowing
of Revolving Loans, the Effective Amount of all outstanding Revolving Loans
and the Effective Amount of all L/C Obligations shall not at any time exceed
the combined Commitments; and provided, further, that the Effective Amount of
the Revolving Loans of any Bank plus the participation of such Bank in the
Effective Amount of all L/C Obligations shall not at any time exceed such
Bank's Commitment. Within the limits of each Bank's Commitment, and subject
to the other terms and conditions hereof, amounts borrowed by the Company as
Revolving Loans under this Section may be prepaid under Section 2.06 and
reborrowed under this Section.
2.02Loan Accounts. The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Bank shall be evidenced by one or more loan
accounts or records maintained by such Bank or the Issuing Bank, as the case
may be, in the ordinary course of business. The loan accounts or records
maintained by the Agent, the Issuing Bank, and each Bank shall be conclusive
absent manifest error of the amount of the Loans made by the Banks to the
Company and the Letters of Credit Issued for the account of the Company and
the interest and payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Company hereunder to pay any amount owing with respect to the Loans or any
Letter of Credit.
2.03Procedure for Borrowing
(a) Each Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Agent in the form of a Notice of Borrowing
(which notice must be received by the Agent prior to 9:00 a.m. San Francisco,
California time) (i) three Business Days prior to the requested Borrowing
Date, in the case of Offshore Rate Loans; and (ii) one Business Day prior to
the requested Borrowing Date, in the case of Base Rate Loans, specifying:
(1) the amount of the Borrowing, which shall be in an aggregate
minimum amount of $2,000,000 for Offshore Rate Loans, or any integral
multiple of $100,000 in excess of such amount;
(2) the requested Borrowing Date, which shall be a Business Day;
(3) the Type of Loans comprising the Borrowing; and
(4) the duration of the Interest Period applicable to any
Offshore Rate Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Borrowing
comprised of Offshore Rate Loans, such Interest Period shall be three
months.
provided, however, that with respect to any Borrowing to be made on the
Closing Date, the Notice of Borrowing shall be delivered to the Agent not
later than 2:00 p.m. (San Francisco, California time) one Business Day before
the Closing Date and such Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office by 11:00 a.m. (San Francisco, California time) on the
Borrowing Date requested by the Company in funds immediately available to the
Agent. The proceeds of all such Loans will then be made available to the
Company by the Agent at such office by crediting the account of the Company
on the books of BofA with the aggregate of the amounts made available to the
Agent by the Banks and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, there may not be at any one
time more than six different Interest Periods in effect.
2.04Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.04(b):
(1) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the
case of Offshore Rate Loans, to convert any such Loans (or any part
thereof in an amount not less than $2,000,000, or that is in an integral
multiple of $100,000 in excess thereof) into Loans of the other Type; or
(2) elect, as of the last day of the applicable Interest Period,
to continue any Offshore Rate Loans having Interest Periods expiring on
such day (or any part thereof in an amount not less than $2,000,000, or
that is in an integral multiple of $100,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $2,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the
right of the Company to continue such Loans as, and convert such Loans into,
Offshore Rate Loans, shall terminate (except as provided immediately below).
With respect to each Borrowing that is less than $2,000,000 in aggregate
principal amount, the Company may combine such Borrowing with another
Borrowing(s) so as to have a combined Borrowing of not less than $2,000,000
(and, if greater, in an integral multiple of $100,000) and borrow such
combined Borrowing as Offshore Rate Loans, subject to the other provisions of
this Agreement.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than 9:00 a.m. San Francisco, California
time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(1) the proposed Conversion/Continuation Date;
(2) the aggregate amount of Loans to be converted or renewed;
(3) the Type of Loans resulting from the proposed conversion or
continuation; and
(4) other than in the case of conversions into Base Rate Loans,
the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, as the case may be, or
if any Default or Event of Default then exists, the Company shall be deemed
to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made
ratably according to the respective outstanding principal amounts of the
Loans held by each Bank with respect to which the notice was given.
(e) Unless the Majority Banks otherwise agree, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
there may not be at any one time more than six different Interest Periods in
effect.
2.05Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than five Business Days' prior notice to the Agent, terminate
the Commitments, or permanently reduce the Commitments by an aggregate
minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any prepayments of Loans made on
the effective date thereof, (a) the Effective Amount of all Revolving Loans
and L/C Obligations together would exceed the amount of the Commitments then
in effect, or (b) the Effective Amount of all L/C Obligations then
outstanding would exceed the L/C Commitment. Once reduced in accordance with
this Section, the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro Rata Share.
If and to the extent specified by the Company in the notice to the Agent,
some or all of the reduction in the Commitments shall be applied to reduce
the L/C Commitment. All accrued commitment fees and letter of credit fees
to, but not including the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination.
2.06Optional Prepayments. Subject to Section 4.04, the Company may, at
any time or from time to time, upon not less than three Business Days' (for
Offshore Rate Loans) and one Business Day's (for Base Rate Loans) irrevocable
notice to the Agent, ratably prepay Loans in whole or in part, in minimum
amounts of $1,000,000 or any multiple of $100,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment,
the Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank
of its receipt of any such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Company, the Company shall make
such prepayment and the payment amount specified in such notice shall be due
and payable on the date specified therein, together with accrued interest to
each such date on the amount prepaid and any amounts required pursuant to
Section 4.04.
2.07Mandatory Prepayments of Loans. If on any date the Effective Amount
of L/C Obligations exceeds the L/C Commitment, the Company shall, within two
Business Days, Cash Collateralize the outstanding Letters of Credit in an
amount equal to the excess of the maximum amount then available to be drawn
under the Letters of Credit over the L/C Commitment. Subject to Section
4.04, if on any date after giving effect to any Cash Collateralization made
on such date pursuant to the preceding sentence, the Effective Amount of all
Revolving Loans then outstanding plus the Effective Amount of all L/C
Obligations exceeds the combined Commitments, the Company shall, within two
Business Days and without notice or demand, prepay the outstanding principal
amount of the Revolving Loans and L/C Advances by an amount equal to the
applicable excess.
2.08Repayment. The Company shall repay to the Banks on the Revolving
Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date.
2.09Interest.
(a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
Offshore Rate or the Base Rate, as the case may be (and subject to the
Company's right to convert to other Types of Loans under Section 2.04), plus
the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Offshore Rate Loans under Section 2.06 or Section 2.07 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on
demand of the Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Obligations at a rate per
annum which is determined by adding 3% per annum to the Applicable Margin
then in effect for such Loans and, in the case of Obligations not subject to
an Applicable Margin, at a rate per annum equal to the Base Rate plus 3%;
provided, however, that, on and after the expiration of any Interest Period
applicable to any Offshore Rate Loan outstanding on the date of occurrence of
such Event of Default or acceleration, the principal amount of such Loan
shall, during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus
3%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest
is computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Bank, and in such event the Company shall pay such Bank interest at the
highest rate permitted by applicable law.
2.10 Fees.
(a) Fees. The Company shall pay arrangement and agency fees to BofA
for its own account, in the times and in the amounts required by the letter
agreements (collectively, the "Fee Letter") between the Company and BofA
dated March 3, 1998 and the attachments thereto.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee equal to the Applicable Fee Percentage
per annum times the actual daily unused portion of such Bank's Commitment,
computed on a quarterly basis in arrears on the last Business Day of each
fiscal quarter of the Company based upon the daily utilization for that
quarter as calculated by the Agent. For purposes of calculating utilization
under this subsection, the Commitment shall be deemed used to the extent of
the Effective Amount of Revolving Loans then outstanding plus the Effective
Amount of L/C Obligations then outstanding. Such commitment fee shall accrue
from the Closing Date to the Revolving Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each January, April,
July and October (i.e., each fiscal quarter of the Company) commencing on
October 30, 1998 through the Revolving Termination Date, with the final
payment to be made on the Revolving Termination Date; provided that, in
connection with any reduction or termination of the Commitments under Section
2.05, the accrued commitment fee calculated for the period ending on such
date shall also be paid on the date of such reduction or termination, with
the following quarterly payment being calculated on the basis of the period
from such reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times after
the above-mentioned commencement date, including at any time during which one
or more conditions in Article V are not met.
2.11Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans when the Base
Rate is determined by BofA's "reference rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest shall be made on the basis of a 360-
day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of
manifest error.
2.12Payments by the Company.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Agent for the
account of the Banks at the Agent's Payment Office, and shall be made in
dollars and in immediately available funds, no later than 11:00 a.m. (San
Francisco, California time) on the date specified herein. The Agent will
promptly distribute to each Bank its Pro Rata Share (or other applicable
share as expressly provided herein) of such payment in like funds as
received. Any payment received by the Agent later than 1:00 p.m. (San
Francisco, California time) shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Company has not made such payment in full to the Agent, each Bank shall repay
to the Agent on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
2.13Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at
least one Business Day prior to the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount available
to the Agent in immediately available funds on the Borrowing Date and the
Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to
the extent any Bank shall not have made its full amount available to the
Agent in immediately available funds and the Agent in such circumstances has
made available to the Company such amount, that Bank shall on the Business
Day following such Borrowing Date make such amount available to the Agent,
together with interest at the Federal Funds Rate for each day during such
period. A notice of the Agent submitted to any Bank with respect to amounts
owing under this subsection shall be conclusive, absent manifest error. If
such amount is so made available, such payment to the Agent shall constitute
such Bank's Loan on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to the Agent on the Business Day
following the Borrowing Date, the Agent will notify the Company of such
failure to fund and, upon demand by the Agent, the Company shall pay such
amount to the Agent for the Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans comprising
such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of
any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
2.14Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it
any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank
shall immediately (a) notify the Agent of such fact, and (b) purchase from
the other Banks such participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the excess payment pro rata
with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from the purchasing Bank, such
purchase shall to that extent be rescinded and each other Bank shall repay to
the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's ratable share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid
or payable by the purchasing Bank in respect of the total amount so
recovered. The Company agrees that any Bank so purchasing a participation
from another Bank may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off, but subject to Section
11.10) with respect to such participation as fully as if such Bank were the
direct creditor of the Company in the amount of such participation. The
Agent will keep records (which shall be conclusive and binding in the absence
of manifest error) of participations purchased under this Section and will in
each case notify the Banks following any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT
3.01The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein, (i) the Issuing
Bank agrees, (A) from time to time on any Business Day during the period from
the Closing Date to the Revolving Termination Date to issue Letters of Credit
for the account of the Company, and to amend or renew Letters of Credit
previously issued by it, in accordance with subsections 3.02(c) and 3.02(d),
and (B) to honor drafts under the Letters of Credit; and (ii) the Banks
severally agree to participate in Letters of Credit Issued for the account of
the Company; provided, that the Issuing Bank shall not be obligated to Issue,
and no Bank shall be obligated to participate in, any Letter of Credit if as
of the date of Issuance of such Letter of Credit (the "Issuance Date") (1)
the Effective Amount of all L/C Obligations plus the Effective Amount of all
Revolving Loans exceeds the combined Commitments, (2) the participation of
any Bank in the Effective Amount of all L/C Obligations plus the Effective
Amount of the Revolving Loans of such Bank exceeds such Bank's Commitment, or
(3) the Effective Amount of L/C Obligations exceeds the L/C Commitment.
Within the foregoing limits, and subject to the other terms and conditions
hereof, the Company's ability to obtain Letters of Credit shall be fully
revolving, and, accordingly, the Company may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have expired or
which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(1) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the
Issuing Bank from Issuing such Letter of Credit, or any Requirement of
Law applicable to the Issuing Bank or any request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from, the Issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon the Issuing Bank
with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the
Issuing Bank any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the Issuing Bank in good faith
deems material to it;
(2) the Issuing Bank has received written notice from any Bank,
the Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;
(3) the expiry date of any requested Letter of Credit is (A)
more than one year after the date of Issuance, unless the Majority Banks
have approved such expiry date in writing, or (B) after the Revolving
Termination Date, unless all of the Banks have approved such expiry date
in writing;
(4) the expiry date of any requested Letter of Credit is prior
to the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(5) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuing Bank,
or the Issuance of a Letter of Credit shall violate any applicable
policies of the Issuing Bank;
(6) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person; or
(7) such Letter of Credit is in a face amount less than $100,000
or denominated in a currency other than Dollars.
3.02Issuance, Amendment and Renewal of Letters of Credit
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Company received by the Issuing Bank (with a copy sent
by the Company to the Agent) at least four days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior
to the proposed date of issuance. Each such request for issuance of a Letter
of Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in form and
detail satisfactory to the Issuing Bank: (i) the proposed date of issuance of
the Letter of Credit (which shall be a Business Day); (ii) the face amount of
the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the
name and address of the beneficiary thereof; (v) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters
as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the
Issuing Bank is to issue a requested Letter of Credit from the Agent (A)
directing the Issuing Bank not to issue such Letter of Credit because such
issuance is not then permitted under subsection 3.01(a) as a result of the
limitations set forth in clauses (1) through (3) thereof or subsection
3.01(b)(2); or (B) that one or more conditions specified in Article V are not
then satisfied; then, subject to the terms and conditions hereof, the Issuing
Bank shall, on the requested date, issue a Letter of Credit for the account
of the Company in accordance with the Issuing Bank's usual and customary
business practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the
written request of the Company received by the Issuing Bank (with a copy sent
by the Company to the Agent) at least five days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior
to the proposed date of amendment, amend any Letter of Credit issued by it.
Each such request for amendment of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, made in the form of
an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended;
(ii) the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such
other matters as the Issuing Bank may require. The Issuing Bank shall be
under no obligation to amend any Letter of Credit if: (A) the Issuing Bank
would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (B) the beneficiary of any
such letter of Credit does not accept the proposed amendment to the Letter of
Credit. The Agent will promptly notify the Banks of the receipt by it of any
L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the
option of the Company and upon the written request of the Company received by
the Issuing Bank (with a copy sent by the Company to the Agent) at least five
days (or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of notification
of renewal, the Issuing Bank shall be entitled to authorize the renewal of
any Letter of Credit issued by it. Each such request for renewal of a Letter
of Credit shall be made by facsimile, confirmed immediately in an original
writing, in the form of an L/C Amendment Application, and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to
be renewed; (ii) the proposed date of notification of renewal of the Letter
of Credit (which shall be a Business Day); (iii) the revised expiry date of
the Letter of Credit; and (iv) such other matters as the Issuing Bank may
require. The Issuing Bank shall be under no obligation so to renew any
Letter of Credit if: (A) the Issuing Bank would have no obligation at such
time to issue or amend such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any
outstanding Letter of Credit shall provide that it shall be automatically
renewed unless the beneficiary thereof receives notice from the Issuing Bank
that such Letter of Credit shall not be renewed, and if at the time of
renewal the Issuing Bank would be entitled to authorize the automatic renewal
of such Letter of Credit in accordance with this subsection upon the request
of the Company but the Issuing Bank shall not have received any L/C Amendment
Application from the Company with respect to such renewal or other written
direction by the Company with respect thereto, the Issuing Bank shall
nonetheless be permitted to allow such Letter of Credit to renew, and the
Company and the Banks hereby authorize such renewal, and, accordingly, the
Issuing Bank shall be deemed to have received an L/C Amendment Application
from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Majority Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any
time and from time to time, in order to cause the expiry date of such Letter
of Credit to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true
and complete copy of each such Letter of Credit or amendment to or renewal of
a Letter of Credit.
3.03Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of Credit, each Bank
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Bank a participation in such Letter of Credit and
each drawing thereunder in an amount equal to the product of (i) the Pro Rata
Share of such Bank, times (ii) the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing, respectively. For
purposes of Section 2.01, each Issuance of a Letter of Credit shall be deemed
to utilize the Commitment of each Bank by an amount equal to the amount of
such participation.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Company. The Company shall reimburse the Issuing Bank
prior to 10:00 a.m. San Francisco, California time, on each date that any
amount is paid by the Issuing Bank under any Letter of Credit (each such
date, an "Honor Date"), in an amount equal to the amount so paid by the
Issuing Bank. In the event the Company fails to reimburse the Issuing Bank
for the full amount of any drawing under any Letter of Credit by 10:00 a.m.
San Francisco, California time on the Honor Date, the Issuing Bank will
promptly notify the Agent and the Agent will promptly notify each Bank
thereof, and the Company shall be deemed to have requested that Base Rate
Loans be made by the Banks to be disbursed on the Honor Date under such
Letter of Credit, subject to the amount of the unutilized portion of the
Commitments and subject to the conditions set forth in Section 5.02. Any
notice given by the Issuing Bank or the Agent pursuant to this subsection may
be oral if immediately confirmed in writing (including by facsimile);
provided that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice and provided, further, that
such confirmation will be provided by the Issuing Bank or the Agent.
(c) Each Bank shall, upon any notice pursuant to subsection 3.03(b),
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata
Share of the amount of the drawing, whereupon the participating Banks shall
(subject to subsection 3.03(e)) each be deemed to have made a Revolving Loan
consisting of a Base Rate Loan to the Company in that amount. If any Bank so
notified fails to make available to the Agent for the account of the Issuing
Bank the amount of such Bank's Pro Rata Share of the amount of the drawing by
no later than 12:00 noon San Francisco, California time on the Honor Date,
then interest shall accrue on such Bank's obligation to make such payment,
from the Honor Date to the date such Bank makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time during such
period. The Agent will promptly give notice of the occurrence of the Honor
Date, but failure of the Agent to give any such notice on the Honor Date or
in sufficient time to enable any Bank to effect such payment on such date
shall not relieve such Bank from its obligations under this Section.
(d) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Company in whole or
in part, because of the Company's failure to satisfy the conditions set forth
in Section 5.02 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of such
drawing, which L/C Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at a rate per annum equal to the Base
Rate plus 3% per annum, and each Bank's payment to the Issuing Bank pursuant
to subsection 3.03(c) shall be deemed payment in respect of its participation
in such L/C Borrowing and shall constitute an L/C Advance from such Bank in
satisfaction of its participation obligation under this Section.
(e) Each Bank's obligation in accordance with this Agreement to make
the Revolving Loans or L/C Advances, as contemplated by this Section as a
result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the
Issuing Bank, the Company or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided,
however, that each Bank's obligation to make Revolving Loans under this
Section is subject to the conditions set forth in Section 5.02.
3.04Repayment of Participations
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of immediately available funds from the Company (i) in
reimbursement of any payment made by the Issuing Bank under the Letter of
Credit with respect to which any Bank has paid the Agent for the account of
the Issuing Bank for such Bank's participation in the Letter of Credit
pursuant to Section 3.03 or (ii) in payment of interest thereon, the Agent
will pay to each Bank, in the same funds as those received by the Agent for
the account of the Issuing Bank, the amount of such Bank's Pro Rata Share of
such funds, and the Issuing Bank shall receive the amount of the Pro Rata
Share of such funds of any Bank that did not so pay the Agent for the account
of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made
by the Company to the Agent for the account of the Issuing Bank pursuant to
subsection 3.04(a) in reimbursement of a payment made under the Letter of
Credit or interest or fee thereon, each Bank shall, on demand of the Agent,
forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata
Share of any amounts so returned by the Agent or the Issuing Bank plus
interest thereon from the date such demand is made to the date such amounts
are returned by such Bank to the Agent or the Issuing Bank, at a rate per
annum equal to the Federal Funds Rate in effect from time to time.
3.05Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in paying any drawing under
a Letter of Credit, the Issuing Bank shall not have any responsibility to
obtain any document (other than any sight draft and certificates expressly
required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Bank
for: (i) any action taken or omitted in connection herewith at the request or
with the approval of the Banks (including the Majority Banks, as applicable);
(ii) any action taken or omitted in the absence of gross negligence or
willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Company's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement.
No Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the Issuing Bank, shall be liable or responsible
for any of the matters described in clauses (a) through (g) of Section 3.06;
provided, however, anything in such clauses to the contrary notwithstanding,
that the Company may have a claim against the Issuing Bank, and the Issuing
Bank may be liable to the Company, to the extent, but only to the extent, of
any direct, as opposed to consequential or exemplary, damages suffered by the
Company which the Company proves were caused by the Issuing Bank's willful
misconduct or gross negligence or the Issuing Bank's willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of
a sight draft and certificate(s) strictly complying with the terms and
conditions of a Letter of Credit. In furtherance and not in limitation of
the foregoing: (i) the Issuing Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; and (ii) the Issuing
Bank shall not be responsible for the validity or sufficiency of any
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.
3.06Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any
drawing under a Letter of Credit converted into Revolving Loans, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under
all circumstances, including the following:
(a) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by
the L/C-Related Documents or any unrelated transaction;
(d) any draft, demand, certificate 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; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit;
(e) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of any Letter of Credit; or any payment made by the Issuing
Bank under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any
beneficiary or any transferee of any Letter of Credit, including any arising
in connection with any Insolvency Proceeding;
(f) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company
or a guarantor.
3.07Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if
the Issuing Bank has honored any full or partial drawing request on any
Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder,
or (B) if, as of the Revolving Termination Date, any Letters of Credit may
for any reason remain outstanding and partially or wholly undrawn, or (ii)
the occurrence of the circumstances described in Section 2.07 requiring the
Company to Cash Collateralize Letters of Credit, then, the Company shall
within two Business Days Cash Collateralize the L/C Obligations in an amount
equal to such L/C Obligations. The two Business Days provided for in this
Section is not intended to be in addition to the two Business Days provided
in Section 2.07.
3.08Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account of each of the
Banks a letter of credit fee with respect to the Letters of Credit equal to a
rate per annum equal to the Applicable Margin for Offshore Rate Loans then in
effect times the actual daily maximum amount available to be drawn on the
outstanding Letters of Credit, computed on a quarterly basis in arrears on
the last Business Day of each fiscal quarter of the Company based upon
Letters of Credit outstanding for that quarter as calculated by the Agent.
Such letter of credit fees shall be due and payable quarterly in arrears on
the last Business Day of each fiscal quarter of the Company during which
Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Closing Date, through the Revolving Termination Date
(or such later date upon which the outstanding Letters of Credit shall
expire), with the final payment to be made on the Revolving Termination Date
(or such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank equal to
0.125% of the face amount (or increased face amount, as the case may be) of
such Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable on each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of the Issuing Bank relating to
letters of credit as from time to time in effect.
3.09Uniform Customs and Practice The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce
most recently at the time of issuance of any Letter of Credit shall (unless
otherwise expressly provided in the Letters of Credit) apply to the Letters
of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01Taxes
(a) Any and all payments by the Company to each Bank or the Agent
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Bank or the Agent and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Bank or the Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;
(ii)the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv)the Company shall also pay to each Bank or the Agent for the
account of such Bank, at the time interest is paid, all additional
amounts which the respective Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such Taxes or Other Taxes
had not been imposed.
(d) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(e) If the Company is required to pay additional amounts to any Bank
or the Agent pursuant to subsection (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change
in the judgment of such Bank is not otherwise disadvantageous to such Bank.
(f) Each Bank agrees, upon written request of the Company, to
cooperate with and assist the Company in contesting any assessment of Taxes
and/or Other Taxes which the Company determines were incorrectly or illegally
asserted, subject to the following:
(1) All costs and expenses (including Attorney Costs) will be at
the expense of the Company. Such Bank may, from time to time, require
prepayment of the estimated costs and expenses (including Attorney Costs)
involved, without precluding final settling of accounts between the
Company and such Bank;
(2) Such Bank shall, at all times, retain full control of the
contest which shall be conducted as such Bank, in its sole discretion,
may direct; and
(3) Such Bank may decide, in its sole discretion, to discontinue
its cooperation with the Company in such contest after the final
administrative proceeding of such contest is concluded.
4.02Illegality.
(a) If any Bank determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is
unlawful, for any Bank or its applicable Lending Office to make Offshore Rate
Loans, then, on notice thereof by the Bank to the Company through the Agent,
any obligation of that Bank to make Offshore Rate Loans shall be suspended
until the Bank notifies the Agent and the Company that the circumstances
giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and
demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last
day of the Interest Period thereof, if the Bank may lawfully continue to
maintain such Offshore Rate Loans to such day, or immediately, if the Bank
may not lawfully continue to maintain such Offshore Rate Loan. If the
Company is required to so prepay any Offshore Rate Loan, then concurrently
with such prepayment, the Company shall, at its option and subject to the
other provisions of this Agreement, borrow from the affected Bank, in the
amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans, at
the option of the Company and subject to the other provisions of this
Agreement.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
4.03Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the introduction
of or any change (other than any change by way of imposition of or increase
in reserve requirements included in the calculation of the Offshore Rate) in
or in the interpretation of any law or regulation or (ii) the compliance by
that Bank with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall
be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or participating in Letters of
Credit, or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing, or maintaining any Letter of
Credit or of agreeing to make or making, funding, or maintaining any unpaid
drawing under any Letter of Credit, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent
to the Agent), pay to the Agent for the account of such Bank, additional
amounts as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's
or such corporation's policies with respect to capital adequacy and such
Bank's desired return on capital) determines that the amount of such capital
is increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the
Company through the Agent, the Company shall pay to the Bank, from time to
time as specified by the Bank, additional amounts sufficient to compensate
the Bank for such increase.
4.04Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as
a consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.07) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a
day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans or
from fees payable to terminate the deposits from which such funds were
obtained. For purposes of calculating amounts payable by the Company to the
Banks under this Section and under subsection 4.03(a), each Offshore Rate
Loan made by a Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the Offshore
Rate for such Offshore Rate Loan by a matching deposit or other borrowing in
the interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such Offshore Rate Loan is in fact so funded.
4.05Inability to Determine Rates. If the Majority Banks determine that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to
subsection 2.09(a) for any requested Interest Period with respect to a
proposed Offshore Rate Loan does not adequately and fairly reflect the cost
to such Banks of funding such Loan, the Agent will promptly so notify the
Company and each Bank. Thereafter, the obligation of the Banks to make or
maintain Offshore Rate Loans hereunder shall be suspended until the Agent
upon the instruction of the Majority Banks revokes such notice in writing.
Upon receipt of such notice, the Company may revoke any Notice of Borrowing
or Notice of Conversion/Continuation then submitted by it. If the Company
does not revoke such Notice, the Banks shall make, convert or continue the
Loans, as proposed by the Company, in the amount specified in the applicable
notice submitted by the Company, but such Loans shall be made, converted or
continued as Base Rate Loans instead of Offshore Rate Loans.
4.06Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount
payable to the Bank hereunder and such certificate shall be conclusive and
binding on the Company in the absence of manifest error.
4.07Survival. The agreements and obligations of the Company in this
Article shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the
condition that the Agent have received on or before the Closing Date all of
the following, in form and substance satisfactory to the Agent and each Bank,
and in sufficient copies for each Bank:
(a) Credit Agreement. This Agreement executed by each party
thereto;
(b) Resolutions; Incumbency.
(1) Copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Company; and
(2) A certificate of the Secretary or Assistant Secretary of the
Company, certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it hereunder;
(c) Legal Opinion. An opinion of Collette & Erickson, outside
counsel to the Company and addressed to the Agent and the Banks,
substantially in the form of Exhibit D;
(d) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with reasonable Attorney Costs of BofA
to the extent invoiced prior to or on the Closing Date, plus such additional
amounts of Attorney Costs as shall constitute BofA's reasonable estimate of
Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and BofA); including any such costs,
fees and expenses arising under or referenced in Sections 2.10 and 11.04;
(e) Placement of Debt The Company shall have issued the 1998
Senior Notes, which shall evidence long term fixed-rate debt with final
maturities of at least five years from the placement date in an aggregate
principal amount of at least $30,000,000 (the "Placement").
(f) Certificate. A certificate signed by a Responsible Officer or
any authorized vice president of the Company, dated as of the Closing Date,
stating that:
(1) the representations and warranties contained in Article VI are
true and correct on and as of such date, as though made on and as of such
date;
(2) no Default or Event of Default exists or would result from the
Credit Extension;
(3) the Placement has occurred on or before the Closing Date; and
(4) there has occurred since October 31, 1997, no event or
circumstance that has resulted or could reasonably be expected to result
in a Material Adverse Effect;
(g) Agreements. Copies certified by the Secretary of the Company
as being true and complete as of the date of this Agreement of (i) the
SICPA/OCLI Settlement Agreement (including all schedules and exhibits
thereto), (ii) all amendments to the Flex-SICPA Contract, the SICPA/OCLI
Joint Acquisition Agreement and the Stock and Note Purchase Agreement entered
into after the "closing date" under the Existing Syndicated Credit Agreement,
and (iii) the 1998 Senior Note Agreements.
(h) Termination of Existing Syndicated Credit Agreement. Evidence
satisfactory to the Agent that all commitments to lend under the Existing
Syndicated Credit Agreement have been terminated and that the Company has
repaid (or made arrangements satisfactory to the Agent for repayment of) all
principal, interest, commitment fees, letter of credit fees and other sums
due thereunder; and
(i) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. The obligation of each Bank
to make any Loan to be made by it (including its initial Loan) or to continue
or convert any Loan under Section 2.04 and the obligation of the Issuing Bank
to Issue any Letter of Credit (including the initial Letter of Credit) is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date, Conversion/Continuation Date, or Issuance Date:
(a) Notice of Borrowing or Conversion/Continuation; Application.
The Agent shall have received (with, in the case of the initial Loan only, a
copy for each Bank) a Notice of Borrowing, a Notice of
Conversion/Continuation, or in the case of any Issuance of any Letter of
Credit, the Issuing Bank and the Agent shall have received an L/C Application
or L/C Amendment Application as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and
as of such Borrowing Date or Conversion/Continuation Date with the same
effect as if made on and as of such Borrowing Date or Conversion/Continuation
Date (except to the extent such representations and warranties expressly
refer to an earlier date, in which case they shall be true and correct as of
such earlier date); and
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing, Notice of Conversion/Continuation, and L/C
Application or L/C Amendment Application submitted by the Company hereunder
shall constitute a representation and warranty by the Company hereunder, as
of the date of each such notice and as of each Borrowing Date,
Conversion/Continuation Date, or Issuance Date, as applicable, that the
conditions in this Section 5.02 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
6.01Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business and to execute, deliver, and perform its obligations under the Loan
Documents;
(c) is duly qualified as a foreign corporation and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law except, in each
case referred to in clause (c) or clause (d), to the extent that the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
6.02Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each other Loan Document
to which the Company is party, have been duly authorized by all necessary
corporate action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject; or
(c) violate any Requirement of Law.
6.03Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document. In
providing the representations and warranties in this Section, the Company has
assumed that, other than the Company and its Subsidiaries, no party to the
Agreement or any of the other Loan Documents is subject to any statute, rule
or regulation, or to any impediment to which contracting parties are
generally not subject, which requires the Company, any of its Subsidiaries or
any other Person to obtain approval, consent, exemption, authorization or
other action by, or to provide notice to, or filing with, any Governmental
Authority in connection with the execution, delivery or performance by, or
enforcement against, the Company or any of its Subsidiaries of the Agreement
or any other Loan Document.
6.04Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
6.05Litigation. Except as specifically disclosed in Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes pending, or to
the best knowledge of the Company, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the
Company, or its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has been issued
by any court or other Governmental Authority purporting to enjoin or restrain
the execution, delivery or performance of this Agreement or any other Loan
Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
6.06No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing
Date, neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after
the Closing Date, create an Event of Default under subsection 9.01(e).
6.07ERISA Compliance.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably be expected
to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
6.08Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 7.12
and Section 8.08. Neither the Company nor any Subsidiary is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
6.09Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to
no Liens, other than Permitted Liens.
6.10Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income
or assets otherwise due and payable, except those which are being contested
in good faith by appropriate proceedings and for which adequate reserves have
been provided in accordance with GAAP. There is no proposed tax assessment
against the Company or any Subsidiary that would, if made, have a Material
Adverse Effect.
6.11Financial Condition.
(a) The audited consolidated financial statements of the Company and
its Subsidiaries dated October 31, 1997, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for
the fiscal quarter ended on that date:
(1) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly
noted therein;
(2) fairly present the financial condition of the Company and
its Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(3) except as specifically disclosed in Schedule 6.11, show all
material indebtedness and other liabilities, direct or contingent, of the
Company and its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since October 31, 1997, there has been no Material Adverse
Effect.
6.12Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 6.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
6.13Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act, any state public utilities code, or any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
6.14No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
6.15Copyrights, Patents, Trademarks and Licenses, etc The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all
of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Company,
no slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by
the Company or any Subsidiary infringes upon any rights held by any other
Person. Except as specifically disclosed in Schedule 6.05, no claim or
litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
6.16Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 and has no equity investments in any other corporation or entity other
than those specifically disclosed in part (b) of Schedule 6.16.
6.17Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in
such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary
operates.
6.18Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations.
6.19Year 2000. On the basis of a comprehensive review and assessment
presently being conducted of the Company's and its Subsidiaries' systems and
equipment and inquiry now underway of the Company's and its Subsidiaries'
material suppliers and vendors, the Company reasonably believes that the
"Year 2000 problem" (that is, the inability of computers, as well as embedded
microchips in non-computer devices, to perform properly date-sensitive
functions with respect to certain dates prior to and after December 31,
1999), including costs of remediation, will not result in a Material Adverse
Effect. The Company is developing contingency plans that it reasonably
believes will ensure that any interruption or impairment of its or its
Subsidiaries' own systems or equipment, or the systems or equipment of
material suppliers or vendors, due to the Year 2000 problem, or a general
failure of or interruption in the communications and delivery infrastructure
of the Company or its Subsidiaries, will not result in a Material Adverse
Effect.
6.20Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate
furnished by or on behalf of the Company or any Subsidiary in connection with
the Loan Documents (including the offering and disclosure materials delivered
by or on behalf of the Company to the Banks prior to the Closing Date),
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in
writing:
7.01Financial Statements. The Company shall deliver to the Agent and
each Bank, in form and detail satisfactory to the Agent and the Majority
Banks:
(a) (1) as soon as available, but not later than 105 days after the
end of each fiscal year, a copy of the audited consolidated balance sheet
of the Company and its Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, shareholders'
equity and cash flows for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Deloitte & Touche or another
nationally-recognized independent public accounting firm ("Independent
Auditor") which opinion shall state that such consolidated financial
statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior years. Such opinion shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any
material portion of the Company's or any Subsidiary's records or any
other reason;
(2) as soon as available, but not later than 105 days after the
end of each fiscal year, a copy of the balance sheet of Flex Products as
at the end of such year and the related statements of income and cash
flows for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to
ordinary, good faith audit adjustments and the absence of notes to such
financial statements), the financial position and the results of
operations of Flex Products;
(b) (1) as soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter
and commencing on the first day of the fiscal year and ending on the last
day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith
audit adjustments and the absence of notes to such financial statements),
the financial position and the results of operations of the Company and
the Subsidiaries;
(2) as soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each fiscal year, a
copy of the balance sheet of Flex Products as of the end of such quarter
and the related statements of income and cash flows for the period
commencing on the first day and ending on the last day of such quarter
and commencing on the first day of the fiscal year and ending on the last
day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith
audit adjustments and the absence of notes to such financial statements),
the financial position and the results of operations of Flex Products.
7.02Certificates; Other Information. The Company shall furnish to the
Agent and each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.01(a)(1), a certificate of the Independent
Auditor stating that during the examination there was observed no Default or
Event of Default of the kind which would normally be revealed by such an
examination, or a statement of such Default or Event of Default if any is
found whether or not the same shall have been cured;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a)(1) and (b)(1), a Compliance Certificate
executed by a Responsible Officer;
(c) promptly, copies of all financial statements and reports that the
Company sends to its shareholders, and copies of all financial statements and
regular, periodical or special reports (including Forms 10K, 10Q and 8K) that
the Company or any Subsidiary may make to, or file with, the SEC;
(d) annually not later than 45 days after the commencement of each
fiscal year, the consolidated operating budget of the Company and its
Subsidiaries for the coming fiscal year; and
(e) promptly, notice of each change in ownership of Flex Products
(including each change in the proportionate ownership of Flex Products by the
Company and/or SICPA);
(f) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent,
at the request of any Bank, may from time to time request.
7.03Notices. The Company shall promptly notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary; including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with
respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(1) an ERISA Event;
(2) a material increase in the Unfunded Pension Liability of any
Pension Plan;
(3) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(4) the adoption of any amendment to a Plan subject to Section
412 of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries;
and
(e) each proposed amendment to any or all of the SICPA Agreements.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each
notice under subsection 7.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
7.04Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary (except where the failure so to cause any such
Subsidiary could not be reasonably expected to have a Material Adverse
Effect) to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises
necessary or desirable in the normal conduct of its business, except in
connection with transactions permitted by Section 8.04 and sales of assets
permitted by Section 8.03;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew, to the extent legally possible, all of its
registered patents, trademarks, trade names and service marks, the
non-preservation of which could reasonably be expected to have a Material
Adverse Effect.
7.05Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is
used or useful in its business in good working order and condition, ordinary
wear and tear excepted.
7.06Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other Persons.
7.07Payment of Obligations The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.08Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of
Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.09Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
7.10Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record
and account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Agent or any Bank to visit
and inspect any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property
substantially in compliance with all Environmental Laws.
7.12Use of Proceeds. The Company shall use the proceeds of the Loans and
the Letters of Credit for working capital, capital equipment, and other
general corporate purposes, including the repayment of the loans outstanding
as of the Closing Date under the Existing Syndicated Credit Agreement, so
long as such usage is not in contravention of any Requirement of Law or of
any Loan Document.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Majority Banks waive compliance in
writing:
8.01Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any Subsidiary on
the Closing Date and set forth in Schedule 8.01 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.07;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property subject
thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or its Subsidiary securing
(i) the non-delinquent performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety, and appeal bonds, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of business as
presently conducted;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed, the claims
secured thereby are being actively contested in good faith and by appropriate
proceedings, adequate book reserves shall have been established and
maintained and shall exist with respect thereto, and all such liens in the
aggregate at any time outstanding for the Company and its Subsidiaries do not
exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement, provided, however, that such Liens existed at the
time the respective corporations became Subsidiaries and were not created in
anticipation thereof;
(j) (1) purchase money security interests on any property acquired
or held by the Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property;
provided that (i) any such Lien attaches to such property concurrently
with or within 20 days after the acquisition thereof, and (ii) such Lien
attaches solely to the property so acquired in such transaction;
(2) A deed of trust on the Company's property in Santa Rosa,
California, to secure financing up to $9,000,000 for the construction of
general purpose manufacturing and office buildings on such property;
(k) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are
otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by the Company or
any Subsidiary to provide collateral to the depository institution;
(m) Liens consisting of pledges of cash collateral or government
securities to secure on a mark-to-market basis Permitted Swap Obligations
only, provided that the counterparty to any Swap Contract relating to any
such Permitted Swap Obligations is under a similar requirement to deliver
similar collateral from time to time to the Company or the Subsidiary party
thereto on a mark-to-market basis;
(n) Liens not otherwise permitted pursuant to clauses (a) through
(m), inclusive, of this Section; provided, that:
(1) the Indebtedness or other obligations secured thereby shall
have been incurred, or shall be permitted to be outstanding, in
accordance with the provisions of Section 8.06 of this Agreement; and
(2) immediately prior to, and after giving effect to the
incurrence, assumption or creation thereof and to any concurrent
application of the proceeds of any Indebtedness or other obligation
secured thereby, (A) the aggregate amount of all Indebtedness and other
obligations secured by such Liens at such time would not exceed
$5,000,000, and (B) no Default or Event of Default would exist; and
(o) Liens securing renewals, extensions (as to time) and refinancings
of Indebtedness secured by the Liens described in clauses (a) through (n) of
this Section; provided, that:
(1) the amount of Indebtedness or other obligations secured by
each such Lien is not increased in excess of the amount of such
Indebtedness or other obligations outstanding on the date of such
renewal, extension or refinancing;
(2) none of such Liens is extended to encumber or otherwise
relate to or cover any additional property of the Company or any
Subsidiary; and
(3) immediately prior to, and immediately after the consummation
of such renewal, extension or refinancing, and after giving effect
thereto, no Default or Event of Default exists or would exist.
8.02Restrictions on Liens Except for the 1998 Senior Note Agreements
and the ABN AMRO Bank N.V. refinancing of the Von Birkhahn Note balance, the
Company shall not, and shall not suffer or permit any Subsidiary to, directly
or indirectly, enter into any Contractual Obligations that impairs the
ability of the Company to grant or prohibits the Company from granting any
Lien(s) in favor of the Agent and the Banks.
8.03Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse and shares in any Subsidiary) or enter into any agreement to
do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out, fully depreciated,
or surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement equipment;
(c) dispositions of inventory, equipment or other property by the
Company or any Subsidiary to the Company or any Subsidiary pursuant to
reasonable business requirements; and
(d) dispositions (but not including any disposition of any fixed or
capital assets or any shares in any Subsidiary) not otherwise permitted under
this Section which are made for fair market value; provided, that (i) at the
time of any disposition, no Event of Default shall exist or shall result from
such disposition, (ii) the aggregate sales price from such disposition shall
be paid in cash, and (iii) the aggregate value of all assets so sold by the
Company and its Subsidiaries, together, shall not exceed in any twelve month
period, 10% of the gross book value of the assets of the Company and its
Subsidiaries on a consolidated basis (exclusive of goodwill, patents,
trademarks, trade names, organization expense, treasury stock, unamortized
debt discount and expense, deferred charges, and other like intangibles) less
reserves applicable thereto.
8.04Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall
be the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary.
8.05Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations
or other securities of, or any interest in, any Person, or make or commit to
make any Acquisitions, or make or commit to make any advance, loan, extension
of credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company, except for:
(a) investments in property to be used in the ordinary course of
business of the Company and its Subsidiaries;
(b) investments in trade accounts receivable arising from the sale of
goods and services in the ordinary course of business of the Company and its
Subsidiaries;
(c) investments in United States Governmental Securities, provided
that such obligations mature within three years from the date of acquisition
thereof;
(d) investments in commercial paper given either of the two highest
ratings by either Standard & Poor's or Moody's, provided that such
obligations mature within 270 days from the date of creation thereof;
(e) investments constituting loans and advances to employees,
including travel advances and relocation loans, made in the ordinary course
of and furtherance of the business of the Company or any Subsidiary;
(f) investments in demand deposit accounts maintained with one or
more local commercial banks, which qualify as Acceptable Banks, as operating
funds accounts used in the ordinary course of business of the Company and the
Subsidiaries;
(g) investments in publicly-traded shares in any open-end mutual fund
that invests solely in Investments of the type described in clause (c),
clause (d), clause (i) or clause (j) of this Section and has total assets in
excess of $1,000,000,000, provided that such Investments are classified as
current assets in accordance with GAAP;
(h) investments in money market preferred stock of corporations
organized under the laws of the United States or any state thereof that (i)
is commonly referred to by the terms "Dutch-Auction Preferred," "Capital
Market Preferred," "Remarketed Preferred," "Variable Rate Preferred" or
similar terms, and (ii) has been given, at the time of acquisition, one of
the two highest ratings by either Standard & Poor's or Moody's;
(i) investments in certificates of deposit or banker's acceptances
issued by an Acceptable Bank, provided that such obligations mature within
one year from the date of acquisition thereof;
(j) investments in Permitted Repurchase Agreements;
(k) investments in Dollar-denominated deposits with:
(1) a bank organized under the laws of a country that is a
member of the European Community (or any political subdivision of such
country) having a combined capital and surplus of not less than
$100,000,000 and given an issuer rating of "A" by Thomson BankWatch, Inc.
(or a comparable rating by another nationally-recognized rating agency of
similar standing if Thomson BankWatch, Inc. is not then in the business
of rating commercial banks), or
(2) a foreign branch of an Acceptable Bank;
(l) investments in tax-exempt obligations of any state of the United
States, or any municipality of any such state, given either of the two
highest ratings by either Standard & Poor's or Moody's, provided that such
obligations mature within three years from the date of acquisition thereof;
(m) investments in joint ventures, provided that the aggregate book
value of all such investments shall not at any time exceed 10% of
consolidated total assets of the Company and its Subsidiaries determined at
such time;
(n) investments in federally insured money market deposit accounts
maintained with one or more Acceptable Banks;
(o) other investments in securities for cash management purposes,
made in accordance with the Company's investment policies as in effect on the
Closing Date and as more particularly set forth in Schedule 8.05, maturing
within one year from the date of acquisition thereof, provided that the
aggregate book value of all such investments shall not at any time exceed
2.50% of the consolidated total assets of the Company and its Subsidiaries
determined at such time;
(p) investments in existence on the Closing Date described in
Schedule 8.05;
(q) extensions of credit to and equity investments in Flex Products
(including the investments contemplated in the Stock and Note Purchase
Agreement); the aggregate amount of credit extended to Flex Products shall be
subject to the limits set forth in subsection 8.06(g);
(r) investments constituting Permitted Swap Obligations or payments
or advances under Swap Contracts relating to Permitted Swap Obligations; and
(s) any other investment not otherwise permitted under clauses (a)
through (r) hereof and subject to the provisions of Section 8.06(h);
provided, that:
(1) immediately after, and after giving effect to, any such
investment, the sum of the aggregate amount of (x) all Restricted
Payments declared or made during the period from and after October 31,
1994 to and including the date such investment is made, plus (y) all such
investments made pursuant to this subsection held at such time by the
Company and its Subsidiaries would not exceed the sum of:
(A) $7,000,000, plus
(B) the sum of 50% (or minus 100% if a deficit) of the
cumulative consolidated net income of the Company and its
Subsidiaries for the period commencing after October 31, 1994 and
ending on and including the date such investment is made, plus
(C) the aggregate amount of cash proceeds (net of all costs
and out-of-pocket expenses in connection therewith, including,
without limitation, placement, underwriting and brokerage fees and
expenses) received by the Company and its Subsidiaries after October
31, 1994 and prior to such time from the issuance and sale of (I)
capital stock (other than Redeemable Stock) of the Company (either
directly or through the exercise of warrants, rights or other
options or the exercise of any rights of the holder of any
Indebtedness of the Company to convert such Indebtedness to capital
stock (other than Redeemable Stock)) or (II) any warrants, rights or
other options to purchase such capital stock; and
(2) immediately before, and after giving effect to, such
investment, no Default or Event of Default exists or would exist.
8.06Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist,
or otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.09; and
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.06;
(d) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.11;
(e) Indebtedness evidenced by the 1998 Senior Notes, not to exceed
$44,400,000 in aggregate principal amount;
(f) Indebtedness, not to exceed $9,000,000 in principal amount,
secured by the deed of trust described in Section 8.01(j)(2), for the purpose
of financing the construction of general purpose manufacturing and office
buildings on such property; provided that the weighted average life of such
Indebtedness is for a term not shorter than the remaining term of the
revolving credit under this Agreement;
(g) In addition to the Indebtedness existing on the Closing Date and
set forth in Schedule 8.06:
(1) Unsecured Indebtedness incurred by the Subsidiaries (other
than Flex Products) of the Company (this Indebtedness may be guaranteed
by the Company) not to exceed at any one time an aggregate principal
amount of $5,000,000 (utilized and unutilized);
(2) Indebtedness incurred by Flex Products (including
Indebtedness to SICPA and the Company); provided that Indebtedness
incurred by Flex Products to third parties shall not be guaranteed by the
Company;
(h) Indebtedness secured by Liens permitted under Section 8.01(i) in
an aggregate amount which, together with the investments permitted under
Section 8.05(s) does not exceed the amount permitted for investments under
such Section;
(i) Indebtedness of the Company not covered in clauses (a) through
(h) of this Section not to exceed the amounts by which $32,000,000 exceeds
the combined Commitments as of the date of computation; and
(j) Indebtedness of Flex Products to third persons which is incurred
in lieu of Indebtedness to SICPA pursuant to the SICPA/OCLI Joint Acquisition
Agreement, provided that:
(1) The terms and provisions of such Indebtedness meet the
requirements of the SICPA/OCLI Joint Acquisition Agreement applicable to
credit extensions made by SICPA and the Company thereunder;
(2) The Company extends credit to Flex Products at the same time
pursuant to the terms of the SICPA/OCLI Joint Acquisition Agreement;
(3) Such Indebtedness to third persons is at all times
guaranteed by SICPA; and
(4) If a breach or default occurs under the documents evidencing
such Indebtedness to third persons, payment of such Indebtedness is made
by SICPA
The provisions of this Section shall govern in the event of any contradiction
or ambiguity between the provisions of this Section and any other provision
of this Agreement or other Loan Document.
8.07Transactions with Affiliates The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or
such Subsidiary.
8.08Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter
of Credit, directly or indirectly, (i) to purchase or carry Margin Stock,
(ii) to repay or otherwise refinance indebtedness of the Company or others
incurred to purchase or carry Margin Stock, (iii) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the
Exchange Act.
8.09Contingent Obligations. The Company shall not, and shall not suffer
or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations; and
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.09.
8.10Joint Ventures. The Company shall not, and shall not suffer or
permit any Subsidiary to, enter into any Joint Venture, other than in
businesses and industries reasonably related to the Company's or such
Subsidiary's business or industries as of the date of this Agreement.
8.11Lease Obligations The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except
for:
(a) leases of the Company and of Subsidiaries in existence on the
Closing Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by the Company or any Subsidiary
after the Closing Date in the ordinary course of business;
(c) leases entered into by the Company or any Subsidiary after the
Closing Date pursuant to sale-leaseback transactions permitted under
subsection 8.03(d); and
(d) capital leases other than those permitted under clauses (a) and
(c) of this Section, entered into by the Company or any Subsidiary after the
Closing Date to finance the acquisition of equipment; provided that the
aggregate annual rental payments for all such capital leases shall not exceed
$15,000,000.
8.12Restricted Payments.
(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, declare or make any Restricted Payment unless:
(1) immediately after, and after giving effect to, such
Restricted Payment, the sum of the aggregate amount of (x) all Restricted
Payments declared or made during the period from and after October 31,
1994 to and including the date such Restricted Payment is made, plus (y)
all investments made pursuant to Subsection 8.05(s), plus (z) all
Indebtedness permitted under Section 8.06(h) held or owed at such time by
the Company and its Subsidiaries would not exceed the sum of
(A) $7,000,000 plus
(B) the sum of 50% (or minus 100% in the case of a deficit)
of the cumulative consolidated net income of the Company and its
Subsidiaries for the period commencing after October 31, 1994 and
ending on and including the date such Restricted Payment is declared
or made, and
(2) at the time of such declaration and immediately before, and
after giving effect to, such Restricted Payment, no Default or Event of
Default exists or would exist.
(b) The Company shall not authorize a Distribution on any class of
its capital stock that is not payable within 90 days of authorization.
8.13ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably be expected to result in liability of the
Company in an aggregate amount in excess of $1,000,000; or (b) engage in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.14Tangible Net Worth. The Company shall not permit, as of the last
day of any fiscal quarter, its Tangible Net Worth to be less than $70,000,000
plus 50% of consolidated net income after income taxes (but without giving
effect to any net losses) earned in any quarterly accounting period
commencing after October 31, 1997 plus 50% of any Net Issuance Proceeds after
the date hereof.
8.15Leverage Ratio. The Company shall not permit, as of the last day of
any fiscal quarter, its Leverage Ratio to exceed 2.50 to 1.00.
8.16Fixed Charge Coverage Ratio. The Company shall not permit, as of
the last day of any fiscal quarter, its Fixed Charge Coverage Ratio to be
less than 1.50 to 1.00.
8.17Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the
Company and its Subsidiaries on the date hereof.
8.18Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP, or change the fiscal year
of the Company or of any Subsidiary; except that the Company shall be
permitted to change to the Company's fiscal year the fiscal year of Flex
Products, Netra Corporation, or any Subsidiary acquired by the Company after
the date of this Agreement.
8.19SICPA Agreements.
(a) The Company shall not materially amend any of the SICPA
Agreements without the prior written consent of the Majority Banks.
(b) (1) The Company shall give the Banks, through the Agent, notice
of each proposed material amendment to any or all of the SICPA Agreements
not less than 20 days prior to the date the Company proposes to enter
into any such amendment. Each notice under this subsection, to be
effective, must include a full and complete explanation (in form and
detail acceptable to the Majority Banks) of the proposed amendment
covered by such notice and the 20 day period commences on the day after
which such notice is received by the Agent.
(2) The Majority Banks shall, within such 20 day period, advise
the Agent whether the Majority Banks object to the amendment covered by
such notice. Failure of the Majority Banks to object within such 20 day
period shall be deemed a consent to the amendment by the Majority Banks.
(c) The Company may elect to give the Banks notice through the Agent,
describing a proposed amendment to any or all of the SICPA Agreements. If
the Company elects to give the Banks notice under this subsection, the Banks
shall have a period of five calendar days (but not less than three Business
Days) within which to advise the Company whether the Banks consider such
proposed amendment a material amendment. Failure to respond within such
period shall be deemed notice by the Banks that such proposed amendment is
not a material amendment, in which case the Company need not comply with the
provisions of subsection (b) of this Section. If the Banks advise the
Company that such proposed amendment is not a material amendment, such advise
shall bind the Banks. If the Banks advise the Company that such proposed
amendment is a material amendment, the Company must comply with the
provisions of subsection (b) of this Section. Each notice under this
subsection must, in order to be effective, specifically refer to (y) this
subsection and (z) the period within which a response is required if the
amendment described in the notice is to be considered a material amendment.
(d) The Company understands that two of the fundamental premises on
which the Banks' decision to grant the credit provided in this Agreement are
the terms and provisions of the SICPA Agreements as in effect as of the date
of this Agreement, and therefore any material amendment to any or all of the
SICPA Agreements will affect these fundamental premises. Any decision by any
Bank to object to a proposed amendment to either or both of these Agreements
will be in light of such effect.
(e) The Company also understands that a failure to obtain the consent
of Majority Banks to a proposed amendment to any or all of the SICPA
Agreements is an Event of Default if the Majority Banks disagree with the
Company's determination that a proposed amendment is not material and as a
result notice of the proposed amendment required under this Section is not
given to the Agent.
ARTICLE IX
EVENTS OF DEFAULT
9.01Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan or of any L/C
Obligation, or (ii) within five days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Section 7.01, 7.02, 7.03,
7.12, or in Article VIII, and, in the case of any term, covenant or agreement
contained in any of Sections 7.01 or 7.02, such default shall continue
unremedied for a period of ten days after the occurrence thereof; or
(d) Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan
Document, and such default shall continue unremedied for a period of 20 days
after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which
written notice thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails to
make any payment in respect of any Indebtedness or Contingent Obligation
(other than in respect of Swap Contracts) having an aggregate principal
amount (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $2,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in
the relevant document on the date of such failure; or (B) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document
on the date of such failure if the effect of such failure, event or condition
is to cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause
such Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash collateral
in respect thereof to be demanded or (ii) there occurs under any Swap
Contract an Early Termination Date (as defined in such Swap Contract)
resulting from (1) any event of default under such Swap Contract as to which
the Company or any Subsidiary is the Defaulting Party (as defined in such
Swap Contract) or (2) any Termination Event (as so defined) as to which the
Company or any Subsidiary is an Affected Party (as so defined), and, in
either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $2,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings.
(1) Any involuntary Insolvency Proceeding is commenced or filed
against the Company or any Material Subsidiary, or any writ, judgment,
warrant of attachment, execution or similar process, is issued or levied
against a substantial part of the Company's or any Material Subsidiary's
properties, and any such proceeding or petition shall not be dismissed,
or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy;
(2) the Company or any Material Subsidiary admits the material
allegations of a petition against it in any Insolvency Proceeding, or an
order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or
(3) the Company or any Material Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for
itself or a substantial portion of its property or business; or
(h) ERISA.
(1) An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$1,000,000;
(2) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $1,000,000; or
(3) the Company or any ERISA Affiliate shall fail to pay when
due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of
ERISA under a Multiemployer Plan in an aggregate amount in excess of
$1,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against
the Company or any Subsidiary involving in the aggregate a liability (to the
extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $5,000,000 or more, and the same
shall remain unvacated and unstayed pending appeal for a period of 20 days
after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be
any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(k) Change of Control. More than 50% of the Company's issued and
outstanding common stock is owned as a block by a Person or Persons acting in
concert with Persons other than the Persons who own the Company's stock on
the date of this Agreement, if such change of control continues for a period
of 30 days from the earlier of (i) the date the Company advises Bank of such
change of control or (ii) the date Bank advises the Company that such change
of control will be an Event of Default upon the lapse of such 30-day period;
or
(l) Loss of Licenses. Any Governmental Authority revokes or fails to
renew any material license, permit or franchise of the Company or any
Subsidiary, or the Company or any Subsidiary for any reason loses any
material license, permit or franchise, or the Company or any Subsidiary
suffers the imposition of any restraining order, escrow, suspension or
impound of funds in connection with any proceeding (judicial or
administrative) with respect to any material license, permit or franchise;
provided, however, that to the extent any of the foregoing shall occur with
respect to a Subsidiary, it shall not constitute an Event of Default unless
such occurrence could reasonably be expected to have a Material Adverse
Effect; or
(m) Adverse Change. There occurs a Material Adverse Effect.
9.02Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks:
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately
due and payable (such amount to be held as Cash Collateral for the L/C
Obligations and any other Obligations and promptly returned to the Company as
and to the extent the outstanding Letters of Credit expire without being
drawn and the other Obligations are satisfied); and
(c) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable;
in all such cases without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Company; and
(d) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.01 (in the case of clause (1) of
subsection (g) upon the expiration of the 60-day period mentioned therein),
the obligation of each Bank to make Loans and any obligation of the Issuing
Bank to Issue Letters of Credit shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts
as aforesaid shall automatically become due and payable without further act
of the Agent, the Issuing Bank, or any Bank.
9.03Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter
arising.
9.04Certain Financial Covenant Defaults. In the event that, after
taking into account any extraordinary charge to earnings taken or to be taken
as of the end of any fiscal period of the Company (a "Charge"), and if solely
by virtue of such Charge, there would exist an Event of Default due to the
breach of any of Sections 8.14 through 8.16, as of such fiscal period end
date, such Event of Default shall be deemed to arise upon the earlier of (a)
the date after such fiscal period end date on which the Company announces
publicly it will take, is taking or has taken such Charge (including an
announcement in the form of a statement in a report filed with the SEC) or,
if such announcement is made prior to such fiscal period end date, the date
that is such fiscal period end date, and (b) the date the Company delivers to
the Agent its audited annual or unaudited quarterly financial statements in
respect of such fiscal period reflecting such Charge as taken.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization.
(a) Each Bank hereby irrevocably (subject to Section 10.09)
appoints, designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, nor shall the
Agent have or be deemed to have any fiduciary relationship with any Bank, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with respect
to any Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Agent may agree at the request
of the Majority Banks to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Article with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully
as if the term "Agent", as used in this Article, included the Issuing Bank
with respect to such acts or omissions, and (ii) as additionally provided in
this Agreement with respect to the Issuing Bank.
10.02 Delegation of Duties The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent (but only in its
capacity as Agent) shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects with reasonable care.
10.03 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document,
or for any failure of the Company or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Majority Banks as it
deems appropriate and, if it so requests, it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall
be deemed to have consented to, approved or accepted or to be satisfied with,
each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and
fees required to be paid to the Agent for the account of the Banks, unless
the Agent shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent will notify the
Banks of its receipt of any such notice. The Agent shall take such action
with respect to such Default or Event of Default as may be requested by the
Majority Banks in accordance with Article IX; provided, however, that unless
and until the Agent has received any such request, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable
or in the best interest of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each
Bank represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition
and creditworthiness of the Company and its Subsidiaries, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and
made its own decision to enter into this Agreement and to extend credit to
the Company hereunder. Each Bank also represents that it will, independently
and without reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of
the Company which may come into the possession of any of the Agent-Related
Persons.
10.07 Indemnification of Agent Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand
the Agent-Related Persons (to the extent not reimbursed by or on behalf of
the Company and without limiting the obligation of the Company to do so), pro
rata, from and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of
the foregoing, each Bank shall reimburse the Agent upon demand for its
ratable share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or on behalf of
the Company. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company
and its Subsidiaries and Affiliates as though BofA were not the Agent or the
Issuing Bank hereunder and without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of
the Company or such Subsidiary) and acknowledge that the Agent shall be under
no obligation to provide such information to them. With respect to its
Loans, BofA shall have the same rights and powers under this Agreement as any
other Bank and may exercise the same as though it were not the Agent or the
Issuing Bank, and the terms "Bank" and "Banks" include BofA in its individual
capacity.
10.09 Successor Agent. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If
the Agent resigns under this Agreement, the Majority Banks shall appoint from
among the Banks a successor agent for the Banks. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Banks and the Company, a
successor agent from among the Banks. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall
mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article and Sections 11.04 and
11.05 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation
shall nevertheless thereupon become effective and the Banks shall perform all
of the duties of the Agent hereunder until such time, if any, as the Majority
Banks appoint a successor agent as provided for above. Notwithstanding the
foregoing, however, BofA may not be removed as the Agent at the request of
the Majority Banks unless BofA shall also simultaneously be replaced as
"Issuing Bank" hereunder pursuant to documentation in form and substance
reasonably satisfactory to BofA.
10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Bank agrees with and in favor of the Agent, to deliver to the Agent:
(1) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest
in the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under
this Agreement;
(2) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two
properly completed and executed copies of IRS Form 4224 before the
payment of any interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which interest may be
paid under this Agreement; and
(3) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption from,
or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
and such Bank sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of the Company to such Bank, such
Bank agrees to notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Bank. To
the extent of such percentage amount, the Agent will treat such Bank's IRS
Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
the Company to such Bank, such Bank agrees to undertake sole responsibility
for complying with the withholding tax requirements imposed by Sections 1441
and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such
Bank an amount equivalent to the applicable withholding tax after taking into
account such reduction. However, if the forms or other documentation
required by subsection (a) of this Section are not delivered to the Agent,
then the Agent may withhold from any interest payment to such Bank not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because
such Bank failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agent fully for all
amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of
the Banks under this subsection shall survive the payment of all Obligations
and the resignation or replacement of the Agent.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by the Company therefrom, shall be effective unless the same
shall be in writing and signed by the Majority Banks (or by the Agent at the
written request of the Majority Banks) and the Company and acknowledged by
the Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing
and signed by all the Banks and the Company and acknowledged by the Agent, do
any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, (including mandatory prepayments)
interest, fees or other amounts due to the Banks (or any of them) hereunder
or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any
of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Issuing Bank in addition to the Majority Banks
or all the Banks, as the case may be, affect the rights or duties of the
Issuing Bank under this Agreement or any L/C-Related Document relating to any
Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or
duties of the Agent under this Agreement or any other Loan Document, and
(iii) the Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed by the parties thereto.
11.02 Notices.
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the Company
by facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 11.02, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed,
faxed or delivered, to the address or facsimile number specified for notices
on Schedule 11.02; or, as directed to the Company or the Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall
be designated by such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the
date deposited into the U.S. mail, or if delivered, upon delivery; except
that notices pursuant to Article II, III or X shall not be effective until
actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing
Bank at the address specified for the "Issuing Bank" on Schedule 11.02.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and
at the request of the Company. The Agent and the Banks shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by
the Company to give such notice and the Agent and the Banks shall not have
any liability to the Company or other Person on account of any action taken
or not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans and L/C
Obligations shall not be affected in any way or to any extent by any failure
by the Agent and the Banks to receive written confirmation of any telephonic
or facsimile notice or the receipt by the Agent and the Banks of a
confirmation which is at variance with the terms understood by the Agent and
the Banks to be contained in the telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
11.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within five Business Days after demand (subject to subsection
5.01(d)) for all costs and expenses incurred by BofA (including in its
capacity as Agent and Issuing Bank) in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent and Issuing Bank)
with respect thereto; and
(b) pay or reimburse the Agent and each Bank within five Business
Days after demand (subject to subsection 5.01(d)) for all costs and expenses
(including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
11.05 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit, and the
termination, resignation or replacement of the Agent or replacement of any
Bank) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated
by or referred to herein, or the transactions contemplated hereby, or any
action taken or omitted by any such Person under or in connection with any of
the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or Letters of Credit
or the use of the proceeds thereof, whether or not any Indemnified Person is
a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities resulting
solely from the gross negligence or willful misconduct of such Indemnified
Person. The agreements in this Section shall survive payment of all other
Obligations.
11.06 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not
been made or such set-off had not occurred, and (b) each Bank severally
agrees to pay to the Agent upon demand its pro rata share of any amount so
recovered from or repaid by the Agent.
11.07 Successors and Assigns The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
11.08 Assignments, Participations, etc
(a) Any Bank may, with the prior written consent of the Company at
all times other than during the existence of an Event of Default and the
Agent and the Issuing Bank, which consent of the Company shall not be
unreasonably withheld, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Company, the
Agent, or the Issuing Bank shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an
Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all,
of the Loans, the Commitment, the L/C Obligations and the other rights and
obligations of such Bank hereunder, in a minimum amount of $5,000,000 (or the
remainder of its Loans, Commitment and L/C Obligations, if less than
$5,000,000); provided, however, that the Company and the Agent may continue
to deal solely and directly with the assignor Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the
Company and the Agent by such Bank and the Assignee; (ii) such Bank and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") and (iii)
the assignor Bank has paid to the Agent a processing fee in the amount of
$4,000.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and that the Agent and the Issuing Bank have provided
their consents with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) 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 and
Acceptance, shall have the rights and obligations of a Bank under the Loan
Documents, and (ii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Loan Documents.
(c) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitment
arising therefrom. The Commitment allocated to each Assignee shall reduce
such Commitment of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests
of that Bank (the "originating Bank") hereunder and under the other Loan
Documents; provided, however, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iii) the
Company, the Issuing Bank, and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which
the Participant has rights to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to
the extent such amendment, consent or waiver would require unanimous consent
of the Banks as described in the first proviso to Section 11.01. In the case
of any such participation, the Participant shall be entitled to the benefit
of Sections 4.01, 4.03, and 11.05 as though it were also a Bank hereunder,
and if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion
of its rights under and interest in this Agreement in favor of any Federal
Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR S203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
11.09 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential"
or "secret" by the Company and provided to it by the Company or any
Subsidiary, or by the Agent on such Company's or Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the
Company or any Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a result of
disclosure by the Bank, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company, provided that
such source is not bound by a confidentiality agreement with the Company
known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent,
any Bank or their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder
or under any other Loan Document; (F) to such Bank's independent auditors and
other professional advisors; (G) to any Participant or Assignee, actual or
potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Banks hereunder;
(H) as to any Bank or its Affiliate, as expressly permitted under the terms
of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Bank or such
Affiliate; and (I) to its Affiliates.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at
any time held by, and other indebtedness at any time owing by, such Bank to
or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be
contingent or unmatured. Each Bank agrees promptly to notify the Company and
the Agent after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity
of such set-off and application.
11.11 Notification of Addresses, Lending Offices, Etc Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of
such other administrative information as the Agent shall reasonably request.
11.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.13 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement
required hereunder.
11.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary
of, or have any direct or indirect cause of action or claim in connection
with, this Agreement or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE
BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE
AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY CALIFORNIA LAW.
11.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A
TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.17 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks, the Issuing Bank and the Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.
11.18 Automatic Debit of Fees. With respect to any commitment fee,
arrangement fee, or other fee, or any other cost or expense (including
Attorney Costs) due and payable to the Agent or BofA under the Loan
Documents, the Company hereby irrevocably authorizes BofA to debit the
Company's designated account (Account No. 1498-1-00215) with BofA or such
other account or accounts with BofA as the Company may designate in writing
to the Agent in an amount such that the aggregate amount debited from all
such deposit accounts does not exceed such fee or other cost or expense. If
there are insufficient funds in such deposit accounts to cover the amount of
the fee or other cost or expense then due, such debits will be reversed (in
whole or in part, in BofA's sole discretion) and such amount not debited
shall be deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco, California by their proper and
duly authorized officers as of the day and year first above written.
OPTICAL COATING LABORATORY, INC.
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
Bank Commitment Pro Rata Share
- ---- ---------- --------------
Bank of America
National Trust
and Savings $11,000,000 55%
Association
ABN AMRO Bank N.V. $ 9,000,000 45%
----------- ----
TOTAL $20,000,000 100%
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 6.05: Litigation
1. In 1997, Optical Corporation of America ("OCA") and certain of its
directors and officers ("Affiliates") commenced suit against the
Company. The complaint arises out of a letter of intent executed by the
Company and OCA in March 1996 and an ensuing merger agreement executed
by the Company and OCA in June 1996. Under the merger agreement, the
Company would acquire OCA. The complaint seeks damages for costs and
expenses incurred by OCA in pursuing the merger transaction with the
Company due to the Company's alleged negligent misrepresentations to OCA
and Affiliates and the Company's alleged breach of its letter of intent
with OCA. The Company has filed counterclaims against OCA and the
Affiliates based on OCA's breach of the merger agreement and is seeking
damages based on the difference between the value of OCA's business to
the Company and the agreed upon purchase price under the merger
agreement. The Company does not believe that this litigation will have
any material adverse effect on its future operating results or financial
condition.
2. In 1997, Flex Products filed a suit in United States District Court for
the Eastern District of Michigan alleging that BASF Corporation (BASF)
and BASF AG have infringed Flex's patents covering optically variable
thin film flakes which, when mixed with paints and inks, produce color
shifting visual properties. The complaint requests that the Court
enjoin BASF from importing, making, using, selling or offering to sell
the infringing pigment in the United States. The complaint also seeks
damages for the infringement, including treble damages if the
infringement is found to be willful. BASF Corporation has filed a
counterclaim seeking a declaration that the patent in question is
invalid. Both BASF companies have requested that they be awarded their
attorneys' fees and costs. Management remains confident in the validity
of Flex Products' patent, and based upon the information currently
available, that the BASF product is, in fact, covered by the patent.
3. During the past several years, the Company has been engaged in
litigation in the United Kingdom ("U.K.") involving infringement of a
Company patent by Pilkington, a U.K. company. The Company won its
action at the Patents County Courts level but lost on appeal to the U.K.
House of Lords. During the injunction period, Pilkington submitted a
claim for damages totaling approximately $1.6 million for lost profits.
The Company and legal counsel are in the process of reviewing the claim.
Management believes that the amount of the claim is substantially
overstated and that the ultimate settlement will not have a material
adverse effect on the financial statements.
4. On July 29, 1998, Management learned that a suit was filed in the United
States District Court for the Northern District of Texas by Magnetic
Technologies S.P.R.L. against the Company, Connectware, Inc. and AMP
Incorporation. The Company has not been served with the complaint. The
complaint alleges violations of Section 1 of the Sherman Antitrust Act
and conspiracy between AMP, Connectware and the Company. Mangetic
Technologies had previously sought to join the Company and AMP in a
pending state court action in Texas by Magnetic Technologies against
Connectware alleging similar violations of antitrust laws under Texas
law. The Company and AMP were dismissed from this State lawsuit.
Management has reviewed this matter and does not believe that it has any
merit. In addition, the Company has an indemnification agreement from
Connectware relating to any claims by Magnetic Technologies against the
Company arising out of the transactions alleged in the complaint.
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 6.11: Permitted Liabilities
None.
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 6.12: Environmental Matters
In 1988, the Company discovered ground water contamination at its facilities
in Santa Rosa, California. With the assistance of its environmental
consultants and under the regulatory guidance of the California Regional
Water Quality Control Board, the Company established a program for reducing
contaminant concentration levels to acceptable federal and state levels. In
prior years, the Company recorded accruals to cover the future estimated cost
of drilling additional extraction and monitoring wells and considers those
accruals to be adequate. The Company spent $0, $228,000 and $10,000 in
fiscal years 1997, 1996 and 1995 for drilling, extraction and monitoring
wells which were charged against those accruals. In addition, the accrual
was reduced by a total of $200,000 in 1997 and 1996 as a result of approval
of the Company's final remediation plan by the California Regional Water
Quality Control Board. Ongoing ground water remediation expenses, and the
cost of compliance with environmental standards for years 1995 through 1997,
have not been material to the operations of the Company, and the Company does
not expect them to be material in the future
Flex Products, Inc. ("Flex")
1. Ground water contamination had extended to OCLI's Building D location
where a portion of Flex's operations are located. None of the
contaminants found were associated with materials used by Flex.
2. In 1994, Flex exceeded its permitted acetone emission levels. Since that
period, Flex has redesigned the acetone stripper and has received an
increase in its allowable emission levels from the BAAQMD.
3. Flex is in possession of all documentation for permitted equipment.
4. Flex continues to offer its hazardous wastes to reputable waste handling
companies. All companies are inspected and audited to ensure that they
are in compliance, that they have no pending environmental citations,
that they are fully bonded and insured and that they have a solid safety
history.
5. In 1993, a plastic tub containing some used oil owned by Flex overflowed
due to rain and some of the oil escaped into a sump. Today, all
secondary containment pallets are either covered or placed in a location
to avoid rain access. When used for cleaning of oil contaminated
equipment, the contaminated liquid is immediately prepared for disposal.
Flex maintains a current waste profile for water containing oil.
6. In 1995, OCLI received a notice from the Industrial Waste Superintendent
of Santa Rosa, California, that it was approaching its discharge limits
for total toxic organics. The largest constituent of the discharge was
acetone, a by-product of Flex's operations. Flex redesigned its Building
D stripper unit to eliminate the use of a water sealed vacuum pump.
With the completion of that project, Flex is now a zero discharge
facility.
OCLI Optical Coating Laboratory, Ltd., Scotland
None
OCLI Optical Coating Laboratory, GmbH, Germany
None
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 6.16: Subsidiaries and Minority Interests
(a) Optical Coating Laboratory, Inc. has the following subsidiaries:
Percent of Place of
Subsidiary Name Ownership Incorporation
OCLI International Service Corporation................ 100% California
OCLI Foreign Sales Corporation........................ 100% Guam
OCLI Optical Coating Laboratory, Ltd.................. 100% Scotland
OCLI Optical Coating Laboratory GmbH.................. 100% Germany
MMG Glastechnik GmbH.................................. 100% Germany
OCLI Optical Coatings Espana S.A...................... 100% Spain
Optical Coating Laboratory B.V........................ 100% Netherlands
Optical Coating Laboratory EURL....................... 100% France
Flex Products, Inc.................................... 60% Delaware
Hakuto-OCLI, Ltd. (OCLI Asia)......................... 50% Japan
(b) Optical Coating Laboratory, Inc. has the following minority interests:
None
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 6.17: Insurance Matters
The Company carries earthquake insurance in the following amounts:
1. C-9 Coating Machine $ 5.9 million
2. Blanket Policy for OCLI $ 5.0 million
3. Blanket Policy for Flex Products, Inc. $10.0 million
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 8.01: Permitted Liens
Please see the attached "Minimum Operating Lease Commitments" schedule.
Also, please see the mortgages and other liens referenced in Schedule 8.06.
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 8.05: Certain Investments
Investments in and advances to subsidiaries at 4/30/98:
(Amounts in thousands) At 4/30/98
Investment in OCLI Optical Coating Laboratory, B.V.,
The Netherlands................................................. $26
Investment in OCLI Optical Coating Laboratory, GmbH, Germany...... 13,719
Advances to OCLI Optical Coating Laboratory, GmbH, Germany........ 3,809
Advances to OCLI Optical Coating Laboratory, B.V.,
The Netherlands................................................. 664
Investments in OCLI Optical Coating Laboratory, Ltd., Scotland.... 1,042
Investment in Hakuto-OCLI, Ltd. Joint Venture, Japan.............. 849
Investment in Flex Products, Inc., Santa Rosa, California......... 9,550
Advances to Flex Products, Inc., Santa Rosa, California........... 6,000
Advances to OCLI Optical Coatings Espana, Spain................... 819
OPTICAL COATING LABORATORY, INC.
AND SUBSIDIARIES
SCHEDULE 8.06: Certain Indebtedness
Disclosure was at
(Amounts in thousands) the closing date
-----------------
Aid Association for Lutherans. Mortgage payable. Interest at 8%.
Collateralized by a 72,000 sq. ft. newly constructed buildingd
and related land. Principal and interest payments of $25,000r
per month through 2011.......................................... $ 2,370
Aid Association for Lutherans. Mortgage payable. Interest at 7.5%.
Collateralized by a 65,000 sq. ft. newly constructed building and
related land leased to Flex Products. Principal and interest
payments of $28,000 per month through 2011..................... 2,735
Scottish Development Agency. Building loan, with a conditional
interest moratorium from February 1, 1995 through January 31, 1998,
with interest at 9.5% thereafter. Semiannual principal payments of
approximately $100,000 are payable through January 1998 with
subsequent payments of $331,000, comprising principal and
interest, through 2006. Collateralized by the land and building
of the Company's Scottish subsidiary........................... 3,748
ABN AMRO. Unsecured bank note. Interest at 5.6%. Quarterly
principal and interest payments of approximately $300,000
through December 2002............................................. 4,075
Deutsche Bank. Bank loans of OCLI/MMG Division with interest
rates ranging from 4.5% to 7.5%. Payable in semiannual and
annual installments through 2020. Partly collateralized by
mortgages on OCLI/MMG Division land and buildings and liens
on equipment................................................... 3,284
Asahi Bank. Bank line of Credit - Hakuto/OCLI J.V., Japan......... 1,498
Present value of obligations under capital leases at
imputed interest rates from 8.0% to 9.5% payable in
monthly installments through 2004............................... 2,166
19,876
Less current maturities .......................................... (5,594)
-------
Total long-term debt, net of current maturities............. $14,282
=======
The Company has a surety bond for $903,000 to satisfy the Company's workers'
compensation self-insurance requirements. The surety bond carries a fee of
1.00% per year.
During 1997, the Company replaced its 8%, $5 million note payable to private
parties with a 5.6% bank note. Payments of principal and interest under the
new note are denominated in German marks and are approximately $300,000 per
quarter through December 2002. In connection with the note payable to
private parties, the Company carried an incremental credit facility to cover
a surety letter for approximately $2.5 million issued to secure 50% of the
Company's obligation arising from the purchase of MMG. As the new note does
not require a surety letter, the $2.5 million surety letter was canceled.
During 1997, the Company recorded capital leases totaling $2,037,000 to
finance the hardware, software and integration costs of a new computer system
that is to be implemented in 1998. Lease terms run through February 2002
with payments totaling approximately $50,000 per month.
The Company's subsidiary in Scotland has a credit arrangement of up to
approximately $490,000 at market interest rates and has outstanding letters
of credit of approximately $330,000 to guarantee import duties. There were
no borrowings under the credit arrangement in fiscal years 1997 or 1996.
The Company's subsidiary in Germany has various credit facilities with local
banks totaling approximately $381,000 which are used for working capital
requirements. These credit facilities are utilized as part of normal local
payment practices.
During 1996, the Company entered into three sale/lease-back arrangements for
a newly acquired continuous coating machine and related equipment and for two
newly acquired coating machines to be used in the manufacturing operations of
Flex Products. Cash proceeds from the sale/lease-back arrangements exceeded
the Company's cost by approximately $750,000 which was recorded as deferred
revenue and is being amortized against lease expenses at the rate of
approximately $125,000 per year. The lease terms are six years with monthly
payments totaling approximately $290,000 and buyout provisions at the end of
each lease.
The Company has certain financial covenants and restrictions under its bank
credit arrangements and the unsecured senior notes.
OPTICAL COATING LABORATORY, INC.
AND RESTRICTED COMPANIES
SCHEDULE 8.09: Contingent Obligations
Existing Guarantees
Optical Coating Laboratory, Inc.
a. Surety Bond with National Fire Insurance Company of Hartford for
$819,776 covering the Company's State of California Workers'
Compensation self-insured liabilities.
b. Guarantee to Hakuto Co., Ltd. for one-half (1/2) of both present and
future loans between the Bank and Hakuto-OCLI Co., Ltd. (the "J.V.") to
which Hakuto guaranteed to the Bank the obligations of the J.V. to the
Bank.
c. Letter of Comfort to Deutsche Bank AG, Germany, for credit facilities up
to DM 3,000,000 (German Marks Three Million) for MMG Glastechnik GmbH,
Germany.
d. Guarantee on behalf of OCLI Optical Coating Laboratory, Ltd. to Barclays
Bank, Edinburgh, Scotland, dated May 25, 1984 for U.S. $800,000 (Eight
Hundred Thousand U.S. Dollars).
OCLI Optical Coating Laboratory, Ltd., Scotland
None
OCLI Optical Coating Laboratory, GmbH, Germany
None
Flex Products, Inc.
None
SCHEDULE 11.02
AGENT'S PAYMENT OFFICE
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
OPTICAL COATING LABORATORIES, INC.
2789 Northpoint Parkway
Santa Rosa, CA 95407-7397
Attention: Jeffrey M. Ryan
Telephone: 707/525-7656
Facsimile: 707/525-7410
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Notices for Borrowing, Conversions/Continuations, Payments:
Bank of America National Trust and Savings Association
Agency Management Services #5596
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attention: Irene Ruddell, Associate Agency Officer
Telephone: 925/675-8441
Facsimile: 925/675-8500
Other Notices:
Bank of America National Trust and Savings Association
Credit Products #3838
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: James P. Johnson
Telephone: 415/622-6177
Facsimile: 415/622-2385
Agent's Payment Office:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attention: Agency Management Services #5596
Reference: Optical Coating Laboratories, Inc.
For Credit to Bancontrol Acct. No. 12334-14577
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Bank
Address for Notices:
Bank of America National Trust and Savings Association
Trade Operations #22621
333 S. Beaudry Avenue, 19th Floor
Los Angeles, CA 90017
Attention: Sandra Leon
Telephone: 213/345-5231
Facsimile: 213/345-6684
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard, 4th Floor
Concord, CA 94520
Attention: Joyce Drumgoole
Telephone: 925/675-7132
Facsimile: 925/675-7235
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of America National Trust and Savings Association
Credit Products #3838
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: James P. Johnson
Telephone: 415/622-6177
Facsimile: 415/622-4585
ABN AMRO BANK N.V.
Domestic and Offshore Lending Office:
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 625
Chicago, IL 60603-4108
Attention: Loan Administration
Telephone: 312/904-8855
Facsimile: 312/904-1287
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
ABM AMRO Bank N.V.
135 South LaSalle Street, Suite 625
Chicago, IL 60603-4108
Attention: Credit Administration
Telephone: 312/904-8835
Facsimile: 312/904-8840
With a copy to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attention: Mathew Harvey
Telephone: 415/984-3733
Facsimile: 415/362-3524
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Bank and as a Bank
By:
Name:
Title:
ABN AMRO BANK N.V.
By:
Name:
Title:
By:
Name:
Title:
EXHIBIT A
OPTICAL COATING LABORATORY, INC.
COMPLIANCE CERTIFICATE
Financial
Statement Date: _________, ______
Reference is made to that certain Credit Agreement dated as of July 31,
1998 (as amended, amended and restated, modified, supplemented, extended or
renewed from time to time, the "Credit Agreement") among Optical Coating
Laboratory, Inc. (the "Company"), the several financial institutions from
time to time parties thereto (the "Banks") and Bank of America National Trust
and Savings Association, as letter of credit issuing bank and as agent for
the Banks (in such capacity, the "Agent"). Unless otherwise defined herein,
capitalized terms used herein have the respective meanings assigned to them
in the Credit Agreement.
The undersigned Responsible Officer hereby certifies as of the date
hereof that he/she is the ___________ of the Company, and that, as such,
he/she is authorized to execute and deliver this Certificate to the Banks and
the Agent on the behalf of the Company and its consolidated Subsidiaries, and
that:
[Use the following paragraph if this Certificate is delivered in connection
with the financial statements required by subsection 7.01(a) of the Credit
Agreement.]
1. Attached are true and correct copies of the audited consolidated
balance sheet of the Company and its Subsidiaries as at the end of the fiscal
year ended ___________, ______, and the related consolidated statements of
income or operations, shareholders' equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, accompanied by the opinion of the Independent Auditor,
which opinion (a) states that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years, and (b) is not qualified
or limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any Subsidiary's records
or any other reason. Attached as well is a certificate of the Independent
Auditor stating that in making the examination necessary for its opinion
there was observed no Default or Event of Default of the kind which would
normally be revealed by such an examination, except as specified in the
certificate.
2. Attached are true and correct copies of the balance sheet of Flex
Products as at the end of the fiscal year ended ____________, _____, and the
related statements of income and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, which
fairly present, in accordance with GAAP (subject to ordinary, good faith
audit adjustments and the absence of notes to such financial statements), the
financial position and the results of operations of Flex Products.
or
[Use the following paragraph if this Certificate is delivered in connection
with the financial statements required by subsection 7.01(b) of the Credit
Agreement.]
1. Attached are true and correct copies of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of the fiscal
quarter ended __________, ______, and the related consolidated statements of
income, shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such quarter and commencing on the
first day of the fiscal year and ending on the last day of such quarter,
which fairly present in accordance with GAAP (subject to ordinary, good faith
audit adjustments and the absence of notes to such financial statements), the
financial position and the results of operations of the Company and its
Subsidiaries.
2. Attached are true and correct copies of the balance sheet of Flex
Products as of the end of the fiscal quarter ended ______________,
_____________, and the related statements of income and cash flows for the
period commencing on the first day and ending on the last day of such quarter
and commencing on the first day of the fiscal year and ending on the last day
of such quarter, which fairly present, in accordance with GAAP (subject to
ordinary, good faith audit adjustments and the absence of notes to such
financial statements), the financial position and the results of operations
of Flex Products.
3. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions of the
Company and its Subsidiaries during the accounting period covered by the
attached financial statements.
4. To the best knowledge of the undersigned, the Company and its
Subsidiaries, during such period, have observed, performed or satisfied all
of their covenants and other agreements and satisfied every condition in the
Credit Agreement to be observed, performed or satisfied by the Company and
its Subsidiaries, and the undersigned has no knowledge of any Default or
Event of Default.
5. The following financial covenant analyses and information set forth
on Schedule 1 attached hereto are true and accurate on and as of the date of
this Certificate. All amounts and ratios in Schedule 1refer to the
financial statements attached hereto and are determined in accordance with
the specifications set forth in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as the
___________________ of the Company as of _________________, ______.
OPTICAL COATING LABORATORY, INC.
By:
Title:
Date:
For the fiscal quarter
ended:
Schedule 1
to the Compliance Certificate
Financial Covenant Analyses and Information
8.01 Limitation on Liens.
Actual Permitted
Aggregate principal amount
secured by judgment and
judicial attachment Liens $___________
covered by S8.01(g) $5,000,000
Actual Permitted
Aggregate principal amount of
Indebtedness secured by deed of
trust on the Company's property
in Santa Rosa, California $___________
(S8.01(j)(2)) $9,000,000
Actual Permitted
1 All items determined on a consolidated basis and in accordance with GAAP,
consistently applied.
Aggregate principal amount of
secured Indebtedness and other $___________
obligations covered by S8.01(n) $5,000,000
8.03 Disposition of Assets.
Actual Permitted
Aggregate amount of
dispositions covered by $___________ $__________
S8.03(d) *
* Not to exceed in any twelve month period, 10% of the gross book value of
the assets of the Company and its Subsidiaries on a consolidated basis
(exclusive of goodwill, patents, trademarks, trade names, organization
expense, treasury stock, unamortized debt discount and expense, deferred
charges, and other like intangibles) less reserves applicable thereto.
8.05 Loans and Investments.
Actual Permitted
Aggregate amount of investments $___________ $__________
covered by S8.05(o) *
* The aggregate book value of all such investments shall not at any time
exceed 2.50% of the consolidated total assets of the Company and its
Subsidiaries determined at such time.
8.05(s) Investments.
1. Aggregate amount of all Restricted Payments declared
or made during the period from and after October 31,
1994 to and including the date proposed investment is
to be made: $____________
2. All investments previously made pursuant to S8.05(s) held
by the Company and its Subsidiaries: $____________
3. All Indebtedness permitted under S8.06(h) owed by the
Company and its Subsidiaries: $____________
4. Sum of 1 + 2 + 3: $____________
5. $ 7,000,000
------------
6. 50% of cumulative consolidated net income of the
Company and its Subsidiaries for the period
commencing after October 31, 1994 and ending on
and including the date the proposed investment is
to be made (or minus 100% of deficit): $_____________
7. Aggregate of net cash proceeds from and after
October 31, 1994 to and including the date the
proposed investment is to be made from issuance
and sale of capital stock (other than Redeemable
Stock) and warrants, rights or options: $
=============
8. Line 5 plus line 6 (minus if 6 represents a deficit)
plus line 7: $_____________
9. Amount in line 4: $_____________
10. Amount in line 8: $_____________
11. Line 8 minus line 4: $_____________
12. Amount of proposed investment (cannot exceed
amount in line 11): $_____________
8.06 Limitation on Indebtedness.
Not to be
shorter
Aggregate principal amount of than the
Indebtedness secured by deed of Weighted remaining
trust on the Company's Property average life term of the
in Santa Rosa, California of such revolving
(S8.06(f)) Indebtedness credit
Actual: $___________
Permitted: $9,000,000 ___________ ____________
Actual Permitted
Aggregate amount of
Indebtedness of the Company's
Subsidiaries (other than Flex
Products) (utilized and
unutilized) covered by
S8.06(g)(1) $___________ $5,000,000
Actual Permitted
$32,000,00
Aggregate amount of
Indebtedness covered by _ *
S8.06(i) ----------
$ $
------------ ==========
* = Aggregate of then combined Commitments (utilized and unutilized).
8.06(j) Covenant Calculations:
1. Principal amount of Indebtedness to third person: $
-----------
2. Name of third person:
-----------
3. Guaranteed by SICPA: Yes
4. Corresponding principal amount of Indebtedness of
Flex Products to the Company (must be 150% of amount
on line 1): $
------------
8.11 Lease Obligations.
Actual Permitted
Aggregate annual rental
payments for capital leases
covered by S8.11(d) $___________ $15,000,000
8.12 Restricted Payments.
1. Aggregate amount of all Restricted Payments declared
or made during the period from and after October 31,
1994 to and including the date proposed Restricted
Payment is to be declared or made: $____________
2. All investments made pursuant to S8.05(s) held by
the Company and its Subsidiaries: $____________
3. All Indebtedness permitted under S8.06(h) owed
by the Company and its Subsidiaries: $____________
4. Sum of 1 + 2 + 3: $
=============
5. $ 7,000,000
-------------
6. 50% of cumulative consolidated net income of the
Company and its Subsidiaries for the period
commencing after October 31,1994 and ending on and
including the date the proposed Restricted Payment
is to be made (or minus 100% of deficit): $____________
7. 5 plus 6 (minus if 6 represents a deficit): $____________
8. Amount in line 4: $____________
9. Amount in line 7: $____________
10. Line 7 minus line 4: $____________
11. Amount of proposed Restricted Payment
(cannot exceed amount in line 10): $
=============
8.14 Tangible Net Worth.
Actual Permitted
$70,000,000
+ *
-----------
+ **
-----------
Tangible Net Worth $__________ $__________
* 50% of consolidated net income after income taxes (but without giving
effect to any net losses) earned in any quarterly accounting period
commencing after October 31, 1997.
** 50% of cash proceeds net out-of-pocket costs and expenses paid to non-
Affiliates (not including cash proceeds from common stock issued upon
exercise of employee stock options, issued to employee stock ownership
plan, or issued upon the exercise of rights where no additional
consideration is received by the Company).
8.15 Leverage Ratio.
1. Funded Debt (after subtracting Indebtedness of Flex
Products covered by S8.06(j) and Indebtedness of Flex
Products to SICPA under the SICPA/OCLI Joint Acquisition
Agreement (the "Flex-SICPA Debt")): $
------------
2. EBITDA (after subtracting the interest expense related
to the Flex-SICPA Debt) (EBITDA to be measured
on a four quarter trailing basis and may include acquired
EBITDA to extent permitted under the Credit Agreement): $
------------
3. Ratio of 1 to 2:
------------
4. Required ratio of 1 to 2: 2.50 to 1.00
------------
8.16 Fixed Charge Coverage Ratio.
1. EBIT* (after subtracting the interest expense related to
the Flex-SICPA Debt): $
------------
2. Net interest expense* (after subtracting the interest
expense related to the Flex-SICPA Debt) plus current
portion of long term debt** (after subtracting the
current portion of the Flex-SICPA Debt): $
------------
3. Ratio of 1 to 2:
4. Required ratio of 1 to 2: 1.50 to 1.00
------------
* EBIT and interest expense will be measured on a four quarter trailing
basis and may include acquired EBIT to extent permitted under Credit
Agreement.
** Current portion of long term debt will be calculated on a four quarter
prospective basis.
EXHIBIT B
NOTICE OF BORROWING
Date: ___________, _____
To: Bank of America National Trust and Savings Association as Agent for the
Banks parties to the Credit Agreement dated as of July 31, 1998 (as
amended, amended and restated, modified, supplemented, extended or
renewed from time to time, the "Credit Agreement") among Optical Coating
Laboratory, Inc., certain Banks which are signatories thereto and Bank
of America National Trust and Savings Association, as letter of credit
issuing bank and as Agent
Ladies and Gentlemen:
The undersigned, Optical Coating Laboratory, Inc. (the "Company"),
refers to the Credit Agreement, the terms defined therein being used herein
as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.03 of the Credit Agreement, of the Borrowing specified below:
1. The aggregate amount of the proposed Borrowing is
$_____________.
2. The Business Day of the proposed Borrowing is _____________,
_____.
3. The Borrowing is to be comprised of $________ of [Base Rate]
[Offshore Rate] Loans.
4. The duration of the Interest Period for the Offshore Rate
Loans included in the Borrowing shall be ____ months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company contained in
Article VI of the Credit Agreement are true and correct with the same
effect as if made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in
which case they are true and correct as of such earlier date);
(b) no Default or Event of Default has occurred and is continuing,
or would result from such proposed Borrowing; and
(c) the proposed Borrowing will not cause the Effective Amount of
all outstanding Revolving Loans and the Effective Amount of all L/C
Obligations to exceed the combined Commitments.
OPTICAL COATING LABORATORY, INC.
By:
Title:
By:
Title:
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date: ___________, ____
To: Bank of America National Trust and Savings Association, as Agent for the
Banks parties to the Credit Agreement dated as of July 31, 1998 (as
amended, amended and restated, modified, supplemented, extended or
renewed from time to time, the "Credit Agreement") among Optical Coating
Laboratory, Inc., certain Banks which are signatories thereto and Bank
of America National Trust and Savings Association, as letter of credit
issuing bank and as Agent
Ladies and Gentlemen:
The undersigned, Optical Coating Laboratory, Inc. (the "Company"),
refers to the Credit Agreement, the terms defined therein being used herein
as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.04 of the Credit Agreement, of the [conversion] [continuation] of
the Revolving Loans specified herein, that:
1. The proposed Conversion/Continuation Date is __________, ____.
2. The aggregate amount of the Revolving Loans to be [converted]
[continued] is $_________.
3. The Revolving Loans are to be [converted into] [continued as]
[Offshore Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the Offshore Rate
Loans included in the [conversion] [continuation] shall be ___ months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed [conversion]
[continuation], before and after giving effect thereto:
(a) the representations and warranties of the Company contained in
Article VI of the Credit Agreement are true and correct with the same
effect as if made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in
which case they are true and correct as of such earlier date);
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
(c) the proposed [conversion] [continuation] will not cause the
Effective Amount of all outstanding Revolving Loans and the Effective
Amount of all L/C Obligations to exceed the combined Commitments.
OPTICAL COATING LABORATORY, INC.
By:
Title:
By:
Title:
EXHIBIT D
FORM OF LEGAL OPINION OF COMPANY'S COUNSEL
August 3, 1998
Bank of America National Trust &
Savings Association, as Agent
for Banks, as the Letter of Credit
Issuing Bank, and as a Bank
555 California Street, 41st Floor, #3838
San Francisco, California 94104
ABN AMRO Bank N.V., as a Bank
101 California Street, Suite 4550
San Francisco, California 94104
Re: $20,000,000 Credit Facility by Bank of America
National Trust & Savings Association and
Certain Other Financial Institutions to
Optical Coating Laboratory, Inc.
Ladies and Gentlemen:
We have acted as counsel to Optical Coating Laboratory,
Inc., a Delaware corporation (the "Company"), in connection
with the execution and delivery by the Company of that
certain Credit Agreement dated as of July 31, 1998, by and
among the Company, Bank of America National Trust and
Savings Association, as Agent for the Banks, as the Letter
of Credit Issuing Bank, and as a Bank, ABN AMRO Bank, N.V.,
as a Bank, and the other financial institutions from time to
time party thereto (the "Agreement") providing for a
revolving credit facility (including a letter of credit
subfacility) from you to the Company of up to $20,000,000
(the "Loan"). This firm also represents the Company on a
regular basis, although our engagement has been limited to
specific matters as to which we have been consulted by the
Company. We are delivering this opinion to you pursuant to
Section 5.01(c) of the Agreement. All capitalized terms
used and not expressly defined herein shall have the meaning
given to them in the Agreement.
In connection with the foregoing we have been furnished
with originals or copies certified to our satisfaction of
such corporate or other records of the Company, with such
certificates of officers and representatives of the Company,
and with such other documents, and we have made such other
examinations, investigations and inquiries of the Company
and its officers, as we have deemed necessary as a basis for
the opinions expressed below.
In connection with this opinion, we have examined and
relied upon originals, or copies certified or otherwise
identified to our satisfaction as being true copies, of the
following, each dated this date unless otherwise indicated:
A. The Agreement;
B. Any other documents specified in the Agreement to
be executed and delivered by the Company in conjunction with
delivery of the Agreement (together with the Agreement,
the "Loan Documents");
C. A Certificate of the Secretary of the Company
certifying as to (i) the Certificate of Incorporation of the
Company, (ii) the Bylaws of the Company and (iii)
resolutions adopted by the Board of Directors of the
Company;
D. A certificate executed by Charles J. Abbe,
President and Chief Executive Officer, Craig B. Collins,
Vice President, Finance and Chief Financial Officer and
Jeffrey M. Ryan, Assistant Treasurer of the Company
(the "Company's Certificate"), stating that aside
from certain outstanding indentures and loan, credit,
guaranty or lease agreements, all of which are identified in
said certificate, no other agreements or instruments or
orders, writs, judgments, awards, injunctions and decrees,
affect or purport to affect the right of the Company to
borrow money or to undertake and perform obligations of the
Company under the Agreement;
E. A certificate of the Secretary of State of
Delaware, dated July 14, 1998, attesting to the continued
corporate existence and good standing of, and current
payment of franchise taxes by, the Company in that state;
F. A certificate of the Secretary of State of
California, dated July 14, 1998, attesting that the Company
is qualified to transact business as a foreign corporation
in that state;
G. A certificate of the Franchise Tax Board of
California, dated July 15, 1998, attesting to the good
standing of the Company with that agency; and
H. Originals, or copies certified or otherwise
identified to our satisfaction, of such other documents,
records, instruments and certificates of public officials as
we have deemed necessary or appropriate to enable us to
render this opinion.
We have also examined originals or copies of the
documents listed in the Company's Certificate.
In conducting our examination we have assumed, without
investigation, the genuineness of all signatures, the
correctness of all certificates, the authenticity of all
certificates and documents submitted to us as originals, the
conformity to original documents of all documents submitted
to us as certified or photostatic copies and the
authenticity of the originals of such copies, and the
accuracy and completeness of all records made available to
us by the Company. We have also assumed, without
investigation, the accuracy of the representations and
warranties as to factual matters made by any party in the
Agreement and the accuracy of the representations and
statements made to us by officers or employees of the
Company and by public officials. In making our examination
of documents and instruments executed by any person or
entity, we have assumed, without investigation, that each
such person or entity has (i) the power, capacity, right and
legal authority to enter into and perform all of its
obligations under such documents and instruments, (ii) duly
authorized all requisite action with respect to such
documents and instruments, and (iii) duly executed and
delivered such documents and instruments. We have not,
however, made the assumptions set forth in the immediately
preceding sentence with respect to the Company or its power,
capacity, right, authority, authorization or execution of
documents and instruments.
Whenever a statement below is qualified by the phrases
"known to us" or "to our knowledge," it is intended to
indicate that during the course of our representation of the
Company, no information that would give us actual knowledge
of, or a reasonable belief concerning, the inaccuracy of
such statement has come to the attention of those attorneys
in this firm who have rendered legal services to the
Company. Except as otherwise expressly indicated, we have
not undertaken any independent investigation to determine
the accuracy of such statement, and any limited inquiry
undertaken by us during the preparation of this opinion
letter should not be regarded as such an investigation. No
inference as to our knowledge of any matters bearing on the
accuracy of any such statement should be drawn from the fact
of our representation of the Company.
In rendering the opinions hereinafter expressed, we
have also assumed, without investigation, that the following
facts are true:
1. You, and your Assignees, if any, will enforce your
respective rights under the Agreement in circumstances and
in a manner in which it is commercially reasonable to do so,
and in accordance with all procedural requirements under
applicable law.
2. No party to the Agreement or to any of the other
Loan Documents or any agreement relating thereto is subject
to any statute, rule, or regulation, or to any impediment to
which contracting parties are generally not subject, which
requires the Company or any other person or party to obtain
the consent of or to make a declaration or filing with any
governmental authority or other person or entity. However,
we have not assumed, for the purposes of this letter, that
the Company is not subject to any such statute, rule,
regulation or impediment.
3. We assume that you, and your Assignees, if any,
are exempt from the usury laws of the State of California.
The opinions expressed below are subject to the
following qualifications:
1. Our opinions below are subject to the following:
(a) the effect of bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium and
other similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally; (b) the
limitations imposed by California law, federal law, or
equitable or public policy principles upon the performance
or enforceability of any of the remedies, covenants, or
other provisions of the Agreement or other Loan Documents
and upon the availability of injunctive relief or other
equitable remedies, including, without limitation, the
effect of California and federal court decisions invoking
statutes or principles of equity or of public policy, which
have held that certain covenants and provisions of
agreements are unenforceable where: (i) the breach of such
covenants or provisions imposes restrictions or burdens upon
the debtor, including acceleration or the imposition of late
payment charges or increased interest rates upon delinquency
in the payment of indebtedness due under debt instruments,
and it cannot be demonstrated that the enforcement of such
restrictions or burdens is reasonably necessary for the
protection of the creditor, or (ii) the creditor's
enforcement of such covenants or provisions under the
circumstances would violate the creditor's implied covenant
of good faith and fair dealing; and (c) the limitations upon
the ability of the Company or any other party to the
Agreement to waive any rights, claims or defenses available
to such party at law or in equity pursuant to statute or
otherwise. With respect to subclause (i) of clause (b)
above, but without limiting the generality of the foregoing,
we note that certain cases have held that imposition of
increased interest or late charges were, under the
circumstances, punitive and invalid. See Garrett v. Coast
and Southern Federal Savings & Loan, 9 Cal.3d 731 (1973).
2. In expressing our opinions below, we note that
your right to enforce certain remedies set forth in the
Agreement may be subject to various notice and procedural
limitations imposed by California law.
3. We are members of the Bar of the State of
California and do not hold ourselves out as experts on the
law of any other state. Our opinions below are limited to
the effect of the laws of the State of California and of the
federal laws of the United States. Accordingly, we express
no opinion with respect to the laws of any other
jurisdiction, or the effect thereof, on the transactions
contemplated by the Agreement. The foregoing
notwithstanding, we are sufficiently familiar with the
General Corporation Law of the State of Delaware to render
the opinion in clause (i) of opinion paragraph (a) below.
4. Our opinions below are limited to matters
expressly set forth in this opinion letter, and no opinion
is to be implied or may be inferred beyond the matters
expressly so stated.
5. We call your attention to the fact that no opinion
is expressed with regard to any financial or similar
covenants contained in the Agreement or in any other
agreement or instrument with application to the Company.
6. We call your attention to the fact that no opinion
is expressed with regard to usury laws as would apply to you
or any of your Assignees or any Participants.
7. We call your attention to the fact that no opinion
is expressed with regard to the validity or enforceability
of the provisions set forth in Article X of the Agreement
or, to the extent they relate only to the relationship among
the Banks and the Issuing Bank, the provisions set forth in
Article III of the Agreement.
Based upon and subject to the foregoing, we are of the
opinion that:
(a) The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business as a
foreign corporation in the State of California and (ii) is
duly qualified as a foreign corporation and in good standing
in each state where its ownership, lease or operation of
property or the conduct of its business requires such
qualification, except, in the case of clause (ii), to the
extent that the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
(b) The Company has the power and authority to execute
and deliver, and to perform and observe the provisions of,
each of the Agreement and the other Loan Documents.
(c) The execution, delivery and performance by the
Company of the Agreement and the other Loan Documents have
been duly authorized by all necessary corporate action.
(d) The Agreement and the other Loan Documents have
been duly executed and delivered by the Company.
(e) To our knowledge, no approval, consent, exemption,
authorization, or other action by, or notice to, or filing
with, any Governmental Authority is necessary or required in
connection with the execution, delivery or performance by,
or enforcement against, the Company of the Agreement or any
other Loan Document.
(f) The Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and
binding obligations of the Company, enforceable against the
Company in accordance with their respective terms.
(g) Neither the Company nor any Subsidiary of the
Company is an "Investment Company" or a company "controlled"
by an Investment Company within the meaning of the
Investment Company Act of 1940. The Company is not subject
to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act
(as revised by the ICC Termination Act of 1995), or, to our
knowledge, any other Federal or state statute or regulation
limiting its ability to incur Indebtedness. Without
limiting any qualification or assumption set forth in this
letter, we note that our opinion in this Paragraph (g) is
based solely upon the Company's Certificate and we have made
no independent investigation of the status of the Company,
any Person controlling the Company or any Subsidiary of the
Company as an "Investment Company" or as to whether the
Company is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, or any other Federal or state
statute or regulation limiting its ability to incur
Indebtedness.
(h) The execution, delivery and performance of the
Agreement and the other Loan Documents by the Company are
not in violation of the Certificate of Incorporation or
Bylaws of the Company or, to our knowledge, any Requirement
of Law.
(i) To our knowledge after due inquiry of officers of
the Company, the execution, delivery and performance of the
Agreement and the other Loan Documents by the Company will
not violate or result in a breach of any of the terms of or
constitute a default under or result in the creation of any
Lien on any property or assets of the Company pursuant to
the terms of any agreement or instrument to which the
Company is a party and which is listed in the Company's
Certificate, or any order, injunction, writ or decree of any
Governmental Authority to which the Company or its property
is subject.
(j) The execution, delivery and performance of the
Agreement and the other Loan Documents will not conflict
with or contravene any of Regulations G, T, U and X
promulgated by the Federal Reserve Board.
(k) To our knowledge and except with respect to those
matters identified on Schedule 6.05 to the Agreement, there
are no actions, suits, proceedings, claims or disputes
pending or threatened against the Company or its
Subsidiaries or any of their respective properties before
any court, regulatory body, administrative agency, at law,
in equity, in arbitration or before any Governmental
Authority which (a) purport to affect or pertain to the
Agreement or the other Loan Documents, or any of the
transactions contemplated thereby, or (b) if determined
adversely to the Company or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect.
This opinion letter is rendered solely for your benefit
in connection with the transactions described in the
Agreement. Without our prior written consent, this opinion
letter may not be (a) relied upon by any other person or
entity or used for any other purpose; (b) quoted in whole or
in part or otherwise referred to in any report or document;
or (c) furnished (the original or copies thereof) to any
person or entity except in connection with the enforcement
of the Loan Documents by you or to regulatory authorities to
which you are subject.
Very truly yours,
Collette & Erickson LLP
OCLI 1.729
EXHIBIT E
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, _____ is made between
_______________________ (the "Assignor") and __________________________ (the
"Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement
dated as of July 31, 1998 (as amended, amended and restated, modified,
supplemented, extended or renewed from time to time, the "Credit Agreement")
among Optical Coating Laboratory, Inc., a Delaware corporation (the
"Company"), the several financial institutions from time to time party
thereto (including the Assignor, the "Banks"), and Bank of America National
Trust and Savings Association, as letter of credit issuing bank ("Issuing
Bank") and as agent for the Banks (the "Agent"). Any terms defined in the
Credit Agreement and not defined in this Assignment and Acceptance are used
herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Revolving Loans to, and to participate in Letters of
Credit issued by the Issuing Bank for the account of, the Company in an
aggregate amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Revolving Loans in the aggregate
principal amount of $__________ to the Company] [no Revolving Loans are
outstanding under the Credit Agreement];
WHEREAS, [the Assignor has acquired a participation in the Issuing
Bank's liability under Letters of Credit in an aggregate principal amount of
$____________ (the "L/C Obligations")] [no Letters of Credit are outstanding
under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of
the] [all] rights and obligations of the Assignor under the Credit Agreement
in respect of its Commitment, [together with a corresponding portion of each
of its outstanding Revolving Loans and L/C Obligations,] in an amount equal
to $__________ (the "Assigned Amount) on the terms and subject to the
conditions set forth herein and the Assignee wishes to accept assignment of
such rights and to assume such obligations from the Assignor on such terms
and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except
as expressly provided in this Assignment and Acceptance) __% (the "Assignee's
Percentage Share") of (A) the Commitment [and the Revolving Loans and the L/C
Obligations] of the Assignor and (B) all related rights, benefits,
obligations, liabilities and indemnities of the Assignor under and in
connection with the Credit Agreement and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor by
Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Revolving Loans and L/C Obligations assigned.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the
obligations of a Bank under the Credit Agreement, including the requirements
concerning confidentiality and the payment of indemnification, with a
Commitment in an amount equal to the Assigned Amount. The Assignee agrees
that it will perform in accordance with their terms all of the obligations
which by the terms of the Credit Agreement are required to be performed by it
as a Bank. It is the intent of the parties hereto that the Commitment of the
Assignor shall, as of the Effective Date, be reduced by an amount equal to
the Assigned Amount and the Assignor shall relinquish its rights and be
released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee; provided, however, the
Assignor shall not relinquish its indemnity rights under the Loan Documents
(including rights arising under Article IV and subsection 11.04(b) and
Section 11.05 of the Credit Agreement).
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
$__________, representing the Assignee's Pro Rata Share of the principal
amount of all Revolving Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 11.08 of the Credit
Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date with
respect to the Commitment, Revolving Loans and L/C Obligations shall be for
the account of the Assignor. Any interest, fees and other payments accrued
on and after the Effective Date with respect to the Commitment, Revolving
Loans and L/C Obligations shall be for the account of the Assignee. Each of
the Assignor and the Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the
other party any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.11 or 7.01 of the
Credit Agreement, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assignment and Acceptance; and (b) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Bank and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit and legal decisions in taking or
not taking action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date
for this Assignment and Acceptance shall be __________, ____ (the "Effective
Date"); provided that the following conditions precedent have been satisfied
on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) any consent of the Company, the Issuing Bank and the
Agent required for an effective assignment of the Assigned Amount by the
Assignor to the Assignee under Section 11.08 of the Credit Agreement shall
have been duly obtained and shall be in full force and effect as of the
Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts
due to the Assignor under this Assignment and Acceptance;
(iv) the Assignee shall have complied with Section 10.10 of
the Credit Agreement (if applicable); and
(v) the processing fee referred to in Section 2(b) hereof and
in Section 11.08 of the Credit Agreement shall have been paid to the Agent.
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company, the Issuing Bank and
the Agent for acknowledgement by the Agent, a Notice of Assignment
substantially in the form attached hereto as Schedule 1.
6. Agent.
(a) The Assignee hereby appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
[(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.] [INCLUDE ONLY
IF ASSIGNOR IS AGENT]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Assignor, the Agent and
the Company that under applicable law and treaties no tax will be required to
be withheld by the Assignor with respect to any payments to be made to the
Assignee hereunder, (b) agrees to furnish (if it is organized under the laws
of any jurisdiction other than the United States or any State thereof) to the
Agent and the Company prior to the time that the Agent or Company is required
to make any payment of principal, interest or fees hereunder, duplicate
executed originals of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement
to the benefits of a tax treaty that provides for a complete exemption from
U.S. federal income withholding tax on all payments hereunder) and agrees to
provide new Forms 4224 or 1001 upon the expiration of any previously
delivered form or comparable statements in accordance with applicable U.S.
law and regulations and amendments thereto, duly executed and completed by
the Assignee, and (c) agrees to comply with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to
take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be
executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any
already given or obtained) for its due execution, delivery and performance of
this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Credit Agreement, no further action by, or notice
to, or filing with, any Person is required of it for such execution, delivery
or performance; and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in accordance
with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to
or affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto. The Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of the Company, or the performance or
observance by the Company, of any of its respective obligations under the
Credit Agreement or any other instrument or document furnished in connection
therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any
already given or obtained) for its due execution, delivery and performance of
this Assignment and Acceptance; and apart from any agreements or undertakings
or filings required by the Credit Agreement, no further action by, or notice
to, or filing with, any Person is required of it for such execution, delivery
or performance; (iii) this Assignment and Acceptance has been duly executed
and delivered by it and constitutes the legal, valid and binding obligation
of the Assignee, enforceable against the Assignee in accordance with the
terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to
or affecting creditors' rights and to general equitable principles; and
(iv) it is an Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required
in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No
failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off
or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The
Assignor and the Assignee each irrevocably submits to the non-exclusive
jurisdiction of any State or Federal court sitting in California over any
suit, action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such California State or Federal
court. Each party to this Assignment and Acceptance hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
OR STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By:
Title:
By:
Title:
Address:
[ASSIGNEE]
By:
Title:
By:
Title:
Address:
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, ____
Bank of America National Trust
and Savings Association, as Agent,
and as Letter of Credit Issuing Bank
U.S. Division Credit Products-SF #3838
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: James P. Johnson, Managing Director
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, CA 95407-7397
Attn: Treasurer
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of July 31, 1998 (as amended,
amended and restated, modified, supplemented, extended or renewed from time
to time the "Credit Agreement") among Optical Coating Laboratory, Inc. (the
"Company"), the Banks referred to therein and Bank of America National Trust
and Savings Association, as letter of credit issuing bank ("Issuing Bank")
and as agent for the Banks (the "Agent"). Terms defined in the Credit
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to2, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and
to the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor, [and all
outstanding Revolving Loans made by the Assignor] [and the Assignor's
participation in the Letters of Credit]) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance").
Before giving effect to such assignment the Assignor's Commitment is
$ ___________ [and] [the aggregate amount of its outstanding Revolving Loans
See Section 11.08 of Credit Agreement regarding circumstances under which
is $_____________] [, and its participation in L/C Obligations is
$_____________].
2. The Assignee agrees that, upon receiving the consent of the Agent,
the Issuing Bank and, if applicable, the Company, to such assignment, the
Assignee will be bound by the terms of the Credit Agreement as fully and to
the same extent as if the Assignee were the Bank originally holding such
interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: __________________________
Address: __________________________
__________________________
__________________________
Attention: __________________________
Telephone: (___) ____________________
Telecopier: (___) ____________________
Telex __________________________
(Answerback):
(B) Payment Instructions:
Account No.: __________________________
At: __________________________
__________________________
__________________________
Reference: __________________________
Attention: __________________________
Company consent is or is not required.
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above
mentioned.
[NAME OF ASSIGNOR]
By:
______________________________
Title:
______________________________
By:
______________________________
Title:
______________________________
[NAME OF ASSIGNEE]
By:
______________________________
Title:
______________________________
By:
______________________________
Title:
______________________________
ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO:
OPTICAL COATING LABORATORY,INC.
By:
Title:
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By:
Title:
OPTICAL COATING LABORATORY, INC.
DATED AS OF JULY 30, 1998
Note Purchase Agreement
_____________________
$6,400,000 8.71% SERIES A1 SENIOR NOTES DUE JUNE 1, 2002
$8,000,000 7.80% SERIES A2 SENIOR NOTES DUE JULY 31, 2008
$30,000,000 6.69% SERIES B SENIOR NOTES DUE JULY 31, 2008
TABLE OF CONTENTS
PAGE
1. BACKGROUND; AUTHORIZATION OF NOTES....................... 1
1.1 Background.......................................... 1
1.2 Authorization of Issuance and Exchange of Notes..... 1
2. NOTE EXCHANGE; SALE AND PURCHASE OF SERIES B NOTES....... 2
2.1 Note Exchange....................................... 2
2.2 Sale and Purchase of Series B Notes................. 2
2.3 Other Agreements.................................... 2
3. CLOSING.................................................. 3
4. CONDITIONS TO CLOSING.................................... 3
4.1 Representations and Warranties...................... 3
4.2 Performance; No Default............................. 3
4.3 Compliance Certificates............................. 4
4.4 Opinions of Counsel................................. 4
4.5 Purchase Permitted By Applicable Law, etc........... 4
4.6 Note Exchange and Sale of Other Notes............... 4
4.7 Payment of Special Counsel Fees..................... 5
4.8 Private Placement Numbers........................... 5
4.9 Payments in respect of Existing Notes............... 5
4.10 Changes in Corporate Structure...................... 5
4.11 Certain Consents and Agreements..................... 5
4.12 Credit Agreement.................................... 5
4.13 Proceedings and Documents........................... 6
4A. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE
NOTES.................................................... 6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 6
5.1 Organization; Power and Authority................... 6
5.2 Authorization, etc.................................. 6
5.3 Disclosure.......................................... 7
5.4 Organization and Ownership of Shares of
Subsidiaries; Affiliates............................ 7
5.5 Financial Statements................................ 8
5.6 Compliance with Laws, Other Instruments, etc........ 8
5.7 Governmental Authorizations, etc.................... 9
5.8 Litigation; Observance of Agreements, Statutes and
Orders.............................................. 9
5.9 Taxes............................................... 9
5.10 Title to Property; Leases........................... 9
5.11 Licenses, Permits, etc.............................. 10
5.12 Compliance with ERISA and Foreign Pension Plans..... 10
5.13 Private Offering by the Company..................... 11
5.14 Use of Proceeds; Margin Regulations................. 11
5.15 Existing Indebtedness; Future Liens................. 12
5.16 Foreign Assets Control Regulations, etc............. 12
5.17 Status under Certain Statutes....................... 12
5.18 Environmental Matters............................... 12
6. REPRESENTATIONS OF THE PURCHASER......................... 13
6.1 Purchase for Investment............................. 13
6.2 Source of Funds..................................... 13
6.3 No Conflict......................................... 15
6.4 Accredited Investor................................. 15
6.5 No Brokers.......................................... 15
6.6 Acknowledgement..................................... 15
7. INFORMATION AS TO COMPANY................................ 15
7.1 Financial and Business Information.................. 15
7.2 Officer's Certificate............................... 18
7.3 Inspection.......................................... 19
8. PAYMENT OF THE NOTES..................................... 19
8.1 Required Prepayments; Payment at Maturity........... 19
8.2 Optional Prepayments with Make-Whole Amount......... 20
8.3 Allocation of Partial Prepayments................... 21
8.4 Maturity; Surrender, etc............................ 21
8.5 No Other Optional Prepayments or Purchase of Notes.. 21
8.6 Make-Whole Amount................................... 22
9. AFFIRMATIVE COVENANTS.................................... 24
9.1 Compliance with Law................................. 24
9.2 Insurance........................................... 24
9.3 Maintenance of Properties........................... 25
9.4 Payment of Taxes and Claims......................... 25
9.5 Corporate Existence, etc............................ 25
9.6 Designation of Subsidiaries......................... 25
9.7 Pari Passu.......................................... 27
10. NEGATIVE COVENANTS....................................... 27
10.1 Nature of Business.................................. 27
10.2 Transactions with Affiliates........................ 27
10.3 Fixed Charge Coverage............................... 27
10.4 Limitations on Restricted Subsidiary Indebtedness... 27
10.5 Limitation on Consolidated Total Debt and Priority
Indebtedness........................................ 28
10.6 Liens............................................... 29
10.7 Maintenance of Consolidated Adjusted Net Worth...... 31
10.8 Restricted Payments and Restricted Investments...... 32
10.9 Merger, Consolidation, etc.......................... 33
10.10 Sale of Assets, etc................................ 34
11. EVENTS OF DEFAULT........................................ 35
12. REMEDIES ON DEFAULT, ETC................................. 38
12.1 Acceleration........................................ 38
12.2 Other Remedies...................................... 38
12.3 Rescission.......................................... 39
12.4 No Waivers or Election of Remedies, Expenses, etc... 39
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............ 40
13.1 Registration of Notes............................... 40
13.2 Transfer and Exchange of Notes...................... 40
13.3 Replacement of Notes................................ 40
14. PAYMENTS ON NOTES........................................ 41
14.1 Place of Payment.................................... 41
14.2 Home Office Payment................................. 41
15. EXPENSES, ETC............................................ 41
15.1 Transaction Expenses................................ 41
15.2 Survival............................................ 42
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT................................................ 42
17. AMENDMENT AND WAIVER..................................... 42
17.1 Requirements........................................ 42
17.2 Solicitation of Holders of Notes.................... 43
17.3 Binding Effect, etc................................. 43
17.4 Notes held by Company, etc.......................... 44
18. NOTICES.................................................. 44
19. REPRODUCTION OF DOCUMENTS................................ 45
20. CONFIDENTIAL INFORMATION................................. 45
21. SUBSTITUTION OF PURCHASER................................ 47
22. MISCELLANEOUS............................................ 47
22.1 Successors and Assigns.............................. 47
22.2 Payments Due on Non-Business Days; When Payments
Deemed Received..................................... 47
22.3 Severability........................................ 47
22.4 Construction........................................ 48
22.5 Counterparts........................................ 48
22.6 Governing Law....................................... 48
TABLE OF CONTENTS (cont.)
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 3 -- Payment Instructions
SCHEDULE 4.10 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership
of Restricted Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA Affiliates and Foreign Pension Plans
SCHEDULE 5.15 -- Existing Indebtedness and Liens
SCHEDULE 10.8 -- Existing Investments
EXHIBIT A1 -- Form of 8.71% Series A1 Senior Note due
June 1, 2002
EXHIBIT A2 -- Form of 7.80% Series A2 Senior Note due
July 31, 2008
EXHIBIT B -- Form of 6.69% Series B Senior Note due
July 31, 2008
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the
Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for
the Purchasers
OPTICAL COATING LABORATORY, INC.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
$6,400,000 8.71% SERIES A1 SENIOR NOTES DUE JUNE 1, 2002
$8,000,000 7.80% SERIES A2 SENIOR NOTES DUE JULY 31, 2008
$30,000,000 6.69% SERIES B SENIOR NOTES DUE JULY 31, 2008
Dated as of July 30, 1998
To the Purchaser Named on
the Signature Page Hereto
Ladies and Gentlemen:
OPTICAL COATING LABORATORY, INC., a Delaware corporation
(together with its successors and assigns, the "Company"), agrees
with you as follows:
1. BACKGROUND; AUTHORIZATION OF NOTES
The Company has heretofore issued to Massachusetts Mutual
Life Insurance Company (as successor to Connecticut Mutual Life
Insurance Company), Modern Woodmen of America and American Life
and Casualty Insurance Company (the "Existing Noteholders") its
8.71% Senior Notes due June 1, 2002 (the "Existing Notes"), in
the aggregate original principal amount of $18,000,000, pursuant
to, and in accordance with the provisions of, those certain Note
Purchase Agreements (collectively, the "Existing Note Purchase
Agreement"), dated as of May 27, 1994, between the Company and,
respectively, each of the Existing Noteholders. The aggregate
principal amount of the Existing Notes currently outstanding is
$14,400,000.
1.2 Authorization ofIssuance and Exchange of Notes.
(a) Authorization of Series A1 Notes and Series A2
Notes in Exchange for Existing Notes. In exchange for the
Existing Notes, the Company will authorize the issue of, and
execute and deliver:
(i) $6,400,000 aggregate principal amount of its
8.71% Series A1 Senior Notes due June 1, 2002 (the
"Series A1 Notes," such term to include any such notes
issued in substitution therefor pursuant to Section 13
of this Agreement or the Other Agreements (as
hereinafter defined)); and
(ii) $8,000,000 aggregate principal amount of its
7.80% Series A2 Senior Notes due July 31, 2008 (the
"Series A2 Notes," such term to include any such notes
issued in substitution therefor pursuant to Section 13
of this Agreement or the Other Agreements).
The exchange of the Series A1 Notes and Series A2 Notes for
the Existing Notes is hereinafter referred to as the "Note
Exchange."
(b) Authorization of Series B Notes. The Company will
authorize the issue and sale of $30,000,000 aggregate
principal amount of its 6.69% Series B Senior Notes due July
31, 2008 (the "Series B Notes," such term to include any
such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements).
(c) Forms of Notes; Certain Definitions. The Series
A1 Notes shall be substantially in the form set out in
Exhibit A1, the Series A2 Notes shall be substantially in
the form set out in Exhibit A2, and the Series B Notes shall
be substantially in the form set out in Exhibit B, in each
case, with such changes therefrom, if any, as may be
approved by you and the Company. The Series A1 Notes, the
Series A2 Notes and the Series B Notes are herein referred
to collectively as the "Notes," and individually as a
"Note." Certain capitalized terms used in this Agreement
are defined in Schedule B; references to a "Section,"
"Schedule" or an "Exhibit" are, unless otherwise specified,
to a Section of, or a Schedule or an Exhibit attached to,
this Agreement.
2. NOTE EXCHANGE; SALE AND PURCHASE OF SERIES B NOTES
2.1 Note Exchange
Subject to the terms and conditions of this Agreement, at
the Closing provided for in Section 3, the Company shall deliver
to you, if you are a holder of any of the Existing Notes, one or
more Series A1 Notes or Series A2 Notes (as set forth below your
name on Schedule A) in the aggregate principal amount of the
Existing Notes held by you, and in consideration thereof you
shall surrender to the Company, for cancellation, the Existing
Notes held by you. Upon consummation of the Note Exchange, the
Existing Note Purchase Agreement shall be deemed to have been
terminated (other than for the respective rights and obligations
of the parties under Sections 7.5, 10.3 and 10.6 thereof, which
shall survive such termination) and all Existing Notes shall be
cancelled.
2.2 Sale and Purchase of Series B Notes
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you, if you are a purchaser of any
Series B Notes, and you will purchase from the Company, at the
Closing provided for in Section 3, Series B Notes in the
principal amount specified below your name in Schedule A at the
purchase price of 100% of the principal amount thereof.
2.3 Other Agreements
Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the
"Other Agreements") identical with this Agreement with each of
the other purchasers named in Schedule A (the "Other
Purchasers"), providing at such Closing for the Note Exchange
and/or sale to each of the Other Purchasers of Notes of the
Series and in the principal amounts specified below its name in
Schedule A. Your obligation hereunder and the obligations of the
Other Purchasers under the Other Agreements are several and not
joint obligations and you shall have no obligation under any
Other Agreement and no liability to any Person for the
performance or non-performance by any Other Purchaser thereunder.
3. CLOSING
The Note Exchange and the sale and purchase of the Series B
Notes shall occur at the offices of Hebb & Gitlin, One State
Street, Hartford, Connecticut 06103, at 10:00 a.m., local time,
at a closing (the "Closing") on August 3, 1998 or on such other
Business Day thereafter on or prior to July 31, 1998 as may be
agreed upon by the Company and you and the Other Purchasers. At
the Closing, the Company will deliver to you the Notes of the
Series to be purchased by you and/or acquired by you in the Note
Exchange, as the case may be, in the form of a single Note (or
such greater number of Notes in denominations of at least
$100,000 as you may request), dated the date of the Closing and
registered in your name (or in the name of your nominee), as
indicated in Schedule A, against:
(a) in the case of the Series A1 Notes and the Series
A2 Notes to be acquired by you, if any, your surrender of
the Existing Notes held by you to the Company for
cancellation, and
(b) in the case of the Series B Notes to be purchased
by you, if any, payment by federal funds wire transfer in
immediately available funds of the amount of the purchase
price therefor as directed by the Company in Schedule 3.
If at the Closing the Company shall fail to tender such
Notes to you as provided in clauses (a) and (b) above, or any of
the conditions specified in Section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be
relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure
or such nonfulfillment.
4. CONDITIONS TO CLOSING
Your obligation to enter into the Note Exchange and/or to
purchase and pay for the Series B Notes to be sold to you at the
Closing, as specified in Schedule A, is subject to the
fulfillment to your satisfaction, prior to or at the Closing, of
the following conditions:
4.1 Representations and Warranties
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the
Closing.
4.2 Performance; No Default
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to
be performed or complied with by it prior to or at the Closing
and after giving effect to the issue and sale of the Notes (and
the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred
and be continuing. Neither the Company nor any Restricted
Subsidiary shall have entered into any transaction since the date
of the Memorandum that would have been prohibited by any of
Sections 10.2, 10.5, 10.6, 10.8, 10.9 or 10.10 had such Sections
applied since such date.
4.3 Compliance Certificates
(a) Officer's Certificate. The Company shall have
delivered to you an Officer's Certificate, dated the date of
the Closing, certifying that the conditions specified in
Sections 4.1, 4.2 and 4.10 have been fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate of its Secretary or one of
its Assistant Secretaries, dated the date of the Closing,
certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization,
execution and delivery of the Notes, this Agreement and the
Other Agreements.
4.4 Opinions of Counsel
You shall have received from
(a) Collette & Erickson, counsel for the Company, and
(b) Hebb & Gitlin, your special counsel,
closing opinions, each dated the date of the Closing,
substantially in the respective forms set forth in Exhibits
4.4(a) and 4.4(b), and as to such other matters as you may
reasonably request. This Section 4.4 shall constitute direction
by the Company to such counsel named in the immediately preceding
clause (a) to deliver such closing opinion to you.
4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your acquisition of Notes shall
(a) be permitted by the laws and regulations of each jurisdiction
to which you are subject, without recourse to provisions (such as
section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as
to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and (c) not subject you to any tax, penalty or
liability under or pursuant to any applicable law or regulation
(other than any tax based solely on income received by you). If
requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such
acquisition is so permitted.
4.6 Note Exchange and Sale of Other Notes
Contemporaneously with the Closing, the Company and all of
the Existing Noteholders shall consummate the Note Exchange and
the Company shall sell to the Other Purchasers and the Other
Purchasers shall purchase the Series B Notes to be purchased by
them at the Closing as specified in Schedule A.
4.7 Payment of Special Counsel Fees
Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the reasonable fees,
charges and disbursements of your special counsel referred to in
Section 4.4(b) to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior
to the date of the Closing.
4.8 Private Placement Numbers
Private Placement Numbers issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Insurance Commissioners)
shall have been obtained for each Series.
4.9 Payments in respect of Existing Notes
The Company shall have made payment, to each Existing
Noteholder, of all accrued interest on the outstanding principal
amount of the Existing Notes held by such Existing Noteholder.
4.10 Changes in Corporate Structure
Except as specified in Schedule 4.10, the Company shall not
have changed its jurisdiction of incorporation or been a party to
any merger or consolidation and shall not have succeeded to all
or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
4.11 Certain Consents and Agreements.
Each holder of Indebtedness of the Company the consent of
which is, in the reasonable judgment of you and your special
counsel, necessary or desirable to permit the Company to enter
into the transactions contemplated by this Agreement and to
perform its obligations in respect of this Agreement and the
Notes shall have executed and delivered to you a consent, in form
and substance acceptable to you, to the transactions contemplated
by this Agreement, permitting the Company to incur and have
outstanding the indebtedness and all other obligations in respect
of this Agreement and the Notes, the issuance and sale of the
Notes, and waiving any default or event of default which might
have occurred by virtue of the execution and delivery of this
Agreement and the Notes.
4.12 Credit Agreement.
You shall have received a copy of the Credit Agreement,
entered into on the date of the Closing, by and among the
Company, Bank of America National Trust and Savings Association,
as agent and letter of credit issuing bank, and the other
financial institutions party thereto, certified as being true and
complete by an officer of the Company.
4.13 Proceedings and Documents3
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory
to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified
or other copies of such documents as you or they may reasonably
request.
4A. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE
THE NOTES
Anything in this Agreement to the contrary notwithstanding,
the Company's obligation to issue the Notes shall be subject to
the conditions that (i) each of the Other Purchasers shall have
executed and delivered a Note Purchase Agreement identical
(except as to the identity of the purchaser thereunder) to this
Agreement, and such Other Purchasers shall have accepted delivery
of, and made payment for, the Notes to be purchased by them at
the Closing; and (ii) all of the Existing Notes shall have been
surrendered and cancelled concurrently with, or prior to, the
Closing. The Company acknowledges that the issuance of the Notes
to you and each Other Purchaser on the date of the Closing, and
the payment by you and each Other Purchaser for the Notes to be
purchased by you and each Other Purchaser on the date of the
Closing, if in each case effectuated on the date of Closing,
shall be deemed to have been contemporaneously effectuated and
shall satisfy the conditions specified in the preceding sentence.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to you, as of the date
of the Closing, that:
5.1 Organization; Power and Authority
The Company:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware;
(b) is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such
qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or
in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect; and
(c) has the corporate power and authority to own or
hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement
and the Other Agreements and the Notes and to perform the
provisions hereof and thereof.
5.2 Authorization, etc.
This Agreement, the Other Agreements and the Notes have been
duly authorized by all necessary corporate action on the part of
the Company, and this Agreement constitutes, and upon execution
and delivery thereof each Note will constitute, a legal, valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
5.3 Disclosure.
The Company, through its agent, BancAmerica Robertson
Stephens, has delivered to you and each Other Purchaser a copy of
an Offering Memorandum, dated June 1998 (the "Memorandum"),
relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of
the business and principal properties of the Company and its
Restricted Subsidiaries. Except as disclosed in Schedule 5.3,
this Agreement, the Memorandum, the documents, certificates or
other writings delivered to you by or on behalf of the Company in
connection with the transactions contemplated hereby and the
financial statements listed in Schedule 5.5, taken as a whole, do
not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein
not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly
described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since June 1, 1998,
there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any
Restricted Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material
Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has
not been set forth herein or in the Memorandum or in the other
documents, certificates and other writings delivered to you by or
on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
5.4 Organization and Ownership of Shares of
Subsidiaries; Affiliates
(a) Schedule 5.4 contains (except as noted therein)
complete and correct lists of (i) the Company's
Subsidiaries, showing, as to each Subsidiary, the correct
name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its Capital Stock
outstanding owned by the Company and each other Subsidiary,
(ii) the Company's Restricted Subsidiaries, (iii) the
Company's Affiliates, other than Subsidiaries, and (iv) the
Company's directors and senior officers.
(b) All of the outstanding shares of Capital Stock of
each Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by the Company or
another Restricted Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified as a
foreign corporation or other legal entity and is in good
standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which
the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such
Subsidiary has the corporate or other power and authority to
own or hold under lease the properties it purports to own or
hold under lease and to transact the business it transacts
and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject
to any Material legal restriction or any Material agreement
(other than this Agreement, the Other Agreements, the
agreements listed in Schedule 5.4 and customary limitations
imposed by corporate law statutes) restricting the ability
of such Subsidiary to pay dividends out of profits or make
any other similar distributions of profits to the Company or
any of its Subsidiaries that owns outstanding shares of
Capital Stock of such Subsidiary.
(e) As of the date of the Closing, (i) the total
assets of all Unrestricted Subsidiaries, if such assets were
included in the computation of Consolidated Total Assets,
would constitute less than 20% of such Consolidated Total
Assets, and (ii) the total revenues of all Unrestricted
Subsidiaries would constitute less than 20% of consolidated
total revenues of the Company and its Subsidiaries at such
time.
5.5 Financial Statementsl
The Company has delivered to you and each Other Purchaser
copies of the financial statements of the Company and its
Subsidiaries listed in Schedule 5.5. All of said financial
statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated
results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with
GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any
interim financial statements, to normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments,
etc.
The execution, delivery and performance by the Company of
this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute
a default under, or result in the creation of any Lien in
respect of any property of the Company or any Subsidiary
under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the
Company or any Subsidiary is bound or by which the Company
or any Subsidiary or any of their respective properties may
be bound or affected,
(b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary, which
conflict or breach, individually or in the aggregate with
any and all other such conflicts or breaches, could
reasonably be expected to have a Material Adverse Effect, or
(c) violate any provision of any statute or other rule
or regulation of any Governmental Authority applicable to
the Company or any Subsidiary, which violation, individually
or in the aggregate with any and all other such violations,
could reasonably be expected to have a Material Adverse
Effect.
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or
performance by the Company of this Agreement or the Notes.
5.8 Litigation; Observance of Agreements,
Statutes and Orders
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge
of the Company, threatened against or affecting the Company
or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in
default under any term of any agreement or instrument to
which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including, without
limitation, Environmental Laws) of any Governmental
Authority, which default or violation, individually or in
the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.9 Taxes.
The Company and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns
and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (a)
the amount of which is not individually or in the aggregate
Material or (b) the amount, applicability or validity of which is
currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves
in accordance with GAAP. The Company knows of no basis for any
other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are
adequate. The Federal income tax liabilities of the Company and
its Subsidiaries have been determined by the Internal Revenue
Service and paid for all fiscal years up to and including the
fiscal year ended October 31, 1997.
5.10 Title to Property; Leases
The Company and its Subsidiaries have good and sufficient
title to their respective properties that individually or in the
aggregate are Material, including all such properties reflected
in the most recent audited balance sheet referred to in Section
5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed
of in the ordinary course of business), in each case free and
clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material
respects.
5.11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess
all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or
rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product
or practice of the Company or any Restricted Subsidiary
infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right owned by any other
Person; and
(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company
or any of its Subsidiaries with respect to any patent,
copyright, service mark, trademark, trade name or other
right owned or used by the Company or any of its
Subsidiaries.
5.12 Compliance with ERISA and Foreign Pension
Plans
(a) The Company and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable
laws except for such instances of noncompliance as have not
resulted in and could not reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans (as defined in
section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to
result in the incurrence of any such liability by the
Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code,
other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit
liabilities under each of the Plans (other than
Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such
Plan's most recent actuarial valuation report, did not
exceed the aggregate current value of the assets of such
Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in
section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of
ERISA.
(c) The Company and the ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to
contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation
(determined as of the last day of the Company's most
recently ended fiscal year in accordance with Financial
Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and
its Restricted Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and
the issuance and sale of the Notes hereunder will not
involve any transaction that is subject to the prohibitions
of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the Code. The representation by the Company in the first
sentence of this Section 5.12(e) is made in reliance upon
and subject to the accuracy of your representation in
Section 6.2 as to the Sources used to pay the purchase price
of the Notes to be purchased by you.
(f) Schedule 5.12 sets forth all ERISA Affiliates and
all "employee benefit plans" maintained by the Company (or
any "affiliate" thereof) or in respect of which the Notes
could constitute an "employer security" ("employee benefit
plan" has the meaning specified in section 3 of ERISA,
"affiliate" has the meaning specified in section 407(d) of
ERISA and section V of the Department of Labor Prohibited
Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and
"employer security" has the meaning specified in section
407(d) of ERISA).
(g) The present value of all benefits vested under
each Foreign Pension Plan, determined as of the most recent
valuation date in respect thereof, does not exceed the value
of the assets of such Foreign Pension Plan, and all required
payments in respect of funding each such Foreign Pension
Plan have been made.
5.13 Private Offering by the Company
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar Securities for sale to, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person
other than you, the Other Purchasers and not more than 10 other
Institutional Investors, each of which has been offered the Notes
at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the
registration requirements of section 5 of the Securities Act.
5.14 Use of Proceeds; Margin Regulations
The Company will apply the proceeds of the sale of the Notes
to refinance the Existing Notes and for general corporate
purposes. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose
of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System (12 CFR 221), or for the purpose of buying or carrying or
trading in any Securities under such circumstances as to involve
the Company in a violation of Regulation X of said Board (12 CFR
224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 1% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have
any present intention that margin stock will constitute more than
1% of the value of such assets. As used in this Section, the
terms "margin stock" and "purpose of buying or carrying" shall
have the meanings assigned to them in said Regulation U.
5.15 Existing Indebtedness; Future Liens
(a) Except as described therein, Schedule 5.15 sets
forth a complete and correct list of all outstanding
Indebtedness of the Company and its Restricted Subsidiaries
as of January 31, 1998 (and specifying, as to each such
Indebtedness, the collateral, if any, securing such
Indebtedness), since which date there has been no Material
change in the amounts, interest rates, sinking funds,
instalment payments or maturities of the Indebtedness of the
Company or its Restricted Subsidiaries. Neither the Company
nor any Restricted Subsidiary is in default and no waiver of
default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company or
such Restricted Subsidiary and no event or condition exists
with respect to any Indebtedness of the Company or any
Restricted Subsidiary that would permit (or that with notice
or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable
before its stated maturity or before its regularly scheduled
dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the
Company nor any Restricted Subsidiary has agreed or
consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 10.6(a).
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor
its use of the proceeds thereof will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
5.17 Status under Certain Statutes
Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended,
the Public Utility Holding Company Act of 1935, as amended, the
Transportation Acts (49 U.S.C.), as amended, or the Federal Power
Act, as amended.
5.18 Environmental Matters
Neither the Company nor any Subsidiary has knowledge of any
claim or has received any notice of any claim, and no proceeding
has been instituted (and not resolved) raising any claim against
the Company or any of its Subsidiaries or any of their respective
real properties now or formerly owned, leased or operated by any
of them or other assets, alleging any damage to the environment
or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has
knowledge of any facts which would give rise to any claim,
public or private, of violation of Environmental Laws or
damage to the environment emanating from, occurring on or in
any way related to real properties now or formerly owned,
leased or operated by any of them or to other assets or
their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse
Effect;
(b) neither the Company nor any of its Subsidiaries
has stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them or
disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries
are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 Purchase for Investment1
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or
for the account of one or more pension or trust funds and not
with a view to the distribution thereof, provided that the
disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have
not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an
exemption is required by law, and that the Company is not
required to register the Notes.
6.2 Source of Funds
You represent that at least one of the following statements
is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the
Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general
account" as defined in United States Department of Labor
Prohibited Transaction Exemption ("PTE") 95-60 (60 FR 35925,
July 12, 1995) and in respect thereof you represent that
there is no "employee benefit plan" (as defined in section
3(3) of ERISA and section 4975(e)(1) of the Code, treating
as a single plan all plans maintained by the same employer
or employee organization or affiliate thereof) with respect
to which the amount of the general account reserves and
liabilities of all contracts held by or on behalf of such
plan exceeds 10% of the total reserves and liabilities of
such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the National
Association of Insurance Commissioners' Annual Statement
filed with your state of domicile; or
(b) if you are an insurance company, the Source does
not include assets allocated to any separate account
maintained by you in which any employee benefit plan (or its
related trust) has any interest, other than a separate
account that is maintained solely in connection with your
fixed contractual obligations under which the amounts
payable, or credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the
separate account; or
(c) the Source is either (i) an insurance company
pooled separate account, within the meaning of PTE 90-1
(issued January 29, 1990), or (ii) a bank collective
investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the
Company in writing pursuant to this paragraph (c), no
employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns
more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment
fund" (within the meaning of part V of PTE 84-14 (the "QPAM
Exemption")) managed by a "qualified professional asset
manager" or "QPAM" (within the meaning of part V of the QPAM
Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the
assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within
the meaning of section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of part I(c) and (g) of
the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the
definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose
assets are included in such investment fund
have been disclosed to the Company in writing pursuant to
this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans,
or a separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified to
the Company in writing pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of
ERISA.
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
6.3 No Conflict.
You represent to the Company that your execution and
delivery of this Agreement and purchase of the Notes have been
duly authorized and do not conflict in any material respect with
any articles of incorporation, bylaws, charter, or law,
regulation or order of specific application to you. If you are
surrendering any Existing Notes, you further represent that no
other Person has any right or interest in any such Existing Note
so surrendered and cancelled.
6.4 Accredited Investor
You represent to the Company that you are an "accredited
investor" as such term is defined in Section 2(15) of the
Securities Act.
6.5 No Brokers
Subject to the next sentence of this Section 6.5, you
represent to the Company that you have not retained any broker or
agreed to any broker's or finder's fee for which you would have
liability for or on account of this Agreement or for the purchase
of the Notes contemplated hereby. It is acknowledged that
BancAmerica Robertson Stephens has been retained by, and
represents, the Company (and not you).
6.6 Acknowledgement
You understand and acknowledge that some of the Company's
warranties and representations in Section 5 are made in reliance
upon your representations in this Section 6.
7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 60 days after the
end of each quarterly fiscal period in each fiscal year of
the Company (other than the last quarterly fiscal period of
each such fiscal year), duplicate copies of,
(i) an unaudited consolidated balance sheet of
the Company and its Subsidiaries as at the end of such
quarter, and
(ii) unaudited consolidated statements of income,
stockholders' equity and cash flows of the Company and
its Subsidiaries, for such quarter and (in the case of
the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly
presenting, in all material respects, the consolidated
financial position of the companies being reported on and
their consolidated results of operations and cash flows,
subject to changes resulting from year-end adjustments,
provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form
10-Q prepared in compliance with the requirements therefor
and filed with the SEC shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end
of each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income,
stockholders' equity and cash flows of the Company and
its Subsidiaries, for such year,
setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP, and accompanied by an
opinion thereon of independent certified public accountants
of recognized national standing, which opinion shall state
that such financial statements present fairly, in all
material respects, the consolidated financial position of
the companies being reported upon and their consolidated
results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has
been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis
for such opinion in the circumstances; provided that the
delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year
prepared in accordance with the requirements therefor and
filed with the SEC, shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) Additional Financial Statements -- if, for any
fiscal period of the Company, either
(i) total assets of all Unrestricted Subsidiaries
as at the end of such fiscal period, if such assets
were included in the computation of Consolidated Total
Assets as at the end of such fiscal period, would
constitute more than 10% of such Consolidated Total
Assets, or
(ii) total revenues of all Unrestricted
Subsidiaries for such fiscal period, if revenues would
constitute more than 10% of consolidated total revenues
of the Company and its Subsidiaries for such period,
concurrently with the delivery of the applicable statements
referred to in Section 7.1(a) or Section 7.1(b) required to
be delivered for such fiscal period,
(A) unaudited combined and combining balance
sheets of the Unrestricted Subsidiaries, as at the end
of such fiscal period, and
(B) unaudited combined and combining statements
of income and cash flows of the Unrestricted
Subsidiaries, for such fiscal period,
and, in the case of the combined financial statements, (1)
reflecting all eliminations and adjustments required to
reconcile such statements to the consolidated financial
statements delivered for such fiscal period pursuant to
Section 7.1(a) or Section 7.1(b) above, as the case may be,
and (2) setting forth, in comparative form, the figures for
the corresponding periods in the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP
applicable to such financial statements generally, and
certified by a Senior Financial Officer as fairly
presenting, in all material respects, the combined financial
position of the Unrestricted Subsidiaries and their combined
results of operations and cash flows, subject to changes
resulting from year-end adjustments;
(d) SEC and Other Reports -- promptly upon their
becoming available, one copy of (i) each financial
statement, report (including, without limitation, the
Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act), notice or
proxy statement sent by the Company or any Subsidiary to
public securities holders generally, and (ii) each regular
or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and
each prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC and of all press
releases and other statements made available generally by
the Company or any Restricted Subsidiary to the public
concerning developments that are Material;
(e) Notice of Default or Event of Default -- promptly,
and in any event within five days after a Responsible
Officer becoming aware of the existence of any Default or
Event of Default or that any Person has given any notice or
taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action
with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and
period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within
five days after a Responsible Officer becoming aware of any
of the following, a written notice setting forth the nature
thereof and the action, if any, that the Company or an ERISA
Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable
event, as defined in section 4043(c) of ERISA and the
regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in
effect on the date of the Closing; or
(ii) the taking by the PBGC of steps to institute,
or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that
could result in the incurrence of any liability by the
Company or any ERISA Affiliate pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or
excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then
existing, could reasonably be expected to have a
Material Adverse Effect;
(g) Notices from Governmental Authority -- promptly,
and in any event within 30 days of receipt thereof, copies
of any notice to the Company or any Subsidiary from any
Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could
reasonably be expected to have a Material Adverse Effect;
(h) Actions, Proceedings -- promptly after a
Responsible Officer becomes aware of the commencement
thereof, notice of any action or proceeding relating to the
Company or any Subsidiary in any court or before any
Governmental Authority or arbitration board or tribunal as
to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect;
and
(i) Requested Information -- with reasonable
promptness, such other data and information relating to the
business, operations, affairs, financial condition, assets
or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of
Notes, or such information regarding the Company required to
satisfy the requirements of 17 C.F.R. S230.144A, as amended
from time to time, in connection with any contemplated
transfer of the Notes.
7.2 Officer's Certificate
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall
be accompanied by a certificate of a Senior Financial Officer
setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish
whether the Company was in compliance with the requirements
of Sections 7.1(c), 10.3 through 10.10, inclusive, during
the quarterly or annual period covered by the statements
then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum
or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in
existence); and
(b) Event of Default -- a statement that such officer
has reviewed the relevant terms hereof and has made, or
caused to be made, under his or her supervision, a review of
the transactions and conditions of the Company and its
Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the
date of the certificate and that such review has not
disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists
(including, without limitation, any such event or condition
resulting from the failure of the Company or any Subsidiary
to comply with any Environmental Law), specifying the nature
and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
7.3 Inspection
The Company shall permit the representatives of each holder
of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default
then exists, at the expense of such holder and upon
reasonable prior notice to the Company, to visit the
principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be
unreasonably withheld) its independent public accountants,
and (with the consent of the Company, which consent will not
be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested
in writing; and
(b) Default -- if a Default or Event of Default then
exists, at the expense of the Company, to visit and inspect
any of the offices or properties of the Company or any
Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies
and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective
officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss
the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be
requested.
8. PAYMENT OF THE NOTES
8.1 Required Prepayments; Payment at Maturity
Regardless of the amount of the Notes which may be
outstanding from time to time, the Company shall prepay or, in
the case of principal amounts due at the maturity of any Note,
pay, and there shall become due and payable on the respective
dates specified below, the respective aggregate principal amounts
of each Series of Notes hereinafter set forth opposite such dates
(or such lesser amount as would constitute payment in full of the
Notes of such Series):
Principal Principal Principal
Date: Amount Amount Amount
of Series A1 of Series A2 of Series B
Notes Notes Notes
to be prepaid to be prepaid to be prepaid
or paid: or paid or paid
June 1, 1999 $1,600,000 $0 $0
June 1, 2000 $1,600,000 $0 $0
June 1, 2001 $1,600,000 $0 $0
June 1, 2002 $1,600,000 $0 $0
Principal Principal Principal
Date: Amount Amount Amount
of Series A1 of Series A2 of Series B
Notes Notes Notes
to be prepaid to be prepaid to be prepaid
or paid: or paid or paid
July 31, 2002 $0 $1,142,857 $4,286,000
July 31, 2003 $0 $1,142,857 $4,286,000
July 31, 2004 $0 $1,142,857 $4,286,000
July 31, 2005 $0 $1,142,857 $4,286,000
July 31, 2006 $0 $1,142,857 $4,286,000
July 31, 2007 $0 $1,142,857 $4,286,000
July 31, 2008 $0 $1,142,858 $4,284,000
____ __________ ___________
Totals $6,400,000 $8,000,000 $30,000,000
Each partial prepayment of the Notes of each Series pursuant to
Section 8.2 will reduce the principal amount of each mandatory
prepayment applicable to the Notes of such Series, as set forth
in this Section 8.1, and the payment at maturity of the Notes of
such Series, in the same proportion as the aggregate unpaid
principal amount of the Notes of such Series is reduced as a
result of such prepayment.
8.2 Optional Prepayments with Make-Whole Amount
Subject to the provisions of Section 8.3, the Company may,
at its option, upon notice as provided below, prepay at any time
all, or from time to time any part of, the Notes (but if in part,
in an amount not less than $1,000,000 or such lesser amount as
shall then be outstanding), at 100% of the principal amount so
prepaid, plus the Make-Whole Amount determined for the prepayment
date with respect to such principal amount. The Company will
give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment.
Each such notice shall
(a) specify such prepayment date,
(b) specify the aggregate principal amount of the
Notes of each Series to be prepaid on such date,
(c) specify the principal amount of each Note held by
such holder to be prepaid (determined in accordance with
Section 8.3),
(d) specify the interest to be paid on the prepayment
date with respect to such principal amount being prepaid,
and
(e) be accompanied by a certificate of a Senior
Financial Officer as to the estimated Make-Whole Amount due
in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment),
setting forth the details of such computation.
Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole
Amount as of the specified prepayment date.
8.3 Allocation of Partial Prepayments
In the case of each partial prepayment of the Series B
Notes, the principal amount of the Series B Notes to be prepaid
shall be allocated among all of the Series B Notes at the time
outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof. The Company may, at
its option, pursuant to Section 8.2, (a) prepay the Series A1
Notes and the Series A2 Notes without prepaying the Series B
Notes, and (b) prepay the Series B Notes without prepaying the
Series A1 Notes or the Series A2 Notes; provided that all partial
prepayments of the Series A1 Notes and the Series A2 Notes
pursuant to Section 8.2 shall be allocated to all outstanding
Series A1 Notes and Series A2 Notes (without distinguishing
between the Series) ratably in accordance with the unpaid
principal amounts thereof.
8.4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this
Section 8, the principal amount of each Note to be prepaid shall
mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount
accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to
pay such principal amount when so due and payable, together with
the interest and Make-Whole Amount, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any
Note paid or prepaid in full shall be surrendered to the Company
and cancelled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
8.5 No Other Optional Prepayments or Purchase of Notes
The Company will not prepay (whether directly or indirectly
by purchase, redemption or other acquisition) any of the
outstanding Notes except upon the payment or prepayment of the
Notes in accordance with the terms of this Section 8 or in
connection with an offer made pursuant to Section 10.10(b). The
Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of
Notes pursuant to any provision of this Section 8 and no Notes
may be issued in substitution or exchange for any such Notes.
8.6 Make-Whole Amount
The term "Make-Whole Amount" means, with respect to Prepaid
Principal and the date the payment thereof is due (the "Payment
Date") an amount equal to the excess (if any) of the Present
Value of the Prepaid Cash Flows over the amount of such Prepaid
Principal, determined in respect of such Prepaid Principal as of
such Payment Date. As used in this definition:
"Prepaid Principal" means any portion of the principal
amount of the Notes of any Series being paid for any reason
(including, without limitation, acceleration, optional
prepayment or mandatory payment required because of the
occurrence of a contingency) prior to its regularly
scheduled maturity date.
"Present Value of the Prepaid Cash Flows" means, with
respect to any Prepaid Principal, the Indebtedness in
respect of which such Prepaid Principal was paid, and any
Payment Date in respect thereof, the sum of the present
values of the then remaining scheduled payments of principal
and interest that would have been payable in respect of such
Indebtedness but that are no longer payable as a result of
such payment. In determining such present values,
(a) the amount of interest accrued through and
including the day immediately preceding such Payment
Date on such Prepaid Principal since the scheduled
interest payment date immediately preceding such
Payment Date shall be deducted from the first of such
payments of interest, and
(b) a discount rate per annum equal to the Make-
Whole Discount Rate determined with respect to such
Prepaid Principal and such Payment Date divided by two,
and a discount period of six months of 30 days each,
shall be used.
"Make-Whole Discount Rate" means, in respect of any
Payment Date, the sum of:
(a) .50% per annum; plus
(b) the per annum percentage rate (rounded to the
nearest three decimal places) equal to the bond
equivalent yield to maturity derived from the
Applicable Treasury Rate determined as of the date that
is two Business Days prior to such Payment Date.
"Applicable Treasury Rate" means, at any time:
(a) the Dow Jones Markets Service Rate at such
time;
(b) if the Dow Jones Markets Service is not then
quoting yields on United States Government Securities,
then the Bloomberg Rate at such time;
(c) if neither the Dow Jones Markets Service nor
the Bloomberg Financial Markets System is then quoting
yields on United States Government Securities, then the
per annum yield reported on such other electronic
quotation service selected by the Company and agreed to
by the holders of a majority of the applicable Prepaid
Principal at 10:00 a.m. (New York time) on the second
Business Day preceding such Payment Date for United
States Government Securities having a maturity (rounded
to the nearest month) corresponding to the then
Weighted Average Life to Maturity of such Prepaid
Principal at such time; and
(d) if neither the Dow Jones Markets Service nor
the Bloomberg Financial Markets System is then quoting
yields on United States Government Securities and the
Company and the holders of a majority of such Prepaid
Principal cannot agree on another electronic quotation
service, then the Applicable H.15 Rate at such time.
In each such case, if no such United States Treasury
obligation with a Treasury Constant Maturity corresponding
exactly to such Weighted Average Life to Maturity is listed,
then the yields for the two then most current hypothetical
United States Treasury obligations with Treasury Constant
Maturities most closely corresponding to such Weighted
Average Life to Maturity (one with a longer maturity and one
with a shorter maturity, if available) shall be calculated
pursuant to the immediately preceding sentence and the Make-
Whole Discount Rate shall be interpolated or extrapolated
from such yields on a straight-line basis.
"Applicable H.15" means, at any time, the United States
Federal Reserve Statistical Release H.15(519) then most
recently published and available to the public, or if such
publication is not available, then any other source of
current information in respect of interest rates on
Securities of the United States of America that is generally
available and, in the judgment of the holders of a majority
of applicable Prepaid Principal, provides information
reasonably comparable to the H.15(519) report.
"Applicable H.15 Rate" means, at any time, the then
most current annual yield to maturity of the hypothetical
United States Treasury obligation listed in the then
Applicable H.15 with a maturity equal to the then Weighted
Average Life to Maturity of the applicable Prepaid
Principal.
"Bloomberg Rate" means at any time the per annum yield
reported on the Bloomberg Financial Markets System at 10:00
a.m. (New York time) on the second Business Day preceding
the applicable Payment Date for United States Treasury
obligations having a Treasury Constant Maturity
corresponding to the then Weighted Average Life to Maturity
of such Prepaid Principal. Page USD shall be used as the
source of such yields, or if not then available, such other
screen available on the Bloomberg Financial Markets System
as shall, in the opinion of the holders of a majority of the
Prepaid Principal, provide equivalent information.
"Dow Jones Markets Service Rate" means at any time the
per annum yield reported on the Dow Jones Markets Service at
10:00 a.m. (New York time) on the second Business Day
preceding the applicable Payment Date for United States
Treasury obligations having a Treasury Constant Maturity
(rounded to the nearest month) corresponding to the then
Weighted Average Life to Maturity of such Prepaid Principal.
Page 678 shall be used as the source of such yields, or if
not then available, such other screen available on the Dow
Jones Markets Service as shall, in the opinion of the
holders of a majority of the applicable Prepaid Principal,
provide equivalent information.
"Treasury Constant Maturity" has the meaning specified
in the Applicable H.15.
"Weighted Average Life to Maturity" means, in respect
of any Prepaid Principal, the number of years (calculated to
the nearest 1/12th) obtained by dividing the Remaining
Dollar-Years of such Prepaid Principal by such Prepaid
Principal, determined as of such Payment Date.
"Remaining Dollar-Years" means, in respect of any
Prepaid Principal, the result obtained by:
(a) multiplying, in the case of each then
remaining scheduled payment of principal that would
have been payable in respect of such Prepaid Principal
but is no longer payable as a result of the payment of
such Prepaid Principal;
(i) an amount equal to such scheduled
payment of principal; by
(ii) the number of years (calculated to the
nearest 1/12th) that will elapse between the
applicable Payment Date and the date such
scheduled principal payment would be due if such
Prepaid Principal had not been so prepaid; and
(b) calculating the sum of each of the products
obtained in the preceding subsection (a).
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are
outstanding:
9.1 Compliance with Law.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, and will obtain and
maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits,
franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
9.2 Insurance.
The Company will and will cause each of its Restricted
Subsidiaries to maintain, with financially sound and reputable
insurers, insurance with respect to their respective properties
and businesses against such casualties and contingencies, of such
types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a
similar business and similarly situated.
9.3 Maintenance of Properties.
The Company will and will cause each of its Restricted
Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly
conducted at all times, provided that this Section shall not
prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of
its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4 Payment of Taxes and Claims
The Company will and will cause each of its Subsidiaries to
file all tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental
charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes,
assessments, charges or levies have become due and payable and
before they have become delinquent and all claims for which sums
have become due and payable that have or might become a Lien on
properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax
or assessment or claims if (a) the amount, applicability or
validity thereof is contested by the Company or such Subsidiary
on a timely basis in good faith and in appropriate proceedings,
and the Company or a Subsidiary has established adequate reserves
therefor in accordance with GAAP on the books of the Company or
such Subsidiary or (b) the nonpayment of all such taxes,
assessments, charges and levies in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
9.5 Corporate Existence, etc.
The Company will at all times preserve and keep in full
force and effect its corporate existence. Subject to Sections
10.9 and 10.10, the Company will at all times preserve and keep
in full force and effect the corporate existence of each of its
Subsidiaries (unless merged into the Company or a Restricted
Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force
and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse
Effect.
9.6 Designation of Subsidiaries.
(a) Right of Designation. Subject to the satisfaction
of the requirements of Section 9.6(c), the Company shall
have the right to designate each Subsidiary as a Restricted
Subsidiary or an Unrestricted Subsidiary by delivering to
each holder of Notes a writing, signed by a Senior Financial
Officer, certifying that the Board of Directors shall have
so designated such Subsidiary within 30 days of the
acquisition by the Company or any Subsidiary of the
necessary percentages of Voting Stock and other equity
interests of such Subsidiary as set forth in the definition
of "Subsidiary" contained in Schedule B. Any such
Subsidiary not so designated within such 30-day period shall
be deemed, on and after such date and without any further
action by the Company or any holder of Notes, to have been
originally designated by the Company as an Unrestricted
Subsidiary, and such Subsidiary may be redesignated as
contemplated by Section 9.6(b) and Section 9.6(c). Each
Subsidiary designated as a Restricted Subsidiary in Schedule
5.4 shall be a Restricted Subsidiary on and after the date
of the Closing and all other Subsidiaries, if any, listed in
Schedule 5.4 shall, subject to Section 9.6(b), be
Unrestricted Subsidiaries on and after the date of the
Closing.
(b) Right of Redesignation. Subject to the
satisfaction of the requirements of Section 9.6(c), the
Company may at any time designate
(i) any Unrestricted Subsidiary as a Restricted
Subsidiary, or
(ii) any Restricted Subsidiary as an Unrestricted
Subsidiary, by delivering to each holder of Notes a
written notice, signed by a Senior Financial Officer,
certifying that the Board of Directors shall have so
designated such Subsidiary.
(c) Designation Criteria.
(i) No Subsidiary shall at any time after the
date of the Closing be designated as a Restricted
Subsidiary, unless
(A) immediately before and after, and after
giving effect to such designation, and assuming
that all obligations, liabilities and Investments
of, and all Liens on the property of, such
Subsidiary being so designated were incurred or
made contemporaneously with such designation, no
Default or Event of Default exists or would exist,
and
(B) such Subsidiary shall not previously
have been redesignated pursuant to this Section
9.6 more than twice.
(ii) No Subsidiary shall at any time after the
date of the Closing be designated as an Unrestricted
Subsidiary, unless
(A) immediately before and after, and after
giving effect to such designation, no Default or
Event of Default exists or would exist, and
(B) such Subsidiary shall not previously
have been redesignated pursuant to this Section
9.6 more than twice.
(d) Effectiveness. Other than as set forth in the
last two sentences of Section 9.6(a), any designation under
this Section 9.6 that satisfies all of the conditions set
forth in this Section 9.6 shall become effective, for
purposes of this Agreement, on the day that notice thereof
shall have been delivered by the Company and received by
each holder of Notes in accordance with the provisions of
Section 18.
(e) Covenant Compliance. Each notice required by
Section 9.6(d) shall be accompanied by a certificate of a
Senior Financial Officer setting forth the information
(including detailed calculations) required in order to
establish whether the Company is in compliance with the
requirements of Sections 10.3 through Section 10.10,
inclusive, at the time of such designation, and immediately
after giving effect thereto (including with respect to each
such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case
may be, permissible under the terms of such Sections, and
the calculation of the amounts, ratio or percentage at such
times).
9.7 Pari Passu.
The Company covenants that its obligations under the Notes
and under this Agreement and the Other Agreements do and will
rank at least pari passu with all its other present and future
unsecured Senior Debt.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1 Nature of Business.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business if, as a result thereof,
the principal businesses of the Company and its Restricted
Subsidiaries, taken as a whole, would be changed substantially
from the businesses thereof described in the Memorandum.
10.2 Transactions with Affiliates.
The Company will not, and will not permit any Restricted
Subsidiary to, enter into directly or indirectly any transaction
or group of related transactions (including, without limitation,
the purchase, lease, sale or exchange of properties of any kind
or the rendering of any service) with any Affiliate (other than
the Company or another Restricted Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of
the Company's or such Restricted Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an
Affiliate.
10.3 Fixed Charge Coverage.
The Company will not, at any time, permit Consolidated Net
Income Available for Fixed Charges for the period of four
consecutive fiscal quarters of the Company most recently ended at
such time to be less than 150% of Consolidated Fixed Charges for
such period.
10.4 Limitations on Restricted Subsidiary Indebtedness and
Intercompany Indebtedness.
(a) Limitation on Restricted Subsidiary Indebtedness.
The Company will not, at any time, permit any Restricted
Subsidiary to incur, issue, assume or in any other manner
become liable in respect of any Indebtedness unless
(i) such Indebtedness is Excluded Restricted
Subsidiary Indebtedness and immediately prior to the
creation thereof, and after giving effect thereto and
to any concurrent application of the proceeds of such
Indebtedness, no Default or Event of Default would
exist, or
(ii) such Indebtedness is not Excluded Restricted
Subsidiary Indebtedness and is permitted to be incurred
at such time under Section 10.5, or
(iii) such Indebtedness is a renewal,
extension (as to time) or refunding of Indebtedness
previously incurred in accordance with clause (i) or
clause (ii) hereof, and
(A) the principal amount of the Indebtedness
being so renewed, extended or refunded which is
outstanding at the time of such renewal, extension
or refunding is not increased, and
(B) immediately prior to such renewal,
extension or refunding, and after giving effect
thereto, no Default or Event of Default would
exist.
(b) No Restrictions on Distributions. The Company
will not permit any Restricted Subsidiary to become
obligated in respect of any Indebtedness after the date of
the Closing if any agreement, note or other instrument
executed in connection with, or as a condition to obtaining
the funds constituting, such Indebtedness contains any
limitation or restriction on the ability of such Restricted
Subsidiary to declare or make Distributions in respect of
its Capital Stock.
(c) Disposition of Restricted Subsidiary Indebtedness.
Each Restricted Subsidiary, any of whose outstanding
Indebtedness is at any time sold, transferred or otherwise
disposed of by the Company or another Restricted Subsidiary,
shall be deemed to have incurred all such Indebtedness, and
all Liens securing such Indebtedness (if any), at the time
of such sale, transfer or other disposition.
(d) Limitation on Intercompany Indebtedness. The
Company will not, at any time, incur, issue, assume or in
any other manner become liable in respect of any
Indebtedness owing to any Subsidiary unless
(i) such Subsidiary is a Wholly-Owned Restricted
Subsidiary, and
(ii) all of the Company's obligations in respect
of such Indebtedness are subordinated in right of
payment and security to the Company's obligations under
the Notes on terms and conditions satisfactory in form,
scope and substance to the Required Holders.
10.5 Limitation on Consolidated Total Debt and
Priority Indebtedness.
(a) Limitation on Consolidated Total Debt. The
Company will not, at any time, permit Consolidated Total
Debt to exceed 60% of Consolidated Total Capitalization, in
each case determined at such time.
(b) Limitation on Priority Indebtedness. The Company
will not, at any time, or at any time permit any Restricted
Subsidiary to, incur, issue, assume or in any other manner
become liable in respect of any Priority Indebtedness,
unless
(i) immediately prior to the creation thereof,
and after giving effect thereto and to any concurrent
retirement of any other Priority Indebtedness, the
aggregate amount of Priority Indebtedness would not
exceed 15% of Consolidated Total Assets at such time,
and
(ii) no Default or Event of Default would exist.
10.6 Liens.
(a) Negative Pledge. The Company will not, and will
not permit any Restricted Subsidiary to, cause or permit to
exist, or agree or consent to cause or permit to exist in
the future (upon the happening of a contingency or
otherwise), any of their property, whether now owned or
hereafter acquired, to be subject to any Lien except:
(i) Taxes, etc. -- Liens securing property taxes,
assessments or governmental charges or levies or the
claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords and other like
Persons, so long as the payment thereof is not at the
time required by Section 9.4;
(ii) Judicial Liens -- Liens
(A) arising from judicial attachments and
judgments,
(B) securing appeal bonds or supersedeas
bonds, and
(C) arising in connection with court
proceedings (including, without limitation, surety
bonds and letters of credit or any other
instrument serving a similar purpose),
provided that (1) any such attachments or judgments
relating thereto have been stayed, bonded or discharged
within 60 days of the entry thereof and the execution
or other enforcement of such Liens is otherwise
effectively stayed, (2) the claims secured thereby are
being actively contested in good faith and by
appropriate proceedings, (3) adequate book reserves
shall have been established and maintained and shall
exist with respect thereto and (4) the aggregate amount
so secured shall not at any time exceed 10% of
Consolidated Adjusted Net Worth at such time;
(iii) Ordinary Course Business Liens -- Liens
incurred or deposits made in the ordinary course of
business
(A) in connection with workers'
compensation, unemployment insurance, social
security and other like laws to secure statutory
or public obligations of the Company or such
Restricted Subsidiary in respect thereof, and
(B) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance
bonds (of a type other than set forth in Section
10.6(a)(ii)) and other similar obligations not
incurred in connection with the borrowing of
money, the obtaining of advances or the payment of
the deferred purchase price of property;
provided, however, that all such Liens do not, in the
aggregate, materially detract from the value of such
property or materially interfere with the use of such
property in the ordinary conduct of the business of the
Company and its Restricted Subsidiaries, taken as a
whole;
(iv) Certain Encumbrances -- Liens in the nature
of reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions,
leases and other similar title exceptions or
encumbrances affecting real property, provided that
such exceptions and encumbrances do not in the
aggregate materially detract from the value of such
properties or materially interfere with the use of such
property in the ordinary conduct of the business of the
Company and its Restricted Subsidiaries, taken as a
whole;
(v) Intercompany Liens -- Liens on property of a
Restricted Subsidiary, provided that such Liens secure
only Indebtedness or other obligations owing to the
Company;
(vi) Closing Date Liens -- Liens in existence on
the date of the Closing securing Indebtedness, provided
that such Liens and the Indebtedness secured thereby
are described in Schedule 5.15;
(vii) Purchase Money Liens -- Purchase Money
Liens, if, after giving effect thereto and to any
concurrent transactions, each such Purchase Money Lien
secures Indebtedness in an amount not exceeding the
lesser of
(A) the cost of acquisition or construction,
or
(B) the Fair Market Value
of the particular property to which such Indebtedness
relates;
(viii) Other Liens -- other Liens securing
Indebtedness of the Company or any Restricted
Subsidiary not otherwise permitted by clauses (i)
through clause (vii), inclusive, of this Section
10.6(a), provided that,
(A) the Indebtedness secured thereby is, at
the time of the incurrence thereof, permitted to
be incurred and outstanding in accordance with the
provisions of Section 10.4(a) and Section 10.5,
and
(B) no Default or Event of Default would
exist; and
(ix) Refinancings, Extensions, etc. -- Liens
securing renewals, extensions (as to time) and
refinancings of Indebtedness secured by the Liens
described in clause (i) through clause (viii) of this
Section 10.6(a), provided that
(A) the amount of Indebtedness or other
obligations secured by each such Lien is not
increased in excess of the amount of such
Indebtedness or other obligations outstanding on
the date of such renewal, extension or
refinancing,
(B) none of such Liens is extended to
encumber or otherwise relate to or cover any
additional property of the Company or any
Restricted Subsidiary, and
(C) immediately prior to, and immediately
after the consummation of such renewal, extension
or refinancing, and after giving effect thereto,
no Default or Event of Default exists or would
exist.
(b) Equal and Ratable Lien; Equitable Lien. In case
any property shall be subjected to a Lien in violation of
this Section 10.6, the Company will forthwith make or cause
to be made, to the fullest extent permitted by applicable
law, provision whereby the Notes will be secured equally and
ratably with all other obligations secured thereby pursuant
to such agreements and instruments as shall be approved by
the Required Holders, and the Company will cause to be
delivered to each holder of Notes an opinion of independent
counsel (selected by the Company and reasonably satisfactory
to the Required Holders) to the effect that such agreements
and instruments are enforceable in accordance with their
terms. Regardless of whether the Company complies with the
provisions of the immediately preceding sentence, in case
any property shall be subjected to a Lien in violation of
this Section 10.6, the Notes shall have the benefit, to the
fullest extent that, and with such priority as, the holders
of Notes may be entitled thereto under applicable law, of an
equitable Lien on such property securing the Notes. A
violation of this Section 10.6 will constitute an Event of
Default, whether or not any such provision is made or action
is taken pursuant to this Section 10.6(b).
(c) Financing Statements. The Company will not, and
will not permit any Restricted Subsidiary to, sign or file a
financing statement under the Uniform Commercial Code of any
jurisdiction that names the Company or such Restricted
Subsidiary as debtor, or sign any security agreement
authorizing any secured party thereunder to file any such
financing statement, except, in any such case, a financing
statement filed or to be filed to perfect or protect a
security interest that the Company or such Restricted
Subsidiary is entitled to create, assume or incur, or permit
to exist, under the foregoing provisions of this Section
10.6 or to evidence for informational purposes a lessor's
interest in property leased to the Company or any such
Restricted Subsidiary.
10.7 Maintenance of Consolidated Adjusted Net
Worth.
The Company will not, at any time, permit Consolidated
Adjusted Net Worth to be less than the sum of
(a) $70,000,000 plus
(b) an aggregate amount equal to 25% of Consolidated
Net Income (but, in each case, only if a positive number)
for each completed fiscal quarter of the Company beginning
with the fiscal quarter ended July 31, 1998.
10.8 Restricted Payments and Restricted
Investments.
(a) Limit on Restricted Payments and Restricted
Investments. The Company will not at any time, and will not
at any time permit any Restricted Subsidiary to, declare or
make any Restricted Payment or make any Restricted
Investment unless:
(i) immediately after, and after giving effect
to, such Restricted Payment or such Restricted
Investment, the sum of the aggregate amount of (x) all
Restricted Payments declared or made during the period
from and after the date of the Closing to and including
the date such Restricted Payment or Restricted
Investment is made, plus (y) all Restricted Investments
held at such time by the Company and its Restricted
Subsidiaries would not exceed the sum of
(A) $10,000,000, plus
(B) the sum of 50% (or minus 100% in the
case of a deficit) of Consolidated Net Income for
the period commencing on and including May 1, 1998
and ending on and including the date such
Restricted Payment is declared or made or such
Restricted Investment is made, plus
(C) the aggregate amount of cash proceeds
(net of all costs and out-of-pocket expenses in
connection therewith, including, without
limitation, placement, underwriting and brokerage
fees and expenses) received by the Company and its
Restricted Subsidiaries after April 30, 1998 and
prior to such time from the issuance and sale of
(I) Capital Stock (other than Redeemable Stock) of
the Company (either directly or through the
exercise of warrants, rights or other options or
the exercise of any rights of the holder of any
Indebtedness of the Company to convert such
Indebtedness to Capital Stock (other than
Redeemable Stock)) or (II) any warrants, rights or
other options to purchase such Capital Stock; and
(ii) at the time of such declaration and
immediately before, and after giving effect to, such
Restricted Payment or such Restricted Investment, no
Default or Event of Default exists or would exist.
(b) Time of Payment. The Company will not authorize a
Distribution on any class of its Capital Stock that is not
payable within 90 days of authorization.
(c) New Restricted Subsidiaries. Any Subsidiary which
becomes a Restricted Subsidiary after the date of the
Closing shall be deemed to have made, at the time such
Subsidiary becomes a Restricted Subsidiary, all Restricted
Investments of such Subsidiary existing immediately after
such Subsidiary shall have become a Restricted Subsidiary.
10.9 Merger, Consolidation, etc.
(a) Merger and Consolidation. The Company will not,
and will not permit any Restricted Subsidiary to, merge with
or into, consolidate with, or sell, lease, transfer or
otherwise dispose of all or substantially all of its assets
to, any other Person, or permit any other Person to merge or
consolidate with or into it, provided that the foregoing
restriction does not apply to
(i) the merger or consolidation of the Company
into or with, or the sale by the Company of all or
substantially all of its assets to, another
corporation, if:
(A) the corporation that results from such
merger or consolidation or that acquires all or
substantially all of such assets (the "Surviving
Corporation") is organized under the laws of the
United States of America, any state thereof or the
District of Columbia;
(B) the due and punctual payment of the
principal of and Make-Whole Amount, if any, and
interest on all of the Notes, according to their
tenor, and the due and punctual performance and
observance of all the covenants in the Notes and
this Agreement to be performed or observed by the
Company, are expressly assumed by the Surviving
Corporation pursuant to such agreements and
instruments as shall be approved by the Required
Holders, and the Company causes to be delivered to
each holder of Notes an opinion of independent
counsel reasonably acceptable to the Required
Holders to the effect that such agreements and
instruments are enforceable in accordance with
their terms (subject to customary qualifications);
and
(C) immediately prior to, and immediately
after the consummation of the transaction, and
after giving effect thereto, no Default or Event
of Default exists or would exist;
(ii) a merger of a Restricted Subsidiary into, or
a consolidation of a Restricted Subsidiary with, the
Company (so long as the Company is the surviving
entity) or a Wholly-Owned Restricted Subsidiary (so
long as such Wholly-Owned Restricted Subsidiary is the
surviving entity) or the sale or other disposition by a
Restricted Subsidiary of all or substantially all of
its assets to the Company or a Wholly-Owned Restricted
Subsidiary; and
(iii) the merger of a Restricted Subsidiary
into, or consolidation of a Restricted Subsidiary with,
or the sale or other disposition by a Restricted
Subsidiary of all or substantially all of its assets
to, another corporation (which shall not be an
Affiliate or a Restricted Subsidiary), if
(A) such transaction complies, in all
respects, with the provisions of Section 10.10,
and
(B) immediately prior to, and immediately
after the consummation of the transaction, and
after giving effect thereto, no Default or Event
of Default exists or would exist.
(b) Acquisition of Stock, etc. The Company will not,
and will not permit any Restricted Subsidiary to, acquire
any Capital Stock of any Person if upon completion of such
acquisition such Person would be a Restricted Subsidiary, or
acquire all of the property of, or such of the property as
would permit the transferee to continue any one or more
integral business operations of, any Person unless,
immediately prior to, and immediately after the consummation
of such acquisition, and after giving effect thereto, no
Default or Event of Default exists or would exist.
10.10 Sale of Assets, etc.
(a) Sale of Assets, etc. The Company will not, and
will not permit any of its Restricted Subsidiaries to, make
any Asset Disposition, unless:
(i) in the good faith opinion of the Company,
such Asset Disposition is in exchange for consideration
having a Fair Market Value at least equal to that of
the property exchanged; and
(ii) immediately after giving effect to such Asset
Disposition:
(A) no Default or Event of Default would
exist; and
(B) the Disposition Value of all property
that was the subject of any Asset Disposition by
the Company and its Restricted Subsidiaries
occurring during such fiscal year would not exceed
10% of Consolidated Total Assets determined as of
the end of the then most recently ended fiscal
year (such amount in respect of the fiscal year in
which such Transfer is proposed to be made is
herein referred to as the "Specified Asset
Percentage").
(b) Transfers in Excess of the Specified Percentage.
(i) Application of Excess Proceeds Amount.
Notwithstanding the provisions of Section 10.10(a), the
Company may, and may permit a Restricted Subsidiary to,
Transfer, in any fiscal year of the Company, property
having an aggregate book value in excess of the
Specified Asset Percentage for such fiscal year of the
Company if:
(A) the Excess Proceeds Amount shall have
been applied by the Company or such Restricted
Subsidiary to a Qualified Proceeds Application
within 360 days of the receipt thereof by the
Company or such Restricted Subsidiary;
(B) immediately before and after the
consummation of each such Transfer, and after
giving effect thereto, no Default or Event of
Default exists or would exist; and
(C) prior to or contemporaneously with the
application of all or any portion of such Excess
Proceeds Amount, the Company shall have delivered
a certificate of a Senior Officer to each holder
of Notes providing a detailed description of such
application and certifying that the conditions set
forth in subclause (A) and subclause (B) hereof
have been satisfied.
(ii) Failure to Apply Proceeds. If,
notwithstanding the provisions of this Section
10.10(b), the Company shall fail to comply with any of
the requirements of Section 10.10(b)(i), then such
failure to comply with any such provisions as of such
date shall be deemed to be an Event of Default.
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) Principal or Make-Whole Amount Payments -- the
Company defaults in the payment of any principal or Make-
Whole Amount, if any, on any Note when the same becomes due
and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise; or
(b) Interest Payments -- the Company defaults in the
payment of any interest on any Note for more than five
Business Days after the same becomes due and payable; or
(c) Particular Covenant Defaults -- the Company
defaults in the performance of or compliance with any term
contained in any of Sections 10.2 through 10.10, inclusive,
or Section 7.1(e); or
(d) Other Defaults -- the Company defaults in the
performance of or compliance with any term contained herein
(other than those referred to in paragraphs (a), (b) and (c)
of this Section 11) and such default is not remedied within
30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any
holder of a Note; or
(e) Warranties or Representations -- any
representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which
made; or
(f) Default on Indebtedness or Security --
(i) the Company or any Significant Subsidiary is
in default (as principal or as guarantor or other
surety) in the payment of any principal of or premium
or make-whole amount or interest on any Indebtedness
(other than Indebtedness under this Agreement and the
Notes) beyond any period of grace provided with respect
thereto, that individually or together with such other
Indebtedness as to which any such failure exists has an
aggregate outstanding principal amount in excess of
$5,000,000, or
(ii) the Company or any Significant Subsidiary is
in default in the performance of or compliance with any
term of any evidence of any Indebtedness (other than
Indebtedness under this Agreement and the Notes), that
individually or together with such other Indebtedness
as to which any such failure exists has an aggregate
outstanding principal amount in excess of $5,000,000,
or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as
a consequence of such default or condition such
Indebtedness has become, or has been declared (or one
or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of
payment, or
(iii) as a consequence of the occurrence or
continuation of any event or condition (other than the
passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity
interests),
(A) the Company or any Significant
Subsidiary has become obligated to purchase or
repay Indebtedness before its regular maturity or
before its regularly scheduled dates of payment in
an aggregate outstanding principal amount in
excess of $5,000,000, or
(B) one or more Persons have the right to
require the Company or any Significant Subsidiary
so to purchase or repay such Indebtedness; or
(g) Voluntary Petitions, etc. -- the Company or any
Significant Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise
to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(h) Involuntary Bankruptcy Proceedings -- a court or
governmental authority of competent jurisdiction enters an
order appointing, without consent by the Company or any
Significant Subsidiary, a custodian, receiver, trustee or
other officer with similar powers with respect to the
Company or any Significant Subsidiary or with respect to any
substantial part of the property of the Company or any
Significant Subsidiary, or constituting an order for relief
or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any Significant Subsidiary, or
any such petition shall be filed against the Company or any
Significant Subsidiary and such order or petition shall not
be dismissed within 60 days; or
(i) Undischarged Final Judgments -- a final judgment
or judgments for the payment of money aggregating in excess
of $5,000,000 are rendered against one or more of the
Company and its Significant Subsidiaries and which judgments
are not, within 60 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged
within 60 days after the expiration of such stay; or
(j) ERISA -- if
(i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan
year or part thereof or a waiver of such standards or
extension of any amortization period is sought or
granted under section 412 of the Code,
(ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC
shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such
proceedings,
(iii) the aggregate "amount of unfunded
benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed 5% of
Consolidated Adjusted Net Worth,
(iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating
to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would
increase the liability of the Company or any Restricted
Subsidiary thereunder;
and any such event or events described in clauses (i)
through (vi) above, either individually or together with any
other such event or events, could reasonably be expected to
have a Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and
"employee welfare benefit plan" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 Acceleration.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or paragraph (h) of Section 11
(other than an Event of Default described in clause (i) of
paragraph (g) or described in clause (vi) of paragraph (g)
by virtue of the fact that such clause encompasses clause
(i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and
payable.
(b) If any other Event of Default has occurred and is
continuing,
(i) any holder or holders of a majority in
principal amount of the Series A1 Notes and Series A2
Notes at the time outstanding may at any time at its or
their option, by notice or notices to the Company,
declare all the Series A1 Notes and Series A2 Notes
then outstanding to be immediately due and payable, and
(ii) any holder or holders of a majority in
principal amount of the Series B Notes at the time
outstanding may at any time at its or their option, by
notice or notices to the Company, declare all the
Series B Notes then outstanding to be immediately due
and payable.
(c) If any Event of Default described in paragraph (a)
or (b) of Section 11 has occurred and is continuing, any
holder or holders of Notes at the time outstanding affected
by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the
Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this
Section 12.1, whether automatically or by declaration, such Notes
will forthwith mature and the entire unpaid principal amount of
such Notes, plus (x) all accrued and unpaid interest thereon and
(y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the
parties hereto agree, that each holder of a Note has the right to
maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the
provision for payment of a Make-Whole Amount by the Company in
the event that the Notes are prepaid or are accelerated as a
result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such
circumstances.
12.2 Other Remedies.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section
12.1, the holder of any Note at the time outstanding may proceed
to protect and enforce the rights of such holder by an action at
law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in
any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
12.3 Rescission.
(a) Series A1 Notes and Series A2 Notes. At any time
after any Series A1 Notes and Series A2 Notes have been
declared due and payable pursuant to clause (b) or clause
(c) of Section 12.1, the holders of not less than a majority
in principal amount of the Series A1 Notes and Series A2
Notes then outstanding, by written notice to the Company,
may rescind and annul any such declaration and its
consequences if (i) the Company has paid all overdue
interest on the Series A1 Notes and Series A2 Notes, all
principal of and Make-Whole Amount, if any, due and payable
on any Series A1 Notes and Series A2 Notes other than by
reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent
permitted by applicable law) any overdue interest in respect
of the Series A1 Notes and Series A2 Notes, at the Default
Rate, (ii) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason
of such declaration, have been cured or have been waived
pursuant to Section 17, and (iii) no judgment or decree has
been entered for the payment of any monies due pursuant
hereto or to the Series A1 Notes and Series A2 Notes.
(b) Series B Notes. At any time after any Series B
Notes have been declared due and payable pursuant to clause
(b) or clause (c) of Section 12.1, the holders of not less
than a majority in principal amount of the Series B then
outstanding, by written notice to the Company, may rescind
and annul any such declaration and its consequences if
(i) the Company has paid all overdue interest on the Series
B Notes, all principal of and Make-Whole Amount, if any, due
and payable on any Series B Notes other than by reason of
such declaration, and all interest on such overdue principal
and Make-Whole Amount, if any, and (to the extent permitted
by applicable law) any overdue interest in respect of the
Series B Notes, at the Default Rate, (ii) all Events of
Default and Defaults, other than non-payment of amounts that
have become due solely by reason of such declaration, have
been cured or have been waived pursuant to Section 17, and
(iii) no judgment or decree has been entered for the payment
of any monies due pursuant hereto or to the Series B Notes.
(c) Effect on Subsequent Events of Default or
Defaults. No rescission and annulment under Section 12.3(a)
or Section 12.3(b) will extend to or affect any subsequent
Event of Default or Default or impair any right consequent
thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder
of any Note in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice such holder's
rights, powers or remedies. No right, power or remedy conferred
by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein
or therein or now or hereafter available at law, in equity, by
statute or otherwise. Without limiting the obligations of the
Company under Section 15, the Company will pay to the holder of
each Note on demand such further amount as shall be sufficient to
cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and
disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of
Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in such register. Prior
to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof,
and the Company shall not be affected by any notice or knowledge
to the contrary. The Company shall give to any holder of a Note
that is an Institutional Investor promptly upon request therefor,
a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office
of the Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or his attorney
duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested
by the holder thereof) of the same Series in exchange therefor,
in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be
substantially in the form of Exhibit A1, Exhibit A2 or Exhibit B,
as the case may be. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less
than $100,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000.
Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made
the representation set forth in Section 6.2. The Company shall
not be required to recognize any transfer of Notes other than a
transfer effected in accordance with the provisions of this
Section 13.2.
13.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be,
in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if
the holder of such Note is, or is a nominee for, an original
purchaser or an Institutional Investor, such Person's own
unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note of the same Series, dated and bearing
interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest
shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the
Notes shall be made in Santa Rosa, California at the principal
office of the Company in such jurisdiction. The Company may at
any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be
either the principal office of the Company in such jurisdiction
or the principal office of a bank or trust company in the United
States.
14.2 Home Office Payment.
So long as you or your nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 or
in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for
such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose,
without the presentation or surrender of such Note or the making
of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such
request, to the Company at its principal executive office or at
the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon
or surrender such Note to the Company in exchange for a new Note
or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that
is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses
(including reasonable attorneys' fees of a special counsel and,
if reasonably required, local or other counsel) incurred by you
and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes
(whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this
Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of
being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with
the insolvency or bankruptcy of the Company or any Significant
Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a
Note harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those
retained by you).
15.2 Survival.
The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the
Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the
Notes, the purchase or transfer by you of any Note or portion
thereof or interest therein and the payment of any Note, and may
be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the
Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and
the Notes embody the entire agreement and understanding between
you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 Requirements.
(a) Series A1 Notes and Series A2 Notes. So long as
any Series A1 Notes or Series A2 Notes are outstanding, this
Agreement and the Series A1 Notes and Series A2 Notes may be
amended, and the observance of any term hereof or of such
Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and
the holders of a majority in principal amount of the Series
A1 Notes and Series A2 Notes at the time outstanding, except
that (i) no amendment or waiver of any of the provisions of
any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term
(as it is used therein), will be effective as to you unless
consented to by you in writing, and (ii) no such amendment
or waiver may, without the written consent of the holder of
each Series A1 Note and Series A2 Note at the time
outstanding affected thereby, (A) subject to the provisions
of Section 12 relating to acceleration or rescission, change
the amount or time of any prepayment or payment of principal
of, or change the rate or the time of payment or method of
computation of interest or of the Make-Whole Amount on, the
Series A1 Notes or Series A2 Notes, (B) change the
percentage of the principal amount of the Series A1 Notes
and Series A2 Notes the holders of which are required to
consent to any such amendment or waiver, or (C) amend any of
Sections 8, 11(a), 11(b), 12, 17 and 20.
(b) Series B Notes. So long as any Series B Notes are
outstanding, this Agreement and the Series B Notes may be
amended, and the observance of any term hereof or of such
Notes may be waived (either retroactively or prospectively),
with (and only with) the written consent of the Company and
the holders of a majority in principal amount of the Series
B Notes at the time outstanding, except that (i) no
amendment or waiver of any of the provisions of any of
Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as it
is used therein), will be effective as to you unless
consented to by you in writing, and (ii) no such amendment
or waiver may, without the written consent of the holder of
each Series B Note at the time outstanding affected thereby,
(A) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or change the rate or
the time of payment or method of computation of interest or
of the Make-Whole Amount on, the Series B Notes, (B) change
the percentage of the principal amount of the Series B Notes
the holders of which are required to consent to any such
amendment or waiver, or (C) amend any of Sections 8, 11(a),
11(b), 12, 17 and 20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each
holder of the Notes (irrespective of the amount of Notes
then owned by it) with sufficient information, sufficiently
far in advance of the date a decision is required, to enable
such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies
of each amendment, waiver or consent effected pursuant to
the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or
indirectly pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into
by any holder of Notes of any waiver or amendment of any of
the terms and provisions hereof pursuant to Section 17.1(a)
or Section 17.1(b), as the case may be, unless such
remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each
holder of Notes of any Series affected by such waiver or
amendment, as the case may be, then outstanding even if such
holder did not consent to such waiver or amendment.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in
Section 17.1(a) and Section 17.1(b) applies equally to all
holders of each Series of Notes affected by such amendment or
waiver and is binding upon them and upon each future holder of
any Note of such Series and upon the Company without regard to
whether such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder
of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein, the term "this Agreement"
and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of
the requisite percentage of the aggregate principal amount of
Notes then outstanding approved or consented to any amendment,
waiver or consent to be given under this Agreement or the Notes,
or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be
outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall
be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by
registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Schedule A, or
at such other address as you or it shall have specified to
the Company in writing,
(ii) if to any other holder of any Note, to such holder
at such address as such other holder shall have specified to
the Company in writing, or
(iii) if to the Company,
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Attention: Mr.Craig B. Collins,
Vice President, Finance and
Chief Financial Officer and
Joseph C. Zils, Esq.,
Vice President and Corporate Counsel
Phone: (707) 545-6440
Facsimile: (707) 525-6840
with a copy to:
John V. Erickson, Esq.
Collette & Erickson
555 California Street, Suite 4350
San Francisco, California 94104
Phone: (415) 788-4646
Facsimile: (415) 788-6929
or at such other address as the Company shall have furnished
in writing to all holders of the Notes at the time
outstanding.
Notices under this Section 18 will be deemed given only when
actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including,
without limitation, (a) consents, waivers and modifications that
may hereafter be executed, (b) documents received by you at the
Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any
original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any
such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such
reproduction was made by you in the regular course of business)
and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of
Notes from contesting any such reproduction to the same extent
that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential
Information" means information delivered to you by or on behalf
of the Company or any Subsidiary in connection with the
transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company
or such Subsidiary, provided that such term does not include
information that
(a) was publicly known or otherwise known to you prior
to the time of such disclosure,
(b) subsequently becomes publicly known through no act
or omission by you or any person acting on your behalf,
(c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary, or
(d) constitutes financial statements delivered to you
under Section 7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential
Information in accordance with reasonable procedures and
standards adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you
may deliver or disclose Confidential Information to:
(i) your directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the
investment represented by your Notes and so long as you
employ reasonable procedures and standards designed to
maintain the confidential nature of all such Confidential
Information that is disclosed to such persons),
(ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of
this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or
offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any
Security of the Company (if such Person has agreed in
writing prior to its receipt of such Confidential
Information to be bound by the provisions of this
Section 20),
(vi) any federal or state regulatory authority having
jurisdiction over you, if disclosure is required by, or in
good faith deemed advisable by you to comply with, any law
or order,
(vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information
about your investment portfolio,
(viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (in your good
faith business or legal judgment),
(A) to effect compliance with any law, rule,
regulation or order applicable to you,
(B) in response to any subpoena or other legal
process, or
(C) in connection with any litigation to which
you are a party, or
(D) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine
such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of
the rights and remedies under your Notes and this
Agreement.
Each holder of a Note, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the
benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection
with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested
by such holder (other than a holder that is a party to this
Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this
Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to
purchase hereunder, by written notice to the Company, which
notice shall be signed by both you and such Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement
and shall contain a confirmation by such Affiliate of the
accuracy with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, wherever the word "you"
is used in this Agreement (other than in this Section 21), such
word shall be deemed to refer to such Affiliate in lieu of you.
In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of
the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "you" is
used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original
holder of the Notes under this Agreement.
22. MISCELLANEOUS
22.1 Successors and Assigns.
All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and
inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note)
whether so expressed or not.
22.2 Payments Due on Non-Business Days; When
Payments Deemed Received.
(a) Payments Due on Non-Business Days. Anything in
this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest
on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
(b) Payments, When Received. Any payment to be made
to the holders of Notes hereunder or under the Notes shall
be deemed to have been made on the Business Day such payment
actually becomes available to such holder at such holder's
bank prior to 12:00 noon (local time of such bank).
22.3 Severability.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not
invalidate or render unenforceable such provision in any other
jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each
other covenant contained herein, so that compliance with any one
covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly
by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may
consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto.
22.6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF CONNECTICUT EXCLUDING CHOICE-OF-LAW PRINCIPLES OF
THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature
page.]
If you are in agreement with the foregoing, please sign
the form of agreement on the accompanying counterpart of this
Agreement and return it to the Company, whereupon the foregoing
shall become a binding agreement between you and the Company.
Very truly yours,
OPTICAL COATING LABORATORY, INC.
By
Name:
Title:
The foregoing is hereby
agreed to as of the
date thereof.
[PURCHASER]
By:
Name:
Title:
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Purchaser MODERN WOODMEN OF AMERICA
Name
Name in Note is Modern Woodmen of America
Registered
Series; Note Series A1; RA1-1; $4,000,000
Registration Number;
Principal Amount
Description of R-3; $4,000,000
Existing Note
Surrendered for
Cancellation;
Outstanding
Principal Amount
Payment on Account
of Note
Method Federal Funds Wire Transfer
Account The Northern Trust Company
50 South LaSalle Street
Information Chicago, IL 60675
Account Name: Modern Woodmen of America
Account No. 84352
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 8.71% Series A1 Senior
Notes Due June 1, 2002
PPN: 683829 A@ 4
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Modern Woodmen of America
Related to Payments Attn: Investment Department
1701 1st Avenue
Rock Island, IL 61201
Address for all Modern Woodmen of America
other Notices Attn: Investment Department
1701 1st Avenue
Rock Island, IL 61201
Telecopy: (309) 786-1701
Purchaser MODERN WOODMEN OF AMERICA
Name
Other Instructions MODERN WOODMEN OF AMERICA
By_______________________
Name:
Title:
Instructions re Investment Department of Purchaser
Delivery of Notes
Tax Identification 36-1493430
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-2
Purchaser AMERICAN LIFE AND CASUALTY INSURANCE
Name COMPANY
Name in Which Note Salkeld & Co.
is Registered
Series; Note Series A1; RA1-2; $2,400,000
Registration Number;
Principal Amount
Description of R-4; $2,400,000
Existing Note
Surrendered for
Cancellation;
Outstanding
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Care of Banker's Trust
Account ABA #021001033
Information Account No. 99911145
Attention: FFC: American Life and
Casualty Insurance Company
99810
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 8.71% Series A1 Senior
Notes Due June 1, 2002
PPN: 683829 A@ 4
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices American Life and Casualty Insurance
Related to Payments Company
11825 N. Pennsylvania Avenue
P.O. Box 1925
Carmel, IN 46032
Attn: Dan Skiba
Telephone: 317-817-6954
Fax: 317-817-2779
Address for all American Life and Casualty Insurance
other Notices Company
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-3
Purchaser AMERICAN LIFE AND CASUALTY INSURANCE
Name COMPANY
11825 N. Pennsylvania Avenue
P.O. Box 1925
Carmel, IN 46032
Attn: Dan Skiba
Telephone: 317-817-6954
Fax: 317-817-2779
Other Instructions AMERICAN LIFE AND CASUALTY INSURANCE
COMPANY
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 45-0103436
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-4
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Name in Which Note Massachusetts Mutual Life Insurance
is Registered Company
Series; Note Series A2; RA2-1; $8,000,000
Registration Number;
Principal Amount
Description of
Existing,Notes R-2; $4,000,000
Surrendered for
Cancellation;
Outstanding
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Chase Manhattan Bank, N.A.
Account 4 Chase MetroTech Center
Information New York, NY 10081
ABA No.: 021000021
For Segment 43 - Par Whole Life
Account No. 910-2-742765
Re: See "Accompanying information" below
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3878
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 7.80% Series A2 Senior
Note Due July 31, 2008
PPN: 683829 A# 2
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Massachusetts Mutual Life
Related to Payments Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department, F 381
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-5
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Address for all Massachusetts Mutual Life
other Notices Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Lawrence D. Stillman, Managing
Director
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 04-1590850
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-6
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Name in Which Note Massachusetts Mutual Life Insurance
is Registered Company
Series; Note Series B; RB-1; $12,500,000
Registration Number;
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Citibank, N.A.
Account 111 Wall Street
Information New York, NY 10043
ABA No. 021000089
For MassMutual Long Term Pool
Account No. 4067-3488
Re: See "Accompanying information" below
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3878
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 6.69% Series B Senior
Notes Due July 31, 2008
PPN: 683829 B* 5
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Massachusetts Mutual Life
Related to Payments Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department, F 381
Address for all Massachusetts Mutual Life
other Notices Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-7
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Lawrence D. Stillman, Managing
Director
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 04-1590850
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-8
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Name in Which Note Massachusetts Mutual Life Insurance
is Registered Company
Series; Note Series B; RB-2; $2,500,000
Registration Number;
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Chase Manhattan Bank, N.A.
Account 4 Chase MetroTech Center
Information New York, NY 10081
ABA No.: 021000021
For MassMutual Pension Management
Account No. 910-2594018
Re: See "Accompanying information" below
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3878
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 6.69% Series B Senior
Notes Due July 31, 2008
PPN: 683829 B* 5
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Massachusetts Mutual Life
Related to Payments Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department
F 381
Address for all Massachusetts Mutual Life Insurance
other Notices Company
1295 State Street
Springfield, MA 01111
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-9
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Attn: Securities Investment Division
Lawrence D. Stillman, Managing
Director
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 04-1590850
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-10
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Name in Which Note Massachusetts Mutual Life Insurance
is Registered Company
Series; Note Series B; RB-3; $3,000,000
Registration Number;
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Citibank, N.A.
Account 111 Wall Street
Information New York, NY 10043
ABA No. 021000089
For MassMutual B-14
Account No. 4065-5546
Re: See "Accompanying information" below
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3878
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 6.69% Series B Senior
Notes Due July 31, 2008
PPN: 683829 B* 5
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Massachusetts Mutual Life
Related to Payments Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department, F 381
Address for all Massachusetts Mutual Life
other Notices Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-11
Purchaser MASSACHUSETTS MUTUAL LIFE INSURANCE
Name COMPANY
Lawrence D. Stillman, Managing Director
Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 04-1590850
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-12
Purchaser BAYSTATE HEALTH SYSTEMS, INC.
Name
Name in Which Note MAC & Co.
is Registered
Series; Note Series B; RB-4; $500,000
Registration Number;
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer
Method
Boston Safe Deposit and Trust Company
Account ABA No. 011001234
Information DDA No. 048771
Ref: Baystate Health Systems
Intermediate Aggregate
A/C #BPOF3001002
Re: See "Accompanying information" below
With telephone advice of payment to the
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at (413) 744-3561
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 6.69% Series B Senior
Notes Due July 31, 2008
PPN: 683829 B* 5
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Baystate Health Systems, Inc.
Related to Payments c/o Massachusetts Mutual Life
Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Securities Custody and
Collection Department, F 381
Address for all Baystate Health Systems, Inc.
other Notices c/o Massachusetts Mutual Life Insurance
Company
1295 State Street
Springfield, MA 01111
Attn: Securities Investment Division
Lawrence D. Stillman, Managing
Director
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-13
Purchaser BAYSTATE HEALTH SYSTEMS, INC.
Name
Other Instructions BAYSTATE HEALTH SYSTEMS, INC.
By Massachusetts Mutual Life
Insurance Company, as Investment
Adviser
By_______________________
Name:
Title:
Instructions re Law Department of Purchaser
Delivery of Notes
Tax Identification 04-2105941
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-14
Purchaser PRINCIPAL LIFE INSURANCE COMPANY
Name
Name in Which Note Principal Life Insurance Company
is Registered
Series; Note Series B; RB-5; $11,500,000
Registration Number;
Principal Amount
Payment on Account
of Note
Federal Funds Wire Transfer (by 12:00
Method Noon New York City time)
Account Norwest Bank Iowa, N.A.
Information 7th and Walnut Streets
Des Moines, IA 50309
ABA # 073000228
For credit to Principal Life Insurance
Company
Account No. 014752
OBI PFGSE (S)B0061658()
Re: See "Accompanying Information" below
Accompanying Name of Company: OPTICAL COATING
Information LABORATORY, INC.
Description of
Security: 6.69% Series B Senior
Notes Due July 31, 2008
PPN: 683829 B* 5
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
Address for Notices Principal Life Insurance Company
Related to Payments 711 High Street
Des Moines, IA 50392-0960
Attn: Investment Accounting - Securities
Fax: 515-248-2643
Confirmation: 515-247-0689
Address for all Principal Life Insurance Company
other Notices 711 High Street
Des Moines, IA 50392-0800
Attn: Investment - Securities
Fax: 515-248-2490
Confirmation: 515-248-3495
Other Instructions PRINCIPAL LIFE INSURANCE COMPANY
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule A-15
Purchaser PRINCIPAL LIFE INSURANCE COMPANY
Name
By_______________________
Name:
Title:
By_______________________
Name:
Title:
Instructions re Debra Svoboda Epp, Esq.
Delivery of Notes Principal Life Insurance Company
711 High Street
Des Moines, IA 50392-0301
Tax Identification 42-0127290
Number
OPTICAL COATING LABORATORY, INC. NOTE PURCHASE AGREEMENT
Schedule B-16
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof
following such term:
"Affiliate" means, at any time, a Person (other than a
Restricted Subsidiary)
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under
common Control with, the Company,
(b) that beneficially owns or holds 10% or more of any
class of the Voting Stock of the Company,
(c) 10% or more of the Voting Stock (or in the case of
a Person that is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by
the Company or a Subsidiary, or
(d) that is an officer or director (or a member of the
immediate family of an officer or director) of the Company
or any Subsidiary,
at such time.
As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Agreement, this" is defined in Section 17.3.
"Asset Disposition" means any Transfer except:
(a) any Transfer from the Company to a Wholly-Owned
Restricted Subsidiary, and any Transfer from a Restricted
Subsidiary to the Company or to a Wholly-Owned Restricted
Subsidiary,
(b) any Transfer made in the ordinary course of
business and involving only property that is either (i)
inventory held for sale or (ii) equipment, fixtures,
supplies or materials no longer required in the operation of
the business of the Company or any of its Restricted
Subsidiaries, or that is obsolete,
(c) a Transfer as part of a Sale-and-Leaseback
Transaction,
(d) Transfers of miscellaneous items of property
having an individual current book value of less $1,000,000,
so long as the aggregate book value of all property subject
to Transfers during any fiscal year of the Company pursuant
to this clause (d) does not exceed $2,000,000 for such
fiscal year, and
(e) Transfers of property in connection with an
exchange of property by the Company or a Restricted
Subsidiary with another Person, so long as the property
received by the Company or such Restricted Subsidiary in
such exchange shall have a substantially similar business
use as, and a Fair Market Value equal to or greater than the
Fair Market Value of, the property subject to such Transfer.
"Attributable Debt" means, at any time, with respect to the
Company or any Restricted Subsidiary, the present value of all
Operating Rentals required to be paid by the Company or such
Restricted Subsidiary under each lease created pursuant to a
Sale-and-Leaseback Transaction during the then remaining term
thereof (determined in accordance with generally accepted
financial practice using a discount factor equal to the interest
rate implicit in such lease if known or, if not known, of 6.69%
per annum).
"Business Day" means, at any time, a day other than a
Saturday, a Sunday or a day on which the bank designated by the
holder of a Note to receive (for such holder's account) payments
on such Note is required by law (other than a general banking
moratorium or holiday for a period exceeding four consecutive
days) to be closed.
"Capital Lease" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person
and a Capital Lease, the amount of the obligation of such Person
as the lessee under such Capital Lease which would, in accordance
with GAAP, appear as a liability on a balance sheet of such
Person.
"Capital Stock" means any class of capital stock, share
capital or similar equity interest of a Person.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Company" is defined in the introductory sentence of this
Agreement.
"Confidential Information" is defined in Section 20.
"Consolidated Adjusted Net Worth" means, at any time,
(a) the sum of
(i) the par value (or value stated on the books
of the corporation) at such time of the Capital Stock
of the Company, plus (or minus in the case of a
deficit), plus
(ii) the amount of the paid-in surplus of the
Company at such time, plus (or minus in the case of a
deficit), plus
(iii) the amount of the retained earnings of
the Company at such time; minus
(b) the net book value at such time (after deducting
related depreciation, obsolescence, amortization, valuation
and other proper reserves) of all Intangible Assets of the
Company and its Restricted Subsidiaries, other than Excluded
Intangible Assets,
in each case, as would appear on a consolidated balance sheet for
the Company and its Restricted Subsidiaries at such time prepared
in accordance with GAAP.
As used in this definition:
Intangible Assets -- with respect to any Person, at any
time, means the following:
(a) deferred assets, other than prepaid expenses
which are refundable (including, without limitation,
insurance and prepaid taxes);
(b) patents, copyrights, trademarks, trade names,
service marks, brand names, franchises, goodwill,
experimental expenses and other similar intangibles;
(c) unamortized debt discount and expense;
(d) lease rights; and
(e) all other property which would be considered
to be intangible under GAAP.
Excluded Intangible Assets -- means, at any time,
(a) all Intangible Assets of the Company and its
Restricted Subsidiaries existing on the date of the
Closing as would appear on a consolidated balance sheet
for such Persons on the date of the Closing prepared in
accordance with GAAP, and
(b) all Intangible Assets of the Company and its
Restricted Subsidiaries in respect of prepaid
royalties, patents, copyrights, trademarks, trade
names, service marks and brand names not in existence
on the date of the Closing, as would appear on a
consolidated balance sheet for such Persons at such
time prepared in accordance with GAAP.
"Consolidated Fixed Charges" means, for any period, the sum
of
(a) Consolidated Interest Expense, plus
(b) Consolidated Operating Rental Expense,
in each case, determined for such period.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest accrued or capitalized on, or with
respect to, Consolidated Total Indebtedness for such period,
including, without limitation, amortization of debt discount,
imputed interest on Capital Leases and interest on the Notes.
"Consolidated Net Income" means, for any period, net
earnings (or loss) after income taxes of the Company and its
Restricted Subsidiaries for such period, determined on a
consolidated basis for such Persons in accordance with GAAP, but
excluding:
(a) net earnings (or loss) of any Person accrued prior
to the date such Person became a Restricted Subsidiary or
was merged into or consolidated with the Company or a
Restricted Subsidiary;
(b) any extraordinary, unusual or nonrecurring gains
or losses;
(c) any gain arising from any reappraisal or write-up
of assets;
(d) any portion of the net earnings of any Restricted
Subsidiary that, by reason of any contract, charter
restriction, applicable law or regulation, is unavailable
for payment of dividends to the Company or a Restricted
Subsidiary;
(e) any gain or loss (net of tax effects applicable
thereto) during such period resulting from the receipt of
any proceeds of any insurance policy, other than Permitted
Insurance Proceeds for such period;
(f) any earnings of any Person acquired by the Company
or any Restricted Subsidiary through purchase, merger or
consolidation or otherwise, or earnings of any Person
substantially all of whose assets have been acquired by the
Company or any Restricted Subsidiary, for any period prior
to the date of acquisition;
(g) net earnings of any Person (other than a
Restricted Subsidiary) in which the Company or any
Restricted Subsidiary shall have an ownership interest
unless such net earnings shall have actually been received
by the Company or such Restricted Subsidiary in the form of
cash distributions;
(h) any gain or loss arising from the acquisition of
any Securities of the Company or any Restricted Subsidiary;
(i) any portion of the net earnings of the Company and
its Restricted Subsidiaries that cannot be freely converted
into United States dollars; and
(j) any gain or loss reflected in such net earnings
for such period that results solely from adjustments to net
earnings from prior periods due to the cumulative effect of
changes in any accounting principles required by GAAP.
"Consolidated Net Income Available for Fixed Charges" means,
for any period, the sum of
(a) Consolidated Net Income, plus
(b) the aggregate amount of
(i) income taxes, and
(ii) Consolidated Fixed Charges,
(to the extent, and only to the extent, that such
aggregate amount was deducted in the computation of
Consolidated Net Income),
in each case accrued for such period by the Company and its
Restricted Subsidiaries, determined on a consolidated basis for
such Persons.
"Consolidated Operating Rental Expense" means, with respect
to any period, the aggregate amount of Operating Rentals accrued
for such period on, or with respect to, Long-Term Operating
Leases of the Company and its Restricted Subsidiaries (other than
Long-Term Operating Leases between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries), determined on a
consolidated basis for such Persons for such period in accordance
with GAAP.
As used in this definition:
"Excluded Lease" means
(a) any Capital Lease, and
(b) any lease (whether or not a Capital Lease) of
word processing, data, communications, computer and
office equipment.
"Long-Term Operating Lease" means any Operating Lease
with an original term of more than three years (including
any extension of such term at the option of the lessor) and
that is not cancelable during such term at the option of the
lessee without incurrence by the lessee of a cancellation
charge or similar liability.
"Operating Lease" means any lease other than an
Excluded Lease.
"Consolidated Total Assets" means, at any time, the total
amount of all assets of the Company and its Restricted
Subsidiaries, determined on a consolidated basis for such Persons
at such time in accordance with GAAP.
"Consolidated Total Capitalization" means, at any time, the
sum of
(a) Consolidated Total Debt, plus
(b) Consolidated Adjusted Net Worth,
in each case, determined at such time.
"Consolidated Total Debt" means, at any time, the total
amount of all Debt of the Company and its Restricted
Subsidiaries, determined on a consolidated basis for such Persons
at such time in accordance with GAAP.
"Consolidated Total Indebtedness" means, at any time, the
total amount of all Indebtedness of the Company and its
Restricted Subsidiaries, determined on a consolidated basis for
such Persons at such time in accordance with GAAP.
"Debt" means, with respect to any Person, without
duplication,
(a) its liabilities for borrowed money (whether or not
evidenced by a Security);
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such
property);
(c) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable
for such liabilities);
(d) its Capital Lease Obligations;
(e) Swaps of such Person; and
(f) its Guaranties (other than Excluded Guaranties) of
any liabilities of another Person constituting liabilities
of a type set forth in clause (a) through clause (e),
inclusive;
in each case, at such time, provided that trade accounts payable
incurred by such Person in the ordinary course of business shall
not constitute "Debt."
"Debt Prepayment Application" means, with respect to any
Transfer of property by the Company or any Restricted Subsidiary,
the application by the Company or such Restricted Subsidiary of
cash in an amount equal to the Net Proceeds Amount with respect
to such Transfer to pay Senior Debt of the Company or such
Restricted Subsidiary (other than Senior Debt owing to any of the
Restricted Subsidiaries or any Affiliate and Senior Debt in
respect of any revolving credit or similar facility providing the
Company or such Restricted Subsidiary with the right to obtain
loans or other extensions of credit from time to time, except to
the extent that in connection with such payment of Senior Debt
the availability of credit under such credit facility is
permanently reduced by an amount not less than the amount of such
proceeds applied to the payment of such Senior Debt), provided
that in the course of making such application the Company shall
offer to prepay each outstanding Note in accordance with Section
10.10(b) in a principal amount that equals the Ratable Portion
for such Note. If any holder of a Note fails to accept such
offer of prepayment, then, for purposes of the preceding sentence
only, the Company nevertheless will be deemed to have paid Senior
Debt in an amount equal to the Ratable Portion for such Note.
As used in this definition,
"Ratable Portion" means, for any Note, an amount equal
to the product of
(a) the Net Proceeds Amount being so offered to
the payment of Senior Debt, multiplied by
(b) a fraction the numerator of which is the
outstanding principal amount of such Note and the
denominator of which is the aggregate outstanding
principal amount of Senior Debt of the Company and its
Restricted Subsidiaries.
"Debt Prepayment Application Date" is defined in Section
10.10(b).
"Default" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of
notice or both, become an Event of Default.
"Default Rate" means, with respect to the Notes of any
Series, that rate of interest per annum that is the lesser of
(a) 1% per annum above the rate of interest stated in clause (a)
of the first paragraph of the Notes of such Series or (ii) the
highest rate allowed by applicable law.
"Disposition Value" means, at any time, with respect to any
property
(a) in the case of property that does not constitute
Restricted Subsidiary Stock, the book value thereof, valued
at the time of such disposition in good faith by the
Company, and
(b) in the case of property that constitutes
Restricted Subsidiary Stock, an amount equal to that
percentage of book value of the assets of the Restricted
Subsidiary that issued such stock as is equal to the
percentage that the book value of such Restricted Subsidiary
Stock represents of the book value of all of the outstanding
Capital Stock of such Restricted Subsidiary (assuming, in
making such calculations, that all Securities convertible
into such Capital Stock are so converted and giving full
effect to all transactions that would occur or be required
in connection with such conversion) determined at the time
of the disposition thereof, in good faith by the Company.
"Distribution" means, without duplication, with respect to
any corporation:
(a) any dividend or other distribution, direct or
indirect, on account of any shares of Capital Stock of such
corporation now or hereafter outstanding, whether in cash or
other property, except a dividend or other distribution
payable solely in shares of Capital Stock of such Person;
and
(b) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of Capital
Stock of such corporation now or hereafter outstanding,
including, without limitation, any deferred payment made by
such corporation in connection with the acquisition of its
Capital Stock, or of any warrants, rights or options to
acquire any shares of such Capital Stock.
"Environmental Laws" means any and all Federal, state,
local, and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions
relating to pollution and the protection of the environment or
the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes,
air emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that is treated as a single employer together
with the Company under section 414 of the Code.
"Event of Default" is defined in Section 11.
"Excess Proceeds Amount" means, in respect of any fiscal
year, an aggregate amount equal to (x) one hundred percent (100%)
of the Net Proceeds Amount in respect of all Transfers of
property by the Company and the Restricted Subsidiaries during
such fiscal year, minus (y) an amount, expressed in Dollars,
equal to the Specified Asset Percentage in respect of such fiscal
year.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Excluded Guaranty" means any Guaranty in effect on the date
of the Closing and described in Schedule 5.15 under the caption
"Existing Guaranties," and any renewal or extension (as to time)
in respect of any such Guaranty, provided that the aggregate
amount of the obligations of the Company or any Restricted
Subsidiary thereunder is not increased,
(a) in the case of the "Existing Guaranty" by the
Company in favor of Hakuto Co., Ltd. with respect to the
obligations of Hakuto-OCLI Co., Ltd., above an amount equal
to $3,000,000; and
(b) in the case of the other "Existing Guaranties,"
above the maximum amount of the liquidated and contingent
obligations of the Company and its Restricted Subsidiaries
thereunder immediately prior to such renewal or extension.
"Excluded Restricted Subsidiary Indebtedness" means at any
time (without duplication):
(a) Indebtedness of a Restricted Subsidiary owing to
the Company or to a Wholly-Owned Restricted Subsidiary,
(b) Indebtedness of a Restricted Subsidiary
outstanding on the date of the Closing and identified on
Schedule 5.15 under the caption "Existing Restricted
Subsidiary Indebtedness,"
(c) Indebtedness of a Restricted Subsidiary secured
by, and in respect of, Liens permitted pursuant to, and
created in accordance with, the provisions of Section
10.6(a)(vii), and
(d) Indebtedness of a Restricted Subsidiary incurred
by any Person prior to the date on which such Person shall
have become a Restricted Subsidiary or shall have been
merged with or into, or consolidated with, a Restricted
Subsidiary, so long as such Indebtedness was not incurred in
contemplation of such Person becoming, merging with or into
or consolidating with, a Restricted Subsidiary,
in each case, at such time.
"Existing Note Purchase Agreement" is defined in Section
1.1.
"Existing Noteholders" is defined in Section 1.1.
"Existing Notes" is defined in Section 1.1.
"Fair Market Value" means, at any time and with respect to
any property, the sale value of such property that would be
realized in an arm's-length sale at such time between an informed
and willing buyer and an informed and willing seller (neither
being under a compulsion to buy or sell).
"Foreign Pension Plan" means any plan, fund or other similar
program that is
(a) established or maintained outside of the United
States of America by any one or more of the Company or its
Subsidiaries primarily for the benefit of the employees
(substantially all of whom are aliens not residing in the
United States of America) of the Company or such
Subsidiaries which plan, fund or other similar program
provides for retirement income for such employees or results
in a deferral of income for such employees in contemplation
of retirement, and
(b) not otherwise subject to ERISA.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any state or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Restricted Subsidiary conducts all or any part of its
business, or that asserts jurisdiction over any
properties of the Company or any Restricted Subsidiary,
or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person in any manner, whether
directly or indirectly, including, without limitation,
obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to
maintain any working capital or other balance sheet
condition or any income statement condition of any other
Person or otherwise to advance or make available funds for
the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of any other
Person to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness
or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of
the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard
to health or safety, the removal of which is required or the
generation, manufacture, refining, production, processing,
treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any
applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by
the Company pursuant to Section 13.1.
"Indebtedness" means, with respect to any Person at any
time, without duplication:
(a) its liabilities for borrowed money (whether or not
evidenced by a Security);
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such
property);
(c) its obligations in respect of Redeemable Stock;
(d) all liabilities for borrowed money secured by any
Lien with respect to any property owned by such Person
(whether or not it has assumed or otherwise become liable
for such liabilities);
(e) its Capital Lease Obligations;
(f) the present value of all payments due under any
arrangement for retention of title or any conditional sale
agreement (other than a Capital Lease{xe "Capital Lease"}),
in each case discounted in accordance with GAAP;
(g) obligations of such Person in respect of letters
of credit, acceptances, performance bonds or instruments
serving a similar function issued or accepted by banks or
other financial institutions for the account of such Person
(other than obligations in respect of any such instruments
relating to, or in support of, trade payables of such
Person);
(h) Swaps of such Person; and
(i) its Guaranties (other than Excluded Guaranties) of
any liabilities of another Person constituting liabilities
of a type set forth in clause (a) through clause (h),
inclusive;
in each case, at such time, provided that trade accounts payable
incurred by such Person in the ordinary course of business shall
not constitute "Indebtedness."
"Institutional Investor" means (a) any original purchaser of
a Note, (b) any holder of a Note holding more than 5% of the
aggregate principal amount of the Notes then outstanding, and (c)
any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company,
any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Investment" means any investment, made in cash or by
delivery of property, by the Company or any Restricted
Subsidiary:
(a) in any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan,
Guaranty, advance, capital contribution or otherwise; or
(b) in any property.
"Lien" means, with respect to any Person, any mortgage,
lien, pledge, charge, security interest or other encumbrance, or
any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or
other title retention agreement or Capital Lease, upon or with
respect to any property or asset of such Person (including in the
case of stock, stockholder agreements, voting trust agreements
and all similar arrangements). The term "Lien" does not include
negative pledge clauses in agreements relating to the borrowing
of money.
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business,
operations, affairs, financial condition, assets, properties, or
prospects of the Company and its Restricted Subsidiaries, taken
as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition,
assets or properties of the Company and its Restricted
Subsidiaries, taken as a whole, or (b) the ability of the Company
to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the
Notes.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Net Proceeds Amount" means, with respect to any Transfer of
any property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued
at the Fair Market Value of such consideration at the time
of the consummation of such Transfer) received by such
Person in respect of such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs
and expenses actually incurred by such Person in connection
with such Transfer (including, without limitation, all taxes
payable in connection with such Transfer).
"Note Exchange" is defined in Section 1.2(a).
"Notes" is defined in Section 1.2(c).
"Officer's Certificate" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such
certificate.
"Operating Rentals" means, with respect to any period, the
sum of the minimum amount of rental and other obligations
required to be paid during such period by the Company or any
Restricted Subsidiary as lessee under all leases of real or
personal property (other than Capital Leases), excluding any
amounts required to be paid by the lessee (whether or not therein
designated as rental or additional rental) (a) which are on
account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges, or (b) which are
based on profits, revenues or sales realized by the lessee from
the leased property or otherwise based on the performance of the
lessee.
"Other Agreements" is defined in Section 2.3.
"Other Purchasers" is defined in Section 2.3.
"Payment Date" is defined in Section 8.6.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"Permitted Insurance Proceeds" means with respect to any
period, (a) proceeds of insurance received during such period
from business interruption coverage, and (b) proceeds of any
insurance received during such period as a settlement of any
property loss or a reimbursement of any expenses related thereto
in an amount not in excess of the amount of such loss or expenses
that is required to be reflected as a loss in the net earnings of
the Company and its Restricted Subsidiaries, determined on a
consolidated basis for such Persons in accordance with GAAP,
provided that such insurance proceeds were received within four
fiscal quarters of the time such loss or expenses, as the case
may be, were reflected in such net earnings.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
"Plan" means an "employee benefit plan" (as defined in
section 3(3) of ERISA) that is or, within the preceding five
years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"Preferred Stock" means any class of Capital Stock of a
corporation that is preferred over any other class of Capital
Stock of such corporation as to the payment of dividends or the
payment of any amount upon liquidation or dissolution of such
corporation.
"Priority Indebtedness" means, at any time, without
duplication, the sum of
(a) all Indebtedness of the Company secured by any
Lien on any property of the Company or any Restricted
Subsidiary outstanding at such time, other than any such
Indebtedness secured by Liens permitted by any one or more
of clauses (a)(i) through (a)(vii), inclusive, of Section
10.6, or clause (a)(ix) of Section 10.6 (unless such
Indebtedness is a renewal, extension (as to time) or
refinancing of Indebtedness secured by a Lien described in
clause (viii) of Section 10.6(a)), plus
(b) Total Restricted Subsidiary Indebtedness
outstanding at such time, plus
(c) all issued and outstanding Preferred Stock of the
Restricted Subsidiaries at such time (valued at the greater
of its voluntary or involuntary liquidation price at such
time, but exclusive of accrued dividends), plus
(d) all Attributable Debt of the Company and its
Restricted Subsidiaries outstanding at such time.
"property or properties" means, unless otherwise
specifically limited, real or personal property of any kind,
tangible or intangible, choate or inchoate.
"Property Reinvestment Application" means, with respect to
any Transfer of property, the application of an amount equal to
the Net Proceeds Amount with respect to such Transfer to the
acquisition by the Company or any Restricted Subsidiary of
operating assets of the Company or any Restricted Subsidiary of a
nature generally similar, and a value at least equivalent, to the
property subject to such Transfer.
"PTE" is defined in Section 6.2(a).
"Purchase Money Lien" means:
(a) a Lien (including, without limitation, a Lien
arising in connection with a Capital Lease) held by any
Person (whether or not the seller of such property) on
property acquired, constructed or improved by the Company or
any Restricted Subsidiary, which Lien secures all or a
portion of the related purchase price or construction costs
of such property, provided that
(i) such Lien
(A) is created contemporaneously with,
or within two hundred seventy (270) days of,
such acquisition or improvement, or the
completion of such construction,
(B) encumbers only property purchased,
constructed or improved after the date of the
Closing and acquired, constructed or improved
with the proceeds of the Indebtedness secured
thereby, and
(C) is not thereafter extended to any
other property; and
(ii) after giving effect to the creation of such
Lien, and to any concurrent transactions, no Default or
Event of Default would exist;
(b) Liens existing on property acquired by the Company
or a Restricted Subsidiary after the date of the Closing
which Liens existed at the time of such acquisition,
provided that
(i) such Liens
(A) were not placed on such property,
and do not secure Indebtedness created,
incurred, issued or assumed,
contemporaneously with or in any manner in
contemplation of, the acquisition of such
property by the Company or such Restricted
Subsidiary, and
(B) do not extend to any other property
of the Company or any Restricted Subsidiary
after such acquisition, and
(ii) after giving effect to such acquisition, and
to any concurrent transactions, no Default or Event of
Default would exist; and
(c) Liens existing on the property, Capital Stock or
Indebtedness of a Person at the time such Person becomes a
Restricted Subsidiary or is merged into or consolidated with
the Company or a Restricted Subsidiary, or all or
substantially all of the property, Capital Stock or
Indebtedness of such Person is sold, leased or otherwise
disposed of to the Company or another Restricted Subsidiary,
provided that
(i) such Lien shall only extend to or cover any
property owned by such Person, or Capital Stock or
Indebtedness issued or created by such Person, prior to
the time such Person became a Restricted Subsidiary, or
prior to such merger, consolidation, sale or other
disposition,
(ii) such Lien was not created in contemplation of
any such transaction, and
(iii) after giving effect to such transaction,
and to any concurrent transactions, no Default or Event
of Default would exist.
"QPAM Exemption" is defined in Section 6.2(d).
"Qualified Proceeds Application" means the application by
the Company or a Restricted Subsidiary of the Excess Proceeds
Amount with respect to Transfers described in Section 10.10(b) to
either (or both) of the following:
(a) the acquisition of operating assets of the
Company or any Restricted Subsidiary of a similar nature to
be used in the ordinary course of business of such Person
described in Section 10.1 (as determined in the good faith
opinion of the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be); or
(b) to pay the outstanding principal of, and the
applicable premium (if any) on, Senior Debt of the Company
or any Restricted Subsidiary (other than Senior Debt held by
the Company, any Restricted Subsidiary or any Affiliate or
Senior Debt in respect of any revolving credit or similar
credit facility providing the Company or any Restricted
Subsidiary with the right to obtain loans or other
extensions of credit from time to time, except to the extent
that in connection with such payment of Senior Debt the
availability of credit under such credit facility is
permanently reduced by an amount not less than the amount of
such proceeds applied to the payment of such Senior Debt).
To the extent that any such proceeds are applied as provided
in clause (b) of this definition and such Senior Debt to be
repaid is Senior Debt evidenced by the Notes, the Company shall
comply with the provisions of Section 8.2 in respect of such
prepayment.
"Redeemable Stock" means, with respect to any Person, each
share of such Person's Capital Stock that is:
(a) redeemable, payable or required to be purchased or
otherwise retired or extinguished, or convertible into
indebtedness of such Person
(i) at a fixed or determinable date, whether by
operation of a sinking fund or otherwise,
(ii) at the option of any Person other than such
Person, or
(iii) upon the occurrence of a condition not
solely within the control of such Person; or
(b) convertible into other Redeemable Stock.
"Required Holders" means, at any time, the holder or holders
of a majority in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by the Company or any
of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and
any other officer of the Company with responsibility for the
administration of the relevant portion of this Agreement.
"Restricted Investments" means all Investments except the
following:
(a) property to be used in the ordinary course of
business of the Company and its Restricted Subsidiaries;
(b) current assets arising from the sale of goods and
services in the ordinary course of business of the Company
and its Restricted Subsidiaries;
(c) Investments in one or more Restricted Subsidiaries
or any Person that concurrently with such Investment becomes
a Restricted Subsidiary;
(d) Investments existing on the date of the Closing
and disclosed in Schedule 10.8;
(e) Investments in United States Government
Securities, provided that such obligations mature within
three years from the date of acquisition thereof;
(f) Investments in tax-exempt obligations of any state
of the United States of America, or any municipality of any
such state, in each case rated "AA" or better by S&P, "Aa2"
or better by Moody's or an equivalent rating by any other
credit rating agency of recognized national standing,
provided that such obligations mature within 365 days from
the date of acquisition thereof;
(g) Investments in certificates of deposit or banker's
acceptances issued by an Acceptable Bank, provided that such
obligations mature within 365 days from the date of
acquisition thereof;
(h) Investments in commercial paper given one of the
two highest ratings by S&P, Moody's or any other credit
rating agency of recognized national standing and maturing
not more than 270 days from the date of creation thereof;
(i) Investments in money market investment programs
and in publicly-traded shares in any open-end mutual fund,
in each case that invest solely in Investments of the type
described in clause (e), clause (g), or clause (h) of this
definition and has total assets in excess of One Billion
Dollars ($1,000,000,000), provided that such Investments are
classified as current assets in accordance with GAAP;
(j) Investments in treasury stock; and
(k) Investments in Permitted Repurchase Agreements.
As of any date of determination, each Restricted Investment
shall be valued at the greater of:
(x) the amount at which such Restricted Investment is
shown on the books of the Company or any of its Restricted
Subsidiaries (or zero if such Restricted Investment is not
shown on any such books); and
(y) either
(i) in the case of any Guaranty of the obligation
of any Person, the amount which the Company or any of
its Restricted Subsidiaries has paid on account of such
obligation less any recoupment by the Company or such
Restricted Subsidiary of any such payments, or
(ii) in the case of any other Restricted
Investment, the excess of (A) the greater of (1) the
amount originally entered on the books of the Company
or any of its Restricted Subsidiaries with respect
thereto and (2) the cost thereof to the Company or its
Restricted Subsidiary over (B) any return of capital
(after income taxes applicable thereto) upon such
Restricted Investment through the sale or other
liquidation thereof or part thereof or otherwise.
As used in this definition of "Restricted Investments":
"Acceptable Bank" means any bank or trust company
(i) which is organized under the laws of the United States
of America or any state thereof, (ii) which has capital,
surplus and undivided profits aggregating at least
$500,000,000, and (iii) whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of
the bank holding company owning all of the Capital Stock of
such bank or trust company) shall have been given one of the
two highest ratings by S&P, Moody's or any other credit
rating agency of recognized national standing.
"Moody's" means Moody's Investors Service, Inc.
"Permitted Repurchase Agreements" means any written
agreement:
(a) that provides for
(i) the transfer of one or more United
States Governmental Securities to the Company or a
Restricted Subsidiary from an Acceptable Bank
against a transfer of funds (the "transfer price")
by the Company or such Restricted Subsidiary to
such Acceptable Bank, and
(ii) a simultaneous agreement by the Company
or such Restricted Subsidiary, in connection with
such transfer of funds, to transfer to such
Acceptable Bank the same or substantially similar
United States Governmental Securities for a price
not less than the transfer price plus a reasonable
return thereon at a date certain not later than
one (1) year after such transfer of funds; and
(b) in respect of which the Company or such
Restricted Subsidiary shall have the right, whether by
contract or pursuant to applicable law, to liquidate
such repurchase agreement upon the occurrence of any
default thereunder.
"S&P" means Standard & Poor's Ratings Group, a division
of McGraw Hill, Inc.
"Restricted Payment" means any Distribution (other than on
account of Capital Stock of a Restricted Subsidiary owned legally
and beneficially by the Company or a Restricted Subsidiary),
including, without limitation, any Distribution resulting in the
acquisition by the Company of Securities which would constitute
treasury stock.
"Restricted Subsidiary" means, at any time, a Subsidiary
which
(a) as of the date of the Closing has been designated
as a "Restricted Subsidiary" in Schedule 5.4, or
(b) after the date of the Closing, and in accordance
with Section 9.6, has been designated as a "Restricted
Subsidiary."
"Restricted Subsidiary Stock" means, with respect to any
Person, the Capital Stock (or any options or warrants to purchase
stock or other Securities exchangeable for or convertible into
any Capital Stock) of any Restricted Subsidiary of such Person.
"Sale-and-Leaseback Transaction" means a transaction or
series of transactions pursuant to which the Company or any
Restricted Subsidiary shall sell or transfer to any Person (other
than by a Restricted Subsidiary to the Company or another
Restricted Subsidiary) any property constructed or acquired after
the date of Closing, and, as part of the same transaction or
series of transactions, the Company or such Restricted Subsidiary
shall, within 180 days of the completion of such construction or
acquisition, rent or lease as lessee, such property.
"SEC" means, at any time, the Securities and Exchange
Commission or any other Federal agency at such time administering
the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Security" has the meaning set forth in section 2(1) of the
Securities Act.
"Senior Debt" means the Notes and any Debt of the Company or
its Restricted Subsidiaries that by its terms is not subordinated
in right of payment to any unsecured Debt of the Company or any
Restricted Subsidiary.
"Senior Financial Officer" means the chief financial
officer, principal accounting officer, treasurer or comptroller
of the Company.
"Series" means any one or more of the series of Notes issued
hereunder.
"Series A1 Notes" is defined in Section 1.2(a)(i).
"Series A2 Notes" is defined in Section 1.2(a)(ii).
"Series B Notes" is defined in Section 1.2(b).
"Significant Subsidiary" means, at any time, any Restricted
Subsidiary that would at such time constitute a "significant
subsidiary" (as such term is defined in Regulation S-X of the SEC
as in effect on the date of the Closing) of the Company.
"Source" is defined in Section 6.2.
"Specified Asset Percentage" is defined in Section 10.10(a).
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person or one
or more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns sufficient equity or voting interests to enable
it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership
or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries
(unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such
Person or one or more of its Subsidiaries). Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"Surviving Corporation" is defined in Section 10.9(a)(i)(A).
"Swaps" means, with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps
and similar obligations obligating such Person to make payments,
whether periodically or upon the happening of a contingency. For
the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so
determined.
"Total Restricted Subsidiary Indebtedness" means, at any
time, without duplication
(a) the aggregate Indebtedness of all Restricted
Subsidiaries outstanding at such time, and
(b) the aggregate amount of claims (whether or not
contingent or liquidated at such time) in respect of
(including, without limitation, accumulated, unpaid
dividends on) all Preferred Stock (and other equity
Securities and all other Securities convertible into,
exchangeable for, or representing the right to purchase,
Preferred Stock) of all Restricted Subsidiaries outstanding
at such time (whether or not any right of redemption or
conversion is exercisable by the holder thereof at such
time),
determined, in each case, on a combined basis for such Persons,
but excluding from such calculation (i) all Excluded Restricted
Subsidiary Indebtedness at such time and (ii) all such Preferred
Stock and other equity Securities which are legally and
beneficially owned by the Company or any Wholly-Owned Restricted
Subsidiary.
"Transfer" means, with respect to any Person, any
transaction in which such Person sells, conveys, transfers or
leases (as lessor) any of its property, including, without
limitation, Restricted Subsidiary Stock.
"United States Government Security" means any direct
obligation of, or obligation guaranteed by, the United States of
America, or any agency controlled or supervised by or acting as
an instrumentality of the United States of America pursuant to
authority granted by the Congress of the United States of
America, so long as such obligation or guarantee shall have the
benefit of the full faith and credit of the United States of
America which shall have been pledged pursuant to authority
granted by the Congress of the United States of America.
"Unrestricted Subsidiary" at any time means a Subsidiary
which,
(a) as of the date of the Closing, is not a Restricted
Subsidiary,
(b) after the date of the Closing and in accordance
with Section 9.6, has been designated as, or deemed
designated as, an "Unrestricted Subsidiary," or
(c) otherwise does not satisfy the criteria for a
Restricted Subsidiary set forth in the definition of
"Restricted Subsidiary" contained in this Schedule B.
"Voting Stock" means Capital Stock of any class or classes
of a Person the holders of which are ordinarily, in the absence
of contingencies, entitled to elect corporate directors (or
Persons performing similar functions).
"Wholly-Owned Restricted Subsidiary" means, at any time, any
Restricted Subsidiary 100% of
(a) all of the Voting Stock and other equity interests
(except directors' qualifying shares) and
(b) all of the Indebtedness
of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Restricted Subsidiaries at such
time.
SCHEDULE 3
PAYMENT INSTRUCTIONS
Bank of America
ABA No. 121000358
For the account of Optical Coating Laboratory, Inc.
Account Number: 14980-00084
Contact Name and Telephone Number: Joyce Drumgoole, (925)
675-7132)
SCHEDULE 4.10
CHANGES IN CORPORATE STRUCTURE
None
SCHEDULE 5.3
DISCLOSURE MATERIALS
None
SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK
(a)(i) and (a)(ii) The Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of
its organization, and the percentage of shares of each class of
its Capital Stock outstanding owned by the Company and each other
Subsidiary.
Percent of Place of
Subsidiary Name OwnershipIncorporation
Unrestricted Subsidiaries:
Hakuto-OCLI, Ltd. (OCLI Asia)................ 50% Japan
OCLI International Service Corporation....... 100% California
OCLI Foreign Sales Corporation............... 100% Guam
OCLI Optical Coating Laboratory GmbH......... 100% Germany
MMG Glastechnik GmbH......................... 100% Germany
OCLI Optical Coatings Espana S.A............. 100% Spain
Optical Coating Laboratory B.V............... 100% Netherlands
Optical Coating Laboratory EURL.............. 100% France
Restricted Subsidiaries:
OCLI Optical Coating Laboratory, Ltd......... 100% Scotland
Flex Products, Inc........................... 60% Delaware
(a)(iii)The Company's Affiliates, other than Subsidiaries
Beneficial Owner Numberrof SPercenteof
OCLI 401(k)/ESOP Plan *1,552,129 *12.9%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
*At June 30, 1998
SCHEDULE 5.5
FINANCIAL STATEMENTS
Financial statements as contained in the Company's Form 10-K for
the year ended October 31, 1997 and Form 10-Q for the three and
six months ended April 30, 1998.
SCHEDULE 5.8
CERTAIN LITIGATION
1. In 1997, Optical Corporation of America (_ OCA_) and
certain of its directors and officers (_ Affiliates_ )
commenced suit against the Company. The complaint arises
out of a letter of intent executed by the Company and OCA in
March 1996 and an ensuing merger agreement executed by the
Company and OCA in June 1996. Under the merger agreement,
the Company would acquire OCA. The complaint seeks damages
for costs and expenses incurred by OCA in pursuing the
merger transaction with the Company due to the Company's
alleged negligent misrepresentations to OCA and Affiliates
and the Company's alleged breach of its letter of intent
with OCA. The Company has filed counterclaims against OCA
and the Affiliates based on OCA's breach of the merger
agreement and is seeking damages based on the difference
between the value of OCA's business to the Company and the
agreed upon purchase price under the merger agreement. The
Company does not believe that this litigation will have any
material adverse effect on its future operating results or
financial condition.
2. In 1997, Flex Products filed a suit in United States
District Court for the Eastern District of Michigan alleging
that BASF Corporation (BASF) and BASF AG have infringed
Flex's patents covering optically variable thin film flakes
which, when mixed with paints and inks, produce color
shifting visual properties. The complaint requests that the
Court enjoin BASF from importing, making, using, selling or
offering to sell the infringing pigment in the United
States. The complaint also seeks damages for the
infringement, including treble damages if the infringement
is found to be willful. BASF Corporation has filed a
counterclaim seeking a declaration that the patent in
question is invalid. Both BASF companies have requested
that they be awarded their attorneys' fees and costs.
Management remains confident in the validity of Flex
Products' patent, and based upon the information currently
available, that the BASF product is, in fact, covered by the
patent.
3. During the past several years, the Company has been engaged
in litigation in the United Kingdom (_ U.K._ ) involving
infringement of a Company patent by Pilkington, a U.K.
company. The Company won its action at the Patents County
Courts level but lost on appeal to the U.K. House of Lords.
During the injunction period, Pilkington submitted a claim
for damages totaling approximately $1.6 million for lost
profits. The Company and legal counsel are in the process
of reviewing the claim. Management believes that the amount
of the claim is substantially overstated and that the
ultimate settlement will not have a material adverse effect
on the financial statements.
SCHEDULE 5.11
PATENTS, ETC.
None.
(Note: Assuming BASF is settled prior to close.)
SCHEDULE 5.12
ERISA AFFILIATES AND FOREIGN PENSION PLANS
1. OCLI 401(k)/ESOP Plan
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Trustees: T. Rowe Price
Administrative Committee:
Craig Collins, Vice President, Finance
and Chief Financial Officer
Jill Sanford, Manager, Compensation and Benefits
Holly Neal, Corporate Controller
2. The OCLI Optical Coating Laboratory, Ltd., Scotland Insurance
Ridge Way
Hillend Industrial Park
Dalgety Bay, Fife
Scotland, KY11 5FR
Trustees: All employees of OCLI Optical
Coating Laboratory, Ltd.
Administrative Committee:
Ian Manson, Finance Director
Gordon Latto, Manufacturing Scheduler/Technician
3. Employees of OCLI/MMG Division, Germany and
OCLI Optical Coating Laboratory GmbH, Germany
accrue retirement benefits under the German National
Program.
Trustees: Not Applicable
SCHEDULE 5.15
EXISTING INDEBTEDNESS AND LIENS
See the attached "Minimum Operating Lease Commitments" schedule
in addition to the following debt schedule as of 4/30/98:
(Amounts in thousands) At 4/30/98
-------------------------------------------------------------
Unsecured senior notes. Interest at 8.71% payable semiannually.
Principal payable in annual installments of $3.6 million from
1998 through 2002. .................................. $14,400
Bank of America NT&SA. Unsecured bank term loan.
Variable interest rates averaging 6.8% at October 31, 1997,
payable quarterly, with semiannual principal payments of
$2 million. ...........................................$ 8,000
Bank of America NT&SA. Unsecured borrowings under bank line of
credit. Variable interest rate averaging 6.7% at October 31, 1997,
payable quarterly or specified duration period. Principal due
upon expiration on April 28, 2000......................$ 3,000
Aid Association for Lutherans. Mortgage payable. Interest at 8%.
Collateralized by a 72,000 sq. ft. newly constructed building
and related land. Principal and interest payments of $25,000
per month through 2011................................ $ 2,370
Aid Association for Lutherans. Mortgage payable. Interest
at 7.5%. Collateralized by a 65,000 sq. ft. newly
constructed building and related land leased to Flex
Products. Principal and interest payments of $28,000 per month
through 2011............................................$ 2,735
Scottish Development Agency. Building loan, with a conditional
interest moratorium from February 1, 1995 through January 31,
1998, with interest at 9.5% thereafter. Semiannual principal
payments of approximately $100,000 are payable through January
1998 with subsequent payments of $331,000, comprising principal
and interest, through 2006. Collateralized by the land and
building of the Company's Scottish subsidiary...........$ 3,748
ABN AMRO Unsecured bank note. Interest at 5.6%. Quarterly
principal and interest payments of approximately $300,000
through December 2002. .................................$ 4,075
Deutsche Bank. Bank loans of OCLI/MMG Division with interest
rates ranging from 4.5% to 7.5%. Payable in semiannual and
annual installments through 2020. Partly collateralized by
mortgages on OCLI/MMG Division land and buildings and liens
on equipment. ..........................................$ 3,284
Asahi Bank. Bank line of Credit - Hakuto/OCLI J.V.,
Japan. ..................................................$ 1,498
Present value of obligations under capital leases at imputed
interest rates from 8.0% to 9.5% payable in monthly installments
through 2004. ...........................................$ 2,166
The Company has a $32 million unsecured credit facility comprised
of a $10 million term loan and a $20 million revolving line of
credit (increased from $15 million in 1997). The revolving line
of credit carries a commitment fee of .375% per year on the
unused portion of the facility and expires on April 28, 2000.
The Company has a surety bond for $903,000 to satisfy the
Company's workers' compensation self-insurance requirements. The
surety bond carries a fee of 1.00% per year.
During 1997, the Company replaced its 8%, $5 million note payable
to private parties with a 5.6% bank note. Payments of principal
and interest under the new note are denominated in German marks
and are approximately $300,000 per quarter through December 2002.
In connection with the note payable to private parties, the
Company carried an incremental credit facility to cover a surety
letter for approximately $2.5 million issued to secure 50% of the
Company's obligation arising from the purchase of MMG. As the
new note does not require a surety letter, the $2.5 million
surety letter was canceled.
During 1997, the Company recorded capital leases totaling
$2,037,000 to finance the hardware, software and integration
costs of a new computer system that is to be implemented in 1998.
Lease terms run through February 2002 with payments totaling
approximately $50,000 per month.
The Company's subsidiary in Scotland has a credit arrangement of
up to approximately $490,000 at market interest rates and has
outstanding letters of credit of approximately $330,000 to
guarantee import duties. There were no borrowings under the
credit arrangement in fiscal years 1997 or 1996.
The Company's subsidiary in Germany has various credit facilities
with local banks totaling approximately $381,000 which are used
for working capital requirements. These credit facilities are
utilized as part of normal local payment practices.
During 1996, the Company entered into three sale/lease-back
arrangements for a newly acquired continuous coating machine and
related equipment and for two newly acquired coating machines to
be used in the manufacturing operations of Flex Products. Cash
proceeds from the sale/lease-back arrangements exceeded the
Company's cost by approximately $750,000 which was recorded as
deferred revenue and is being amortized against lease expenses at
the rate of approximately $125,000 per year. The lease terms are
six years with monthly payments totaling approximately $290,000
and buyout provisions at the end of each lease.
The Company has certain financial covenants and restrictions
under its bank credit arrangements and the unsecured senior
notes.
SCHEDULE 10.8
EXISTING INVESTMENTS
Please see the attached schedules:
1.Santa Rosa Investments Purchased
2.Santa Rosa Investments Sold
3.Santa Rosa Balance On Hand at 7/21/98
FORM OF SERIES A1 SENIOR NOTE
Exhibit A1-1
EXHIBIT A1
FORM OF SERIES A1 SENIOR NOTE
OPTICAL COATING LABORATORY, INC.
8.71% SERIES A1 SENIOR NOTE DUE JUNE 1, 2002
No. RA1-___ [Date]
$_______ PPN: 683829 A@ 4
FOR VALUE RECEIVED, the undersigned, OPTICAL COATING
LABORATORY, INC. (hereinafter called the"Company"), a corporation
organized and existing under the laws of the State of Delaware,
hereby promises to pay __________________, or registered assigns,
the principal sum of _____________________________________ on
June 1, 2002, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof
at the rate of 8.71% per annum from the date hereof, payable
semiannually on the first day of June and December in each year
commencing with the June 1 and December 1 next succeeding
the date hereof, until the principal hereof shall have become due
and payable, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make=Whole Amount
as defined in the Note Purchase Agreements referred to below),
payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from
time to time equal to the lesser of (i) 9.71%, and (ii) the highest
rate allowed by applicable law.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money
of the United States of America at the address shown in the
register maintained by the Company for such purpose or at such
other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note
Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of July 30, 1998 (as from time to time
amended, the "Note Purchase Agreements"), between the Company and
the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase
Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder
hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase
Agreements. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the
manner, at the price (including any applicable Make-Whole Amount)
and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CONNECTICUT, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
OPTICAL COATING LABORATORY,INC.
By
Name:
Title:
FORM OF SERIES A1 SENIOR NOTE
Exhibit A1-2
EXHIBIT A2
FORM OF SERIES A2 SENIOR NOTE
OPTICAL COATING LABORATORY, INC.
7.80% SERIES A2 SENIOR NOTE DUE JULY 31, 2008
No. RA2-___ [Date]
$_______ PPN: 683829 A# 2
FOR VALUE RECEIVED, the undersigned, OPTICAL COATING
LABORATORY, INC. (hereinafter called the"Company"), a corporation
organized and existing under the laws of the State of Delaware,
hereby promises to pay __________________, or registered assigns,
the principal sum of _____________________________________ on
July 31, 2008, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof
at the rate of 7.80% per annum from the date hereof, payable
semiannually on the 31st day of January and July in each year,
commencing on the later of January 31, 1999 and the January 31 or
July 31 next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) to the extent permitted
by law on any overdue payment (including any overdue prepayment)
of principal, any overdue payment of interest and any overdue
payment of any Make=Whole Amount as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid
(or, at the option of the registered holder hereof, on demand),
at a rate per annum from time to time equal to the lesser of
(i) 8.809%, and (ii) the highest rate allowed by applicable law.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money
of the United States of America at the address shown in the
register maintained by the Company for such purpose or at such
other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note
Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of July 30, 1998 (as from time to time
amended, the "Note Purchase Agreements"), between the Company and
the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase
Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder
hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase
Agreements. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the
manner, at the price (including any applicable Make-Whole Amount)
and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CONNECTICUT, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
OPTICAL COATING LABORATORY, INC.
By
Name:
Title:
FORM OF SERIES B1 SENIOR NOTE
Exhibit B1
EXHIBIT B
FORM OF SERIES B SENIOR NOTE
OPTICAL COATING LABORATORY, INC.
6.69% SERIES B SENIOR NOTE DUE JULY 31, 2008
No. RB-___ [Date]
$_______ PPN: 683829 B* 5
FOR VALUE RECEIVED, the undersigned, OPTICAL COATING
LABORATORY, INC. (hereinafter called the"Company"), a corporation
organized and existing under the laws of the State of Delaware,
hereby promises to pay __________________, or registered assigns,
the principal sum of _____________________________________ on
July 31, 2008, with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof
at the rate of 6.69% per annum from the date hereof, payable
semiannually on the 31st day of January and July next succeeding
the date hereof, until the principal hereof shall have become due
and payable, and (b) to the extent permitted by law on any overdue
payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make=Whole Amount
as defined in the Note Purchase Agreements referred to below),
payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from
time to time equal to the lesser of (i) 7.69%, and (ii) the highest
rate allowed by applicable law.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money
of the United States of America at the address shown in the
register maintained by the Company for such purpose or at such
other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note
Purchase Agreements referred to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase
Agreements, dated as of July 30, 1998 (as from time to time
amended, the "Note Purchase Agreements"), between the Company and
the respective purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by
its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase
Agreements and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder
hereof or such holder's attorney duly authorized in writing, a
new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat
the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to
the contrary.
The Company will make required prepayments of principal on
the dates and in the amounts specified in the Note Purchase
Agreements. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms
specified in the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the
manner, at the price (including any applicable Make-Whole Amount)
and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CONNECTICUT, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS
OF A JURISDICTION OTHER THAN SUCH STATE.
OPTICAL COATING LABORATORY, INC.
By
Name:
Title:
EXHIBIT 4.4(a)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY
August 3, 1998
To the Persons Listed on Annex 1 Hereto:
Re: Optical Coating Laboratory, Inc. $44,400,000,
Senior Notes Due June 1, 2002 and July 31,
2008
Ladies and Gentlemen:
We have acted as counsel to Optical Coating
Laboratory, Inc., a Delaware corporation (the
"Company"), and the Restricted Subsidiaries in
connection with the execution and delivery by the
Company of separate Note Purchase Agreements, dated as
of July 30, 1998 (collectively, the "Agreement"), with,
respectively, each of the purchasers listed on Schedule
A attached thereto (collectively the "Purchasers"). We
are delivering this opinion to you pursuant to
Section 4.4 of the Agreement. All capitalized terms
used and not expressly defined herein shall have the
meaning given to them in the Agreement.
In connection with the foregoing we have been
furnished with originals or copies certified to our
satisfaction of such corporate or other records of the
Company and the Restricted Subsidiaries, with such
certificates of officers and representatives of the
Company and the Restricted Subsidiaries, and with such
other documents, and we have made such other
examinations, investigations and inquiries of the
Company and the Restricted Subsidiaries and their
respective officers, as we have deemed necessary as a
basis for the opinions expressed below.
Without limiting the foregoing, we have examined
executed copies of the following documents addressed to
the Purchasers or to which the Purchasers are each a
party (all of which are sometimes collectively referred
to as the "Documents"):
A. The Agreement and all exhibits thereto;
B. The Company's 8.71% Senior Notes due June 1,
2002, dated the date hereof, the Company's 7.80% Senior
Notes due July 31, 2008, dated the date hereof, and the
Company's 6.69% Senior Notes due July 31, 2008, dated
the date hereof, each in the form, principal amount and
with the registration numbers set forth in Schedule A
and Exhibits A1, A2 and B (respectively) to the
Agreement delivered to the Purchasers on the date
hereof pursuant to the Agreement (the "Notes"); and
C. The documents executed and delivered by the
Company in connection with the transactions
contemplated by the Agreement.
In connection with this opinion, we also have
examined and relied upon originals, or copies certified
or otherwise identified to our satisfaction as being
true copies, of the following, each dated this date
unless otherwise indicated:
A. Certificates of the Secretary of the Company
certifying as to (i) the Certificate of Incorporation
and Bylaws of the Company and (ii) resolutions adopted
by the Board of Directors of the Company;
B. Certificates of the Secretaries or other
appropriate officers of each of the Significant
Restricted Subsidiaries (defined as a Restricted
Subsidiary that is also a Significant Subsidiary)
certifying as to the Articles of Incorporation,
Certificate of Incorporation or other similar charter
document, as the case may be, and Bylaws or other
similar charter document of each such Significant
Restricted Subsidiary;
C. A certificate executed by Charles J. Abbe,
President and Chief Executive Officer of the Company,
Craig B. Collins, Vice President, Finance and Chief
Financial Officer of the Company, and Jeffrey M. Ryan,
Assistant Treasurer of the Company (the "Company's
Certificate"), stating that aside from certain
outstanding indentures and loan, credit, guaranty or
lease agreements, all of which are identified in said
certificate, no other agreements or instruments or
orders, writs, judgments, awards, injunctions and
decrees, affect or purport to affect the right of the
Company to borrow money or to undertake and perform
obligations of the Company under the Documents;
D. A Certificate of the Secretary of State of
Delaware, dated July 28, 1998, attesting to the
continued corporate existence and good standing of the
Company in that state;
E. Certificates of recent dates of the
Secretaries of State or other appropriate governmental
authority of those jurisdictions where the Company or
any Significant Restricted Subsidiary is required to be
qualified and in good standing to do business and where
its failure to be so qualified or in good standing
would have a Material Adverse Effect, attesting to its
qualification and good standing in those jurisdictions,
each of which is identified on Annex 2 hereto;
F. Certificates of recent dates of the
Secretaries of State or other appropriate governmental
authorities of those jurisdictions where each of the
Significant Restricted Subsidiaries is incorporated
attesting to the continued corporate existence and good
standing of each such Significant Restricted Subsidiary
in its respective state or jurisdiction of
incorporation;
G. A letter to Hebb & Gitlin and this firm from
BancAmerica Robertson Stephens, describing the manner
of the offering of the Notes (the "Offeree Letter");
H. The opinion of Hebb & Gitlin, counsel to the
Purchasers, as to all matters governed by Connecticut
law, dated the date hereof; and
I. Originals, or copies certified or otherwise
identified to our satisfaction, of such other
documents, records, instruments and certificates of
public officials as we have deemed necessary or
appropriate to enable us to render this opinion.
We have also examined originals or copies of the
documents listed in the Company's Certificate.
In conducting our examination we have assumed,
without investigation, the genuineness of all
signatures (other than the signatures of officers of
the Company with respect to the Documents), the
correctness of all certificates, the authenticity of
all certificates and documents submitted to us as
originals, the conformity to original documents of all
documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such
copies, and the accuracy and completeness of all
records made available to us by the Company or any of
the Restricted Subsidiaries. We have also assumed,
without investigation, the accuracy of the
representations and warranties as to factual matters
made by any party in the Documents and the accuracy of
the representations and factual statements made to us
by officers or employees of the Company and the
Restricted Subsidiaries and by public officials. In
making our examination of documents and instruments
executed by any person or entity, we have, subject to
the next succeeding sentence, assumed, without
investigation, that each such person or entity has
(i) the power, capacity, right and legal authority to
enter into and perform all of its obligations under
such documents and instruments, (ii) duly authorized
all requisite action with respect to such documents and
instruments, and (iii) duly executed and delivered such
documents and instruments. We have not, however, made
the assumptions set forth in the immediately preceding
sentence with respect to the Company or the Restricted
Subsidiaries or their respective power, capacity,
right, authority, authorization or execution of
documents and instruments.
Whenever a statement below is qualified by the
phrases "known to us" or "to our knowledge," it is
intended to indicate that during the course of our
representation of the Company and the Restricted
Subsidiaries, no information that would give us actual
knowledge of, or a reasonable belief concerning, the
inaccuracy of such statement has come to the attention
of those attorneys in this firm who have rendered legal
services to the Company or the Restricted Subsidiaries.
Except as otherwise expressly indicated, we have not
undertaken any independent investigation to determine
the accuracy of such statement, and any limited inquiry
undertaken by us during the preparation of this opinion
letter should not be regarded as such an investigation.
No inference as to our knowledge of any matters bearing
on the accuracy of any such statement should be drawn
from the fact of our representation of the Company or
the Restricted Subsidiaries.
In rendering the opinions hereinafter expressed,
we have also assumed, without investigation, that the
following facts are true:
1. The Purchasers will enforce their rights
under the Documents in circumstances and in a manner in
which it is commercially reasonable to do so, and in
accordance with all procedural requirements under
applicable law.
2. Other than the Company and the Restricted
Subsidiaries, no party to any of the Documents or any
agreement relating thereto is subject to any statute,
rule, or regulation, or to any impediment to which
contracting parties are generally not subject, which
requires the Company, any of the Restricted
Subsidiaries or any other person or party to obtain the
consent of or to make a declaration or filing with any
governmental authority or other person or entity as a
condition to the execution, delivery or performance of
the Documents.
3. The Purchasers are each incorporated admitted
insurers as such term is used in Section 1100.1 of the
California Insurance Code.
The opinions expressed below are subject to the
following qualifications:
1. Our opinions below are subject to the
following: (a) the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium and other
similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally; and (b)
the limitations imposed by California law, federal law,
or equitable or public policy principles upon the
availability of injunctive relief or other equitable
remedies, including, without limitation, the effect of
California and federal court decisions invoking
statutes or principles of equity or of public policy,
which have held that certain covenants and provisions
of agreements are unenforceable where: (i) the breach
of such covenants or provisions results in acceleration
or the imposition of late payment charges or increased
interest rates upon delinquency in the payment of
indebtedness due under debt instruments, and it cannot
be demonstrated that the enforcement of such
restrictions or burdens is reasonably necessary for the
protection of the creditor, or (ii) the creditor's
enforcement of such covenants or provisions under the
circumstances would violate the creditor's implied
covenant of good faith and fair dealing.
2. We are members of the Bar of the State of
California and do not hold ourselves out as experts on
the law of any other state. Consequently, our opinions
below are limited to the effect of the laws of the
State of California, of the federal laws of the United
States and, with respect only to our opinions expressed
in paragraphs (i), (iv), (v), (vi) and (vii) below, of
the General Corporation Law of the State of Delaware.
Accordingly, we express no opinion with respect to the
laws of any other jurisdiction, or the effect thereof,
on the transactions contemplated by the Documents. We
note that the Documents provide that they are governed
by the laws of the State of Connecticut. Accordingly,
our opinions expressed in paragraphs (iv), (v) and (vi)
below assume that the laws of the State of Connecticut
are the same as the laws of the State of California and
that the substantive law of California would apply to
each matter referenced in such paragraphs, including,
without limitation, its laws and exemptions pertaining
to usury.
3. Our opinions below are limited to matters
expressly set forth in this opinion letter, and no
opinion is to be implied or may be inferred beyond the
matters expressly so stated.
Based upon and subject to the foregoing, we are of
the opinion that:
(i) The Company and each Significant Restricted
Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of its
state or other jurisdiction of incorporation and has
all requisite corporate power and authority to carry on
its business and own its Property.
(ii) The Company and each Significant Restricted
Subsidiary is duly qualified and is in good standing as
a foreign corporation in each jurisdiction where the
character of its Properties or the nature of its
activities makes such qualification necessary, except
where the failure to so qualify and be in good standing
would not, in the aggregate, have a Material Adverse
Effect.
(iii) To the best of our knowledge after due
inquiry of officers of the Company, there is no
judgment, order, action, suit, proceeding, inquiry,
order or investigation, at law or in equity, before any
court or Governmental Authority, arbitration board or
tribunal, pending or threatened against the Company or
any one or more of the Restricted Subsidiaries, except
for any such judgment, order, action, suit, proceeding,
inquiry, order or investigation that would not, in the
aggregate for the Company and the Subsidiaries, have a
Material Adverse Effect.
(iv) The Company has the requisite corporate
power and authority to execute and deliver the
Agreement, to issue and sell the Notes, and to perform
its obligations set forth in each of the Agreement and
the Notes.
(v) Each of the Agreement and the Notes has been
duly authorized by all necessary corporate action on
the part of the Company (no action on the part of the
stockholders of the Company being required in respect
thereof), has been duly executed and delivered by
authorized officers of the Company, and constitutes a
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its
terms.
(vi) The execution and delivery of the Agreement
and the Notes and the issue and sale of the Notes by
the Company, and the performance by the Company of its
obligations thereunder, will not conflict with,
constitute a violation of, result in a breach of any
provision of, constitute a default under, or result in
the creation or imposition of any Lien or encumbrance
upon any of its Property or the Property of a
Restricted Subsidiary pursuant to the certificate of
incorporation or bylaws of the Company or such
Restricted Subsidiary, any applicable statute, rule or
regulation known to us to which the Company or any
Restricted Subsidiary is subject, or, to our knowledge
after due inquiry of officers of the Company, any
agreement or instrument to which the Company or such
Restricted Subsidiary is a party and which is listed in
the Company's Certificate.
(vii) All consents, approvals and authorizations
of, and all designations, declarations, filings,
registrations, qualifications and recordations with,
Governmental Authorities required on the part of the
Company have been obtained in connection with the
execution and delivery of each of the Agreement and the
Notes and the issue and sale of the Notes and the use
of the proceeds thereof.
(viii) Under existing law, the Notes are not
subject to the registration requirements under the
Securities Act of 1933, as amended, and the Company is
not required to qualify an indenture with respect
thereto under the Trust Indenture Act of 1939, as
amended.
(ix) Neither the issuance of the Notes nor the
intended use of the proceeds of the Notes (as set forth
in Section 5.14 of the Agreement) will violate
Regulations T, U or X of the Federal Reserve Board.
(x) The Company
(a) is not an "investment company" within
the meaning of the Investment Company Act of 1940,
as amended, and
(b) is not a "holding company" or an
"affiliate" of a "holding company," or a
"subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(xi) Based solely on our physical inspection of
the relevant stock certificates and our inquiry of
officers of the Company, the Company and each
Restricted Subsidiary has good title to all of the
shares it purports to own of the capital stock of each
Restricted Subsidiary, free and clear in each case of
any perfected security interest and any other Lien.
(xii) Section 22.6 of the Agreement provides that
the Agreement will be construed and enforced according
to the laws of the State of Connecticut. With respect
to that provision, we observe that such choice-of-laws
provisions would likely be respected by California
courts where the clause appears in a contract freely
and voluntarily entered into by parties who negotiate
at arm's length, and where (1) there is a reasonable or
"substantial" relationship between the chosen state and
the parties or their transaction, or (2) there is any
other reasonable basis for the parties' choice of law.
See Nedlloyd Lines B.V. v. Superior Court of San Mateo
County, 3 Cal.4th 459, 11 Cal.Rptr.2d 330 (1992).
Additionally, Nedlloyd notes the following additional
qualification to the enforcement of choice-of-laws
clauses in California:
... the court must next determine whether the
chosen state's law is contrary to a fundamental
policy of California. If there is no such
conflict, the court shall enforce the parties'
choice of law. If, however, there is a
fundamental conflict with California law, the
court must then determine whether California has a
"materially greater interest than the chosen state
in the determination of the particular issue ...."
If California has a materially greater interest
than the chosen state, the choice of law shall be
enforced .... [Footnotes and citations omitted.]
Id. at 334.
With regard to the first test of enforceability
noted in Nedlloyd (that is, whether there is a
reasonable or substantial relationship between the
chosen state and the parties or their transaction or
another reasonable basis for the choice of law), we
note that the Company is a Delaware corporation with
its corporate headquarters in California. We also note
that the Existing Note Purchase Agreement and the
Existing Notes are governed by the laws of the State of
Connecticut. We would expect that while a California
court would be inclined to uphold the parties' freely
chosen contractual choice-of-law, the fact that the
Existing Note Purchase Agreement and the Existing Notes
are governed by Connecticut law would be a factor in
its decision whether to enforce the clause in this
case.
The second test in Nedlloyd requires the Court to
assess whether the chosen state's law is contrary to a
fundamental policy of California, and if so, whether
California has a "materially greater interest" in the
determination of the particular issue. While it is not
entirely clear from Nedlloyd as to what constitutes a
"fundamental policy" of California, it appears from the
court's reasoning that California courts will look to
whether there is a state regulatory policy, statute or
constitutional provision designed to restrict the
parties' freedom to contract with respect to an issue
in dispute. In this regard, we note that because the
obligations evidenced by the Notes are unsecured, the
Purchasers' remedies are not subject to such
fundamental policies of the State of California as its
anti-deficiency statutes and protections, the waiver of
which are subject to restrictions in many cases by
statute or case law. On the other hand, California
case law and statutes tend to be protective of
borrowers and guarantors in general, and those
protections could be deemed "fundamental policies" of
the State to the extent that Connecticut law does not
provide substantially similar protections.
The final step in the analysis of this second test
requires the court to decide whether or not California
has a "materially greater interest" than the parties'
chosen forum in the resolution of the fundamental
public policy issue in dispute. If so, then the
parties' choice-of-law provision could be ignored or
invalidated by the court. In this connection, the
Nedlloyd court did not reach a conclusion regarding
this issue in that case, because the court did not find
a conflict between the choice-of-law provision and a
fundamental State policy.
Subject to the forgoing and all other limitations
set forth in this letter, we believe that the courts of
California would probably give effect to the choice-of-
law provisions in the Agreement, if the application of
Connecticut law does not result in the violation of a
fundamental California public policy, and in particular
policies providing protections to borrowers. However,
we have doubts as to whether a California court would
give effect to the choice-of-laws provisions under
circumstances where the application of Connecticut law
would result in the Company being denied material
protections that would be provided to it as a borrower
under California law.
(xiii) The stated rates of interest of 8.71%,
7.80%, and 6.69% and of default interest of one percent
(1.00%) over the stated rates under the Notes are not
in excess of the maximum rate of interest on loans
permitted under California usury law in the absence of
an exemption therefrom. Such permitted maximum rate of
interest is on the date hereof 10% per annum. We
express no opinion as to whether any additional
consideration that may be paid by the Company pursuant
to the Notes and the Agreement, including, without
limitation, the Make-Whole Amount, would render the
transactions contemplated thereunder usurious.
This opinion letter is rendered solely for the
benefit of the Purchasers and their special counsel in
connection with the transaction described in the
Documents. Without our prior written consent, this
opinion letter may not be (a) relied upon by any other
person or entity or used for any other purpose; (b)
quoted in whole or in part or otherwise referred to in
any report or document; or (c) furnished (the original
or copies thereof) to any person or entity, except (i)
this opinion may be quoted or disclosed in connection
with the enforcement of the Documents by the
Purchasers, (ii) future holders of the Notes may rely
on this opinion as if it were addressed to them, and
(iii) each Purchaser and each such future holder of
Notes may make this opinion available for inspection by
the National Association of Insurance Commissioners and
other regulatory authorities having jurisdiction over
such Person's affairs and by any prospective purchaser
or assignee of any of the Notes.
Very truly yours,
Collette & Erickson LLP
ANNEX 1
Addressees
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Modern Woodmen of America
1701 1st Avenue
Rock Island, Illinois 61201
American Life and Casualty Insurance Company
405 6th Avenue
Des Moines, Iowa 50309
Massachusetts Mutual Life
Insurance Company
1295 State Street
Springfield, MA 01111
Baystate Health Systems, Inc.
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Principal Life Insurance Company
711 High Street
Des Moines, IA 50392-0800
Hebb & Gitlin
One State Street
Hartford, CT 06103
ANNEX 2
Foreign Good Standing Certificates
Corporation State
Optical Coating Laboratory, Inc. Delaware
California
Flex Products, Inc. Delaware
California
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL TO THE PURCHASERS
[Letterhead of Hebb & Gitlin]
[Closing Date]
To the Persons Listed on
Annex 1 hereto
Re: Optical Coating Laboratory, Inc. (the "Company")
Ladies and Gentlemen:
Reference is made to the separate Note Purchase Agreements
(collectively, the "Note Purchase Agreement"), each dated as of
July 30, 1998, between the Company and, respectively, each of the
purchasers listed on Schedule A attached thereto (the
"Purchasers"), which provide, among other things, for (i) the
issuance by the Company of its 8.71% Series A1 Senior Notes Due
June 1, 2002 in the aggregate principal amount of Six Million
Four Hundred Thousand Dollars ($6,400,000) and the its 7.80%
Series A2 Senior Notes Due July 31, 2008 in the aggregate
principal amount of Eight Million Dollars ($8,000,000), in each
case in exchange for the surrender of the Existing Notes held by
the Existing Noteholders and (ii) the issuance and sale by the
Company and the purchase by the Purchasers on Schedule A to the
Note Purchase Agreement of the Company's 6.69% Series B Senior
Notes Due July 31, 2008 in the aggregate principal amount of
Thirty Million Dollars ($30,000,000). The capitalized terms used
herein and not defined herein have the meanings specified in the
Note Purchase Agreement.
We have acted as special counsel to the Purchasers in
connection with the transactions contemplated by the Note
Purchase Agreement. This opinion is delivered to you pursuant to
Section 4.4(b) of the Note Purchase Agreement. In acting as such
counsel, we have examined:
(a) the Note Purchase Agreement;
(b) the Company's 8.71% Series A1 Senior Notes Due
June 1, 2002, dated the date hereof, in the form of Exhibit
A1 to the Note Purchase Agreement, in the principal amount
and with the registration numbers set forth on Schedule A to
the Note Purchase Agreement (the "Series A1 Notes");
(c) the Company's 7.80% Series A2 Senior Notes Due
July 31, 2008, dated the date hereof, in the form of Exhibit
A2 to the Note Purchase Agreement, in the principal amount
and with the registration numbers set forth on Schedule A to
the Note Purchase Agreement (the "Series A2 Notes");
(d) the Company's 6.69% Series B Senior Notes Due July
31, 2008, dated the date hereof, in the form of Exhibit B to
the Note Purchase Agreement, in the principal amount and
with the registration numbers set forth on Schedule A to the
Note Purchase Agreement (the "Series B Notes," and together
with the Series A1 Notes and Series A2 Notes, the "Notes");
(e) a certificate of certain officers of the Company,
dated the date hereof;
(f) a certificate of the [Assistant] Secretary of the
Company, dated the date hereof;
(g) a letter to Hebb & Gitlin from BancAmerica
Robertson Stephens, dated the date hereof, making certain
representations with respect to the manner in which the
Notes were offered (the "Offeree Letter");
(h) the opinion of Collette & Erickson, counsel to the
Company and the Restricted Subsidiaries, dated the date
hereof; and
(i) originals, or copies certified or otherwise
identified to our satisfaction, of such other documents,
records, instruments and certificates of public officials as
we have deemed necessary or appropriate to enable us to
render this opinion.
In rendering our opinion, we have relied, to the extent we
deem necessary and proper, on:
(i) warranties and representations as to certain
factual matters contained in the Note Purchase Agreement;
(ii) the Offeree Letter; and
(iii) said opinion of Collette & Erickson with
respect to all questions governed by California law and with
respect to all questions concerning the due incorporation,
valid existence and good standing, power and authority of,
and the authorization, execution and delivery of instruments
by, the Company (except that we have made an independent
examination of a certified copy of the certificate of
incorporation of the Company and the certificates specified
in clause (e) and clause (f) above).
We have reviewed the opinion of Collette & Erickson being
delivered to you on the date hereof. Based on such investigation
as we have deemed appropriate, such opinion is satisfactory in
form and scope to us, and in our opinion the Purchasers and we
are justified in relying thereon.
Our opinion in Section 5 below is based solely on a review
of generally applicable laws of the United States of America and
the State of Connecticut, and not on any search with respect to,
or review of, any orders, decrees, judgments or other
determinations specifically applicable to, the Company.
Based on the foregoing, we are of the following opinions:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. The Company has all requisite corporate power and
authority to execute and deliver the Note Purchase Agreement, to
issue and sell the Notes, and to perform its obligations set
forth in each of the Note Purchase Agreement and the Notes.
3. Each of the Note Purchase Agreement and the Notes has
been duly authorized by all necessary corporate action on the
part of the Company, has been duly executed and delivered by one
or more authorized officers of the Company, and constitutes a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
4. The execution and delivery of the Note Purchase
Agreement and the Notes and the issue and sale of the Notes by
the Company, and the performance by the Company of its
obligations thereunder, will not conflict with, result in a
breach of any provision of, constitute a default under, or result
in the creation or imposition of any Lien upon any of its
Properties pursuant to, the certificate of incorporation or
bylaws of the Company.
5. No consents, approvals or authorizations of any Federal
or State of Connecticut governmental authorities are required in
connection with the execution and delivery of each of the Note
Purchase Agreement and the Notes, and the offer, issue, sale and
delivery of the Notes.
6. Under existing law, the Notes are not subject to the
registration requirements of the Securities Act of 1933, as
amended, and the Company is not required to qualify an indenture
with respect thereto under the Trust Indenture Act of 1939, as
amended.
All opinions herein contained with respect to the
enforceability of documents and instruments are qualified to the
extent that:
(a) the availability of equitable remedies, including
without limitation, specific enforcement and injunctive
relief, is subject to the discretion of the court before
which any proceedings therefor may be brought; and
(b) the enforceability of certain terms provided in
the Note Purchase Agreement and the Notes may be limited by
(i) applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights
generally as at the time in effect, and
(ii) common law or statutory requirements with
respect to commercial reasonableness.
Except in reliance on the opinion of Collette & Erickson
delivered to the Purchasers on the date hereof, and subject to
all of the assumptions and qualifications set forth therein, we
express no opinion as to the law of any jurisdiction other than
the law of the State of Connecticut and United States federal
law. Collette & Erickson may rely on this opinion for the sole
purpose of rendering their opinion to be rendered pursuant to
Section 4.4(a) of the Note Purchase Agreement.
Subsequent holders of the Notes may rely on this opinion as
if it were addressed to them.
Very truly yours,
ANNEX 1
Addressees
Modern Woodmen of America
1701 1st Avenue
Rock Island, Illinois 61201
American Life and Casualty Insurance Company
405 6th Avenue
Des Moines, Iowa 50309
Massachusetts Mutual Life
Insurance Company
1295 State Street
Springfield, MA 01111
Baystate Health Systems, Inc.
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Principal Life Insurance Company
711 High Street
Des Moines, IA 50392-0800
EXHIBIT 15. LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
To the Board of Directors and Stockholders
of Optical Coating Laboratory, Inc.
Santa Rosa, California
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited interim financial
information of Optical Coating Laboratory, Inc. and subsidiaries for the
periods ended July 31, 1998 and 1997 as indicated in our report dated
August 19, 1998. Because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended July 31, 1998, is
incorporated by reference in Registration Statements No. 33-41050,
No. 33-26271, No. 33-12276, No. 33-48808, No. 33-65132, No. 33-60891 and
No. 333-13013 on Forms S-8, Registration Statement No. 33-61177 and
No. 33-65319 on Form S-3.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
Deloitte & Touche LLP
San Jose, California
September 14, 1998
EXHIBIT 15.1. LETTER REGARDING UNAUDITED INTERIM FINANCIAL
INFORMATION
To the Board of Directors and Stockholders
Optical Coating Laboratory, Inc.:
Re: Registration Statements No. 33-41050, No. 33-26271, No. 33-
12276, No. 33-48808, No. 33-65132 and No. 33-60891 on Forms S-8
and Registration Statements No. 33-61177 and No. 33-65319 on
Forms S-3.
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report dated
August 15, 1997 related to our review of interim financial
information of Flex Products, Inc.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and
11 of the Act.
KPMG Peat Marwick LLP
San Francisco, California
September 14, 1998
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<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1998
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