<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
or
[_] TRANSITION REPORT PURSUANT TO SECTION 14 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to _________
Commission file number 1-10639
CONNER PERIPHERALS, INC.
[Exact name of registrant as specified in its charter]
DELAWARE 94-2968210
(State of incorporation) (I.R.S. Employer
Identification No.)
3081 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 456-4500
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.001 par value
6-1/2% Convertible Subordinated Debentures due 2001
6-3/4% Convertible Subordinated Debentures due 2002
(Title of class)
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate value of voting stock held by nonaffiliates of the Registrant
was approximately $776,629,000 as of March 5, 1994 based upon the closing sales
price on the New York Stock Exchange reported for such date. Shares of Common
Stock held by each executive officer and director and by each person who owns 5%
or more of the outstanding Common Stock have been excluded in that such persons
may, under certain circumstances, be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
50,767,965 shares of Common Stock issued and outstanding as of March 5, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or portions thereof) are incorporated by reference into
the Parts of this Annual Report on Form 10-K noted:
(1) Portions of the Annual Report to Stockholders for the fiscal year
ended January 1, 1994 (the "Annual Report") - Parts II and IV. With
the exception of the information specifically incorporated by
reference from the Annual Report into Parts II and IV hereof, the
Company's Annual Report is not to be deemed filed as part of this
report.
(2) Proxy Statement filed with the Securities and Exchange Commission in
connection with the Annual Meeting of Stockholders to be held April
19, 1994 (the "Proxy Statement") - Part III.
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PART I
Item 1. BUSINESS
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Conner Peripherals, Inc. ("Conner" or the "Company") was incorporated in
California in June 1985 and was reincorporated in Delaware in September 1992.
The Company's principal executive offices are located at 3081 Zanker Road, San
Jose, California 95134, and its telephone number is (408) 456-4500.
GENERAL
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Conner designs, builds and sells information storage solutions products,
including a large selection of hard disk drives, tape drives, software and
integrated systems for a wide range of computer storage applications.
In June 1992, the Company began the process of repositioning itself from
being solely a manufacturer of Winchester disk drives to becoming a leading
supplier of total storage solutions for the computer industry. In December 1992
Conner completed the acquisition of Archive Corporation ("Archive") by means of
a merger. The acquisition of Archive strengthened Conner's position in the tape
drive, software and storage systems markets, thereby supporting its strategy of
being a leader in information storage solutions and storage and data protection
products. During 1993, the Company took action to rationalize these operations
in order to better streamline product development, sales and marketing and
support activities.
Demand for all of the Company's products is driven by several distinct
market trends. First, the shift from centralized computing based on mainframes
and minicomputers to networks and client-server architectures has resulted in an
increased demand for compact, high capacity, high-performance storage devices
and systems for use in networks of personal computers and workstations. Second,
the increasing complexity of personal computer operating systems, such as
Windows, OS/2, as well as the software applications designed to support them,
has resulted in the demand for greater storage capacity in individual
computers. Third, the substantial storage requirements necessary to store high
resolution images, sound and video data applications is adding significantly
to the amount of storage required on personal computer systems, both in the
business and home environments.
As the amount of data stored on individual computers increases, the need
for efficient and reliable data protection also increases. This need is causing
an increase in the demand for tape drives and the complex software which manages
the transfer of data from disk drives to tape drives on a network and on
individual computer systems.
The Company's products are sold to original equipment manufacturers
("OEMs"), distributors, Value-Added Resellers ("VARs"), dealers and
distributors in the U.S. and abroad, with the exact channel
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dependent on the product and division. In addition, the Company distributes
disk drive, tape drive and software products through its Storage Systems Group,
which acts as a VAR to dealers in the U.S.
DISK DRIVES
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Disk drives address the escalating requirements of high performance
microcomputers and workstations for greater storage capacity, faster access
time, lower power consumption and smaller size at increasingly lower costs
through the use of advanced technologies.
Every disk drive incorporates the same operating concepts. One or more
rigid disks are attached to a spin motor assembly, which rotates the disks at a
constant speed within a sealed, contamination-free enclosure. Typically, both
surfaces of each disk are coated with a thin layer of magnetic material.
Magnetic heads record and retrieve data from discrete magnetic domains located
on pre-formatted concentric tracks in the magnetic layers of the rotating disks.
An actuator positions the head over the proper track upon instructions from the
drive's electronic circuitry. Most disk drives are "intelligent" disk drives,
which incorporate an embedded controller to manage communications with the
computer.
Disk Drive Design
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During the last five years, the Company has pioneered a variety of disk
drive innovations, many of which have achieved broad acceptance in the disk
drive industry in general. The Company was the first to utilize an architecture
employing a high microcode content, resulting in significant flexibility and
improved reliability in its drives. In addition, the Company was among the
earliest to introduce drives using a high-performance voice coil actuator and
on-board electronic diagnostics. As a result of various design innovations, the
Company's disk drives achieve high performance with low power consumption.
Finally, the Company was the first to introduce drives in a low-profile one
inch package. Many of these innovations are protected by patent rights
belonging to the Company.
The Company believes that its disk drive design has certain important
performance characteristics. The benefits to the user include (1) fast access
time; (2) low heat dissipation; (3) quiet operation; (4) low power consumption;
and, (5) extended product life. Fast access is a performance requirement for
systems incorporating 64-bit and 32-bit microprocessors, such as Intel
Corporation's ("Intel") Pentium and 80486 and Motorola's 68040 family of
microprocessors. Low heat dissipation is an important determinant of a disk
drive's reliability because heat may contribute to component failure. Low heat
dissipation allows the possibility of eliminating or reducing the size of
cooling fans in computers and thus increases the potential for quieter computer
system operation. Low power consumption is also a critical factor in all
portable computing applications because these computers use battery power
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supplies and disk drives are a large power consumer in such systems.
Consequently, low power consumption in disk drives reduces the need for a
computer to incorporate a large power supply as a standard feature.
The benefits of the Company's disk drive design include reduced parts
count, higher reliability and the built-in ability for self-testing. These
benefits may result in the possibility of lower aggregate component costs and
reduced requirements for expensive disk drive test equipment, when compared to
conventional disk drive designs.
Disk Drive Products
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The Company's disk drive products include 2.5-inch and 3.5-inch disk drives
which offer storage capacities ranging from 170 megabytes to over 1 gigabyte of
formatted capacity. The Company's products include the following product
families:
Filepro Series. The Filepro Series products include one- and two-disk,
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low-profile (one-inch high) 3.5-inch hard disk drives, in capacities of 210 and
420 megabytes. The Filepro Series is designed to offer the entry level PC user
a combination of high capacity, performance, reliability and low price.
Filepro Advantage Series. The Filepro Advantage Series of 3.5-inch disk
------------------------
drives offers low cost storage for value systems, including networked and
desktop PCs used for advanced applications, databases and multimedia. The
Filepro Advantage Series is available in capacities of 340 and 540 megabytes.
The Company has announced new versions of these products with storage capacities
of 810 and 1080 megabytes. The Company expects to commence volume shipment of
these products during the second quarter of 1994.
Filepro Performance Series. The Filepro Performance Series disk drives are
--------------------------
available with 545 and 1060 megabytes of capacity and feature seek times as fast
as 9 milliseconds and data transfer rates of up to 55 megabits per second.
These disk drives are primarily used in advanced workstation and network
systems.
Filepro Notebook Series. The Filepro Notebook Series of 2.5-inch disk
-----------------------
drives provide capacities from 170 to 340 megabytes and addresses the needs of
mobile users of portable PCs and notebook computers, with low power, light
weight and a high degree of shock resistance.
TAPE DRIVES
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Tape drives are peripheral hardware devices which enable low cost storage
or data protection of large volumes of data through use of digital tape stored
on small cartridges used singly or in multiple autoloader applications.
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Tape Drive Products
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Computer systems of all types increasingly need dedicated backup storage
peripherals that combine high capacity, exceptional performance, low cost
and reliability. Conner's full line of minicartridge, DAT and data cartridge
tape products meets the needs of the entry, value, performance and portable
markets to complement Conner's line of disk drive products.
Minicartridge Tape Drives. Conner produces a number of low profile
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minicartridge tape drives which are designed to provide up to 250 megabytes of
reliable data storage on a single low cost removable cartridge. These drives
are currently manufactured for Conner in Japan.
DAT Drives. High speed, networked computer environments need automatic
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data protection and backup in the form of dedicated removable storage
peripherals that combine high capacity, absolute reliability, state-of-the-art
backup performance and low cost per megabyte in a small form factor. The Conner
family of True Computer Grade Digital Audio Tape (DAT) products provides a
balance of these features, storing up to 8 gigabytes of data on a single 4mm
cartridge. In addition, the Company offers DAT Autoloaders, which enable the
storage of up to 96 gigabytes through an automated loading mechanism of up to
12 DAT tape cartridges in a single tape drive.
Data Cartridge Drives. Conner Data Cartridge Drives provide high capacity
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and field-proven data storage in a 5.25-inch, half-high form factor. These Data
Cartridge drives are available in internal and external models with capacities
ranging from 250 megabytes to 1.35 gigabytes, and provide high performance data
storage using the industry standard Quarter Inch Cartridge (QIC) format that
guarantees full backward read compatibility with previous generations of drives.
SOFTWARE PRODUCTS
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Conner offers a variety of data protection and storage management software
through Arcada Holdings, Inc. ("Arcada"), a majority-owned subsidiary. Arcada
develops data protection and storage management software products that operate
across multiple desktop and client-server environments, including those of
Microsoft, Inc. and Novell, Inc. Arcada markets its products worldwide under
the Backup Exec(TM) brand name to OEMs, systems integrators, VARs, retailers
--
and large corporate users.
Backup Exec for NetWare. Backup Exec for NetWare delivers sophisticated
-----------------------
client/server based data protection for all servers and workstations on certain
networks, including, DOS, Windows, OS/2, Apple Macintosh, and UNIX workstations
as well as NetWare 3.x and 4.x, LAN Manager, LAN Server and Lotus Notes servers.
Backup Exec is the first storage software certified by Novell for its new
NetWare 4.x network operating system. Backup Exec is offered in single server,
enterprise wide and Windows workstation editions.
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Backup Exec for Windows NT. Backup Exec for Windows NT is a 32-bit backup
--------------------------
application created for Microsoft Windows NT which offers a comprehensive data
storage solution for Windows NT workstations and servers operating in both
local and wide area networks.
STORAGE SYSTEMS
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Conner Storage Systems integrates hardware and software solutions to
allow consumers to meet the demanding requirements of the current mixed
network environments. The products offered include those manufactured or
developed by Conner, as well as integrated systems which include components or
products of third parties. Storage Systems products address the entire storage
solutions marketplace, including disk, optical, and tape subsystems and
storage management software for local area networks and workstation
environments. Conner Storage Systems products are marketed and sold to VARs
and distributors for resale to large corporate users and financial
institutions to manage their network storage and data protection needs.
Storage Systems Products
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From basic single-user needs to complex network storage requirements,
Conner Storage Systems delivers turn-key solutions, coupled with customized
service and support. Conner's Storage Systems products address the needs of
users ranging from entry-level PCs to enterprise-wide network administrators.
Conner MS Systems. Conner MS Systems disk and tape products offer data
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storage and protection for networks including OS/2, DOS, Macintosh and Windows,
workstations, and LAN Manager and NetWare servers. Conner MS Systems are
supported by Conner's Backup Exec software.
GENERAL SALES AND DISTRIBUTION
- ------------------------------
The Company sells its disk and tape drive and software products principally
to OEMs through a direct sales force. The Company focuses its sales efforts on
manufacturers of desktop computers and workstations, as well as to manufacturers
of portable computers and storage subsystems such as servers and arrays.
Many of the Company's OEM customers enter into master purchase agreements
with the Company. These agreements do not require the OEMs to purchase minimum
quantities of the Company's products. Product deliveries are scheduled upon the
Company's receipt of purchase orders under the related agreements. Generally,
these purchase agreements also allow customers to reschedule delivery dates and
cancel purchase orders under certain circumstances without significant
penalties.
Sales of the Company's disk drives to Compaq Computer Corporation
("Compaq") accounted for approximately 13%, 15% and 12% of the Company's
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net sales in 1993, 1992 and 1991, respectively. Sales to Peripherals Europe
GmbH accounted for 12% of the Company's net sales in 1992. No other customer
represented more than 10% of net sales for the three years ended December 31,
1993. The Company's sales to any single OEM customer are subject to significant
variability from quarter to quarter based on a variety of factors including new
product acceptance, price, end user demand, product availability and competitive
offerings.
The Company also sells products to non-OEM purchasers, such as
distributors. Such sales represented 29%, 31% and 16% of net sales for the
years ended December 31, 1993, 1992 and 1991, respectively. The Company's
distributors typically enter into non-exclusive agreements for the distribution
of the Company's products. Product deliveries are scheduled upon the Company's
receipt of purchase orders. Certain of these agreements provide the distributors
with price protection with respect to their inventory of drives and also provide
limited rights to return the products. The Company also sells its products
through VARs and has recently began to expand its marketing efforts to address
different channels that sell computer systems through retailers that sell
directly to end users.
The Company's foreign sales are generally made directly, or through the
Company's wholly-owned subsidiaries Peripherals Singapore or Conner
Peripherals Europe. Sales to foreign customers may be subject to certain
risks, including requirements for the obtaining of export/import licenses,
exposure to tariffs and other trade regulations, currency fluctuations and
repatriation of profits. The Company's foreign sales represented 54%, 61% and
64% of total net sales for 1993, 1992 and 1991, respectively.
Backlog
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At December 31, 1993, the Company's backlog of orders was approximately
$486 million as compared to a backlog of approximately $241 million (including
Archive) at December 31, 1992. Backlog includes only those units for which a
customer has specified delivery within six months.
Demand for the Company's products is cyclical as the industry has recently
experienced alternating periods of severe product shortages and significant
overcapacity. During periods of product shortages, the Company's backlog has
increased significantly and frequently reflects abnormal customer order
patterns, including double ordering, as customers seek to insure the
availability of products to support future production. During periods of
overcapacity, the Company's backlog has declined precipitously as both OEM
customers and distributors seek to reduce their inventories of disk drives or
reduce their purchase commitments. During the first quarter of 1994, the
Company has also experienced a significantly higher backlog due to increased
demand for the Company's new disk drive products.
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The Company's backlog may fluctuate due to certain OEM practices of
submitting single large purchase orders to be shipped over an extended period of
time. Lead times for the release of purchase orders from other customers depend
upon the scheduling practices of the customers, and the Company anticipates that
the rate of new purchase orders will vary significantly from month to month. In
addition, the Company's actual shipments depend on its production capacity and
component availability. Moreover, the pricing of the Company's products as
delivered often depends on the date of delivery as prices may be adjusted
between the time an order is booked into backlog and the time the product is
actually shipped.
Based on its past experience and knowledge of the disk drive industry, the
Company anticipates that it will experience significant volatility in the
scheduling of present and future orders. For these reasons, the Company's
backlog as of any particular date may not be indicative of the Company's actual
sales for any succeeding fiscal period.
Competition
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The disk drive and tape drive industry is intensely competitive. The
principal competitive factors in the industry are price, early product
availability, product performance, storage capacity, low cost manufacturing,
responsiveness to customers, and increasingly schedule predictability.
The Company believes that it is currently able to compete on the basis of
all of these factors. The Company believes that its reliance on outside
vendors-- which is different from certain other companies in the industry that
have become more vertically integrated -- has given it a competitive advantage
both in establishing strong relationships with vendors and in permitting
maximum flexibility in product design. The Company believes that competition
in the OEM sector of the disk drive industry has become more intense as major
disk drive manufacturers commit greater resources to the timely introduction
of new products.
The Company primarily competes against independent manufacturers of 2.5-
inch and 3.5-inch disk drives, including companies such as Maxtor Corporation,
Quantum Corporation, Seagate Technology, Inc. and Western Digital Corporation.
The Company also competes indirectly with disk drive divisions of larger
computer manufacturers such as Digital Equipment Corporation, The Hewlett-
Packard Company, IBM and Toshiba. Should other major OEMs develop disk drive
manufacturing capabilities, the demand for the Company's products would be
reduced. The Company's principal competitors in tape drive products are
Hewlett-Packard, Exabyte Corp. and Rexon, Inc.
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MANUFACTURING
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The Company expects that it will continue to purchase a substantial
majority of most components from outside sources. However, from time to time
the Company may establish limited internal production of certain components,
particularly during periods of supply constraints or when internal production
capability may contribute to new product development efforts. For example, the
Company is currently manufacturing the majority of its media requirements. The
Company's disk drive manufacturing operations consist primarily of final
assembly of heads and disks in a class-10 clean area as well as the formatting
and testing of the assembly. Printed circuit boards are tested before they are
assembled with head/disk assemblies into disk drives. After assembly, each disk
drive is operated in a self-diagnostic mode where actual data transfers take
place and various parameters in the disk drive are tested and adjusted
specifically for that disk drive. The Company's testing procedures may vary
depending upon the requirements of particular OEM customers.
From time-to-time in the past, the Company has experienced production
delays due to yield shortfalls and other production difficulties and the Company
could experience similar delays in the future. Control and continuous
improvement of process yields by both Conner and its suppliers are key
determinants of manufacturing output and efficiency, product quality and
reliability and overall profitability. Moreover, there can be no assurance that
a defect will not escape identification in the factory and require costly recall
from customer sites.
The Company's business conditions require it to establish high-volume
manufacturing capability in anticipation of market demand. The Company's
ability to establish high-volume, low-cost manufacturing capacity depends in
part on its ability to obtain uninterrupted access to advanced technology
components in required volumes and at competitive prices. At the present time,
certain of these components are available only from single sources, although the
Company maintains ongoing programs to qualify additional sources for such
components where practicable. In particular, the Company has recently
experienced shortages of certain semiconductor and head components, which
shortage has adversely affected the Company's sales and ability to satisfy
customer demand in recent periods. There can be no assurance that these supply
constraints will not recur.
To reduce its exposure to production delays at times of component shortage,
the Company often seeks to qualify alternative components when practicable.
However, a prolonged interruption, or a reduction in the supply of one or more
key components, could nevertheless occur and would adversely affect the
Company's operating results and customer relationships.
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As part of an effort to improve manufacturing costs, the Company continues
to shift volume production of its disk drives to Singapore and Malaysia. The
Company is currently expanding its Malaysia production facilities and is
consolidating its Singapore operations. The Company also began in December 1992
to manufacture in the People's Republic of China through Conner-Shenzhen
Peripherals, Ltd., a joint venture with Shenzhen CPC. Through this venture,
Conner became the first company to establish disk drive manufacturing in the
People's Republic of China. The expansion of production in offshore facilities
requires tight inventory and cost controls and employee training. In addition,
the transfer of production of a product to a new facility requires qualification
of the facility by certain of the Company's major OEM customers. Accordingly,
such transfers may have a short-term disruptive effect on the Company's
operations. Foreign manufacturing is also subject to certain risks, including
changes of governmental policies, transportation delays and interruptions and
the imposition of tariffs and import and export controls. There are also risks
inherent in being the first company to manufacture disk drives in the People's
Republic of China. Furthermore, currency exchange fluctuations could increase
the cost of components manufactured abroad.
A significant portion of Conner's tape drive manufacturing is done by one
outside vendor, Matsushita Kotubuki Electronics ("MKE"). Conner also
manufactures and/or assembles some of its own tape drive products at its
Singapore facility. Conner has consolidated its existing Singapore facilities
with those of Archive.
RESEARCH AND DEVELOPMENT
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The Company participates in an industry that is subject to rapid
technological changes, and its ability to remain competitive depends on, among
other things, its ability to maintain a leadership position in technology
innovation. As a result, the Company has devoted and will continue to devote
substantial resources to product development and process engineering efforts.
In 1993, 1992 and 1991 the Company's research and development expenses were
$137,465,000, $94,652,000 and $85,007,000, respectively. The Company's research
and development expenses have increased substantially in the past year as the
Company has expanded prototype production and testing associated with the
planned introduction of several new products and technologies.
The Company's current research and development efforts are principally
directed to the development and prototype production of new high performance
3.5-inch and 2.5-inch disk drives. Disk drives currently in development employ
more complex designs and a greater number of technologically advanced components
than previous disk drive generations. Accordingly, it is possible that it will
be more difficult to introduce these disk drives to volume manufacturing than
was the case with previous disk drive generations.
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The Company's disk drive research and new product development is
conducted primarily at its facilities in San Jose, California and Longmont,
Colorado. The Company's process engineering and final product development is
conducted principally in San Jose and at its facilities in Singapore.
PATENTS AND LICENSES
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The Company has been granted or has acquired 31 United States patents and
has approximately 65 patent applications pending related to disk drive
technology. The Company's issued patents include a patent covering the
Company's microprocessor and microcode based architecture, and a patent covering
the self-testing diagnostic features incorporated in its disk drives. In
addition, the Company has been granted a patent covering its brushless motor
design and a patent covering certain mechanical design features of its low
profile drives, including various design features related to the one-inch high
form factor.
The Company has obtained or applied for a variety of additional patents
relating to other aspects of its drives, including certain features used in
achieving the low power functionalities of its disk drives which are important
for laptop and notebook applications, as well as certain desktop applications.
The Company has also acquired or been granted 80 United States patents, and has
approximately 25 patent applications pending, as part of the Archive acquisition
in December 1992 which relate to tape drive designs or technologies.
In addition to patent protection, the Company relies on the laws of unfair
competition, copyright and trade secrets to protect its proprietary rights. The
Company believes that its technological know-how and abilities, protectable on
these bodies of law, are equally important to its business as technical
innovations subject to patent protection.
As is typical in the disk drive industry, Conner has from time to time been
notified that it may be infringing certain patents and other intellectual
property rights of others, and the Company is engaged in several patent
infringement lawsuits, both as plaintiff and defendant. Although the Company
may offer licenses in connection with these claims, there can be no assurance
that such claims will not result in litigation in the future regarding patents,
mask works, copyrights, trademarks or trade secrets, or that any licenses or
other rights can be obtained on acceptable terms. See "Legal Proceedings."
FACTORS AFFECTING EARNINGS AND STOCK PRICE
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In the past, the Company's sales and earnings have experienced significant
fluctuations due to precipitous changes in industry demand, product cycles and
pricing pressures. During 1993, the Company experienced substantial losses as a
result of distribution problems in Europe, new product introduction delays and
severe competition across
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all the Company's product lines. Although the Company has successfully
introduced a range of new disk drive and tape drive products since then, there
can be no assurance that the Company will not again experience these problems in
the future. In addition, there can be no assurance that the Company will
succeed in ramping production of new products in time to take advantage of
customer demand or that the Company will achieve profitable operations in any
given period or fiscal quarter.
Due to the volatility in the Company's business, the Company expects that
its stock price will continue to be subject to significant fluctuations. The
Company's stock price could decline precipitously due to unsubstantiated rumors
or to actual short-term performance that fails to meet analysts' expectations
for sales or net income. Investors in the Company's securities must be willing
to accept the risk of such fluctuations and stock price volatility.
EMPLOYEES
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At December 31, 1993, the Company had 9,097 employees, of whom 817 were in
research and development or process development engineering; 395 were in
marketing, sales and service; 584 were in general administration; and 7,301 were
in operations, with 4,851 in direct labor and the remainder in quality
assurance, test and manufacturing engineering, procurement and material
management and production management. None of the Company's employees, except
those in Italy, are represented by a labor union. The Company believes that its
relationship with its employees is satisfactory.
Item 2. PROPERTIES
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Facilities
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The following table sets forth information concerning the principal
operating facilities of the Company as of December 31, 1993:
<TABLE>
<CAPTION>
Square
Feet
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<S> <C>
Manufacturing:
United States (7 buildings)............... 410,000
Asia (4 buildings)........................ 830,000
Europe (3 buildings)...................... 142,000
Administration, Research and Development:
United States (13 buildings).............. 440,000
Asia (1 building)......................... 1,200
Sales and Customer Service:
Sales and customer service offices
(28 buildings in North America,
Asia and Europe)......................... 148,000
</TABLE>
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The Company believes that it may require additional facilities in the
United States to address its near term space requirements and expects to be
able to lease such facilities on a short term basis, although there is no
assurance such short term leases will be available at attractive rates.
Item 3. LEGAL PROCEEDINGS
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The Company and certain officers and directors are defendants in a
securities class action lawsuit which purports to represent a class of
investors who purchased or otherwise acquired the Company's common stock
between January 1992 and May 1993. Certain officers and directors are also
defendants in a related shareholders derivative suit. Both complaints seek
unspecified damages and other relief. The Company intends to defend the
actions vigorously.
In August 1993, the Company was served with a patent infringement complaint
filed by IBM in the United States District Court for the Northern District of
California. The complaint alleges that products manufactured by the Company
have infringed nine patents owned by IBM. In addition, the complaint seeks
declaratory relief to the effect that drives produced by IBM do not infringe
five patents held by the Company and seeks to have such patents declared
invalid. The Company answered the complaint, denying all material allegations
and counter claiming that IBM disk drives infringe six patents owned by Conner,
including the five contained in the IBM complaint. The Company believes that it
has meritorious defenses against these allegations, that it has valid claims
against IBM and will defend this action vigorously. However, the Company is
unable to predict the outcome of the litigation or ultimate effect, if any, on
its operations or financial condition. Regardless of the merits of the
respective patent claims, the Company believes that the existence of the IBM
litigation could have an adverse effect on its business and expects that this
litigation will require the Company to incur significant costs and uncertainty,
including substantial legal expenses. Although the Company has engaged in
continuous discussions with IBM toward an appropriate cross-licensing
arrangement, no assurance can be given as to the outcome of the litigation or
settlement negotiations.
In February 1992, the Company filed a patent infringement lawsuit against
Western Digital Corporation ("Western Digital") alleging the infringement of
five of the Company's patents by Western Digital. The suit is currently pending
in the Northern District of California. Shortly after the commencement of this
action, Western Digital filed a claim in the Central District of California
alleging infringement of one patent by the Company. Subsequently, Western
Digital amended its claim to assert infringement by the Company of two
additional disk drive patents. The Western Digital complaint has been
transferred to the Northern District of California. Although the Company
believes it has valid claims against Western Digital and meritorious defenses to
the claims asserted by Western Digital, there can be no assurance as to the
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<PAGE>
outcome of this litigation or that the Company will prevail in its claims and
defenses.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
-14-
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
---------------------------------------------------------------------
Information regarding the market for the Registrant's common equity and
related stockholder matters is set forth under the heading "Consolidated
Statements of Stockholders' Equity" on page 18 and under the heading "Market
Price of Common Stock" on the inside back cover of the Annual Report, which
sections are incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
-----------------------
Information regarding selected financial information is set forth under the
headings "Consolidated Statement of Operations Data," "Consolidated Balance
Sheet Data," and "Summary Quarterly Data" on page 8 of the Annual Report, which
sections are incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Information regarding management's discussion and analysis of financial
condition and results of operations is set forth under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 9-14 of the Annual Report, which section is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Consolidated Financial Statements of the Company at January 1, 1994 and
January 2, 1993, and for each of the three fiscal years in the period ended
January 1, 1994 and the report of independent accountants therein, as well as
the Company's unaudited quarterly financial information for the two-year period
ended January 1, 1994 is set forth on pages 15 through 29 and on page 8 of the
Annual Report, which sections are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
-15-
<PAGE>
PART III
Certain information required by Part III is omitted from this Report on
Form 10-K in that the Company has filed a definitive proxy statement pursuant
to Regulation 14A with respect to the Annual Meeting of Stockholders to be
held April 19, 1994 (the "Proxy Statement") with the Securities and Exchange
Commission and certain information included therein is incorporated herein by
reference.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by this Item is incorporated by reference to the
information under the caption "PROPOSAL NO. 1-- ELECTION OF DIRECTORS" in the
Proxy Statement. The information concerning executive officers of the Company
is incorporated by reference to the information under the caption "Proposal No.
1--ELECTION OF DIRECTORS" and under the caption "OTHER INFORMATION--Executive
Officers" in the Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
----------------------
The information required by this Item is incorporated by reference to the
information under the captions "EXECUTIVE OFFICER COMPENSATION--Summary
Compensation Table," "--Option Grants in Last Fiscal Year", and "--Aggregate
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values" in the
Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this Item is incorporated by reference to the
information under the caption "OTHER INFORMATION-- Share Ownership by Principal
Stockholders and Management" in the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this Item is incorporated by reference to the
information under the captions "CERTAIN TRANSACTIONS" and "EXECUTIVE
COMPENSATION--Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement.
-16-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) The financial statements listed in the following index to consolidated
financial statements are filed as part of this Annual Report on Form 10-K.
Page in
1. Financial Statements Annual Report
-------------
Consolidated Balance Sheets at December 31, 1993 15
and December 31, 1992
Consolidated Statements of Operations for the 16
three years ended December 31, 1993
Consolidated Statements of Cash Flows for the 17
three years ended December 31, 1993
Consolidated Statement of Stockholders' Equity 18
for the three years ended December 31, 1993
Notes to Consolidated Financial Statements 19
Report of Independent Accountants 29
2. Financial Statement Schedules
Schedule Description Page
---------- ----------------------------------- ----
I Marketable Securities - Other S-1
Investments
VIII Valuation and Qualifying Accounts S-2
Report of Independent Accountants S-3
Schedules not listed above have been omitted because they are either
inapplicable or the required information has been provided in the
financial statements or notes thereto.
3. Exhibits
Refer to (c) below.
(b) Reports on Form 8-K
No reports on Form 8-K were filed on behalf of Registrant during the
quarter ended January 1, 1994.
(c) Exhibits
-17-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------------ -----------
<C> <S>
2.1(6) Agreement and Plan of Merger between Conner
Peripherals, Inc., a Delaware corporation, and
Conner Peripherals, Inc., a California corporation,
dated July 13, 1992.
2.2(7) Agreement and Plan of Merger between Archive
Corporation, Conner Acquisition Corp. and Conner
Peripherals, Inc. dated November 18, 1992, as
amended.
3.1(6) Certificate of Incorporation of Registrant, as
amended to date.
3.2(6) Bylaws of Registrant as amended to date.
4.1(3) Form of Indenture relating to the Registrant's
6-3/4% Convertible Sub-ordinated Debentures due 2001.
4.2(4) Form of Indenture relating to the Registrant's
6-1/2% Convertible Sub-ordinated Debentures due 2002.
10.1(2) * Registrant's Profit Sharing Plan, as amended to
date.
10.2(9) * Registrant's 1986 Incentive Stock Plan, together
with forms of agreements thereunder, as amended.
10.3(5) * Registrant's 1992 Restricted Stock Plan.
10.4(6) * Form of Officer and Director Amended and Restated
Indemnification Agreement.
10.6 * Registrant's Employee Stock Purchase Plan, as
amended.
10.7(1) Lease Agreement dated August 19, 1988 between
Registrant and Corporate Plaza, Phase I, a
California general partnership, for certain land and
improvements commonly known as Corporate Plaza,
located in San Jose, California.
10.8(1) Lease Agreement dated June 16, 1988 between Conner
Peripherals, Singapore, Ltd. and
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------------ -----------
<C> <S>
Newton Investment Ltd. for the sixth story of 151
Lorong Chuan, Singapore.
10.9(1) Lease Agreement dated December 8, 1988 between
Conner Peripherals Singapore, Ltd. for the fifth
story of 151 Lorong Chuan, Singapore.
10.10(4) Amendment to Lease Agreements dated June 16, 1988
and December 8, 1988 between Conner Peripherals,
Singapore, Ltd. and Newton Investment Ltd. for the
sixth and fifth stories, respectively, of 151 Lorong
Chuan, Singapore, dated October 23, 1991. See
Exhibits 10.8 and 10.9 listed above.
10.11 Sixth Amendment dated December 22, 1993 (the "Sixth
Amendment") to Note Purchase Agreement among
Registrant and Principal Mutual Life Insurance
Company, Northwestern National Life Insurance
Company, Northern Life Insurance Company, The North
Atlantic Life Insurance Company of America and
Ministers Life - a Mutual Life Insurance Company
dated June 1, 1989 (the "Note Purchase Agreement").
Exhibit A to the Sixth Amendment is a copy of the
Amended and Restated Note Purchase Agreement which
includes all amendments and agreements entered into
to date with respect to the Note Purchase Agreement.
10.12 Fifth Amendment dated December 22, 1993 (the "Fifth
Amendment") to the Note Agreement dated as of March
29, 1991 (the "Note Agreement") among the Registrant
and the Purchasers listed in such agreement relating
to the Registrant's Series A and Series B Senior
Notes. Exhibit A to the Fifth Amendment is a copy
of the Amended and Restated Note Agreement which
includes all amendments and agreements entered into
to date with respect to the Note Agreement.
10.13(6) Lease Agreement to supersede the Lease Agreement
that is dated August 1, 1989, on August 1, 1992 for
Building 1 at 2400 Trade Centre Drive, Longmont, CO.
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------------ -----------
<C> <S>
10.14(6) Stock Purchase Agreement between Compaq Computer
Corporation and the Registrant, dated July 28, 1992.
10.15(8) * Stock Option and Restricted Stock Purchase Plan -
1981 and form of option agreement with respect
thereto.
10.16(8) * Incentive Stock Option Plan - 1981 and form of
option agreement with respect thereto.
10.17(9) Lease Agreement dated March 21, 1992 between Newton
Investment LTD and Conner Peripherals PTE LTD for
the third story of 151 Lorong Chuan, Singapore.
10.18 Sublease Agreement between the Registrant and
General Signal Corporation for the property located
at 195 South Milpitas Boulevard, Milpitas,
California, dated February 20, 1993.
10.19 Credit Agreement dated December 23, 1993 among the
Registrant and Bank of America National Trust and
Savings Association, as Agent, and the other
financial institutions which are parties thereto.
11.1 Statement regarding computation of Registrant's
earnings per share.
13 1993 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Public Accountants.
24.1 Power of Attorney (see pages 22 and 23).
</TABLE>
______________________
-20-
<PAGE>
(1) Incorporated by reference to exhibit filed with Registration Statement No.
33-26831.
(2) Incorporated by reference to exhibit filed with Registrant's Report on Form
10-K for the fiscal year ended December 31, 1989.
(3) Incorporated by reference to exhibit filed with Registrant's Report on Form
10-K for the fiscal year ended December 31, 1990.
(4) Incorporated by reference to exhibit filed with Registrant's Report on Form
10-K for the fiscal year ended December 31, 1991.
(5) Incorporated by reference to exhibit filed with Registrant's Registration
Statement No. 33-46886.
(6) Incorporated by reference to exhibit filed with Registrant's Form 8-B filed
with the Securities and Exchange Commission on September 9, 1992.
(7) Incorporated by reference to exhibit filed with the Tender Offer Statement
on Schedule 14D-1, as amended, of Conner Acquisition Corporation and Conner
Peripherals, Inc., filed with the Securities and Exchange Commission on
November 24, 1992.
(8) Incorporated by reference to exhibit filed with Registrant's Registration
Statement No. 33-56878.
(9) Incorporated by reference to exhibit filed with Registrant's Report on Form
10-K for the fiscal year ended December 31, 1992.
___________________________
* Denotes a management contract or compensatory plan or arrangement.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
San Jose, State of California, on the 30th day of March, 1994.
CONNER PERIPHERALS, INC.
By: /s/ P. Jackson Bell
-----------------------------------------
P. Jackson Bell, Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David T. Mitchell and Finis F. Conner
and each of them, his or her attorneys-in-fact, each with full power of
substitution, for him or her in any and all capacities, to sign on behalf of
the undersigned any amendments to this Report on Form 10-K and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, and each of the undersigned does
hereby ratify and confirm all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Finis F. Conner
------------------------- Chairman of the Board March 30, 1994
(Finis F. Conner) of Directors and Chief
Executive Officer
(Principal Executive
Officer)
/s/ David T. Mitchell
------------------------- President, Chief March 30, 1994
(David T. Mitchell) Operating Officer and
Director
-22-
<PAGE>
/s/ William J. Schroeder
------------------------- Vice Chairman and March 30, 1994
(William J. Schroeder) Director
Director March __, 1994
- -------------------------
(John P. Squires)
/s/ P. Jackson Bell
- ------------------------- Executive Vice President March 30, 1994
(P. Jackson Bell) and Chief Financial Officer
(Principal Financial and
and Accounting Officer)
/s/ William S. Anderson Director March 30, 1994
- -------------------------
(William S. Anderson)
/s/ Mark Rossi Director March 30, 1994
- -------------------------
(Mark Rossi)
/s/ Linda Wertheimer Hart Director March 30, 1994
- -------------------------
(Linda Wertheimer Hart)
/s/ L. Paul Bremer Director March 30, 1994
- -------------------------
(L. Paul Bremer)
/s/ Roger S. Penske Director March 30, 1994
- -------------------------
(Roger S. Penske)
-23-
<PAGE>
CONNER PERIPHERALS, INC.
1993 Annual Report on Form 10-K
Index to Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule Description Page
- ---------- --------------------------- ----
<C> <S> <C>
I Marketable Securities-Other S-1
Investments
VIII Valuation and Qualifying S-2
Accounts
Report of Independent S-3
Accountants
<S> <C> <C>
</TABLE>
-24-
<PAGE>
CONNER PERIPHERALS, INC.
------------------------
SCHEDULE I--MARKETABLE SECURITIES--OTHER INVESTMENTS
<TABLE>
<CAPTION>
Amount At
Number Of Which Carried
Shares Or Market In Balance
Description Principal Amount Cost Value Sheet
- ----------- ---------------- ---- ----- -----
<S> <C> <C> <C> <C>
U.S. Government and Agencies $ 20,000,000 $ 19,936,000 $ 19,967,000 $ 19,969,000
U.S. Certificates of Deposit 25,000,000 25,000,000 25,000,000 25,000,000
European Certificates of Deposit 16,000,000 16,004,000 16,004,000 16,004,000
European Bonds 41,285,000 42,969,000 42,606,000 42,643,000
Money Market Funds 103,206,000 103,033,000 103,206,000 103,206,000
Commercial Paper 25,000,000 24,713,000 24,829,000 24,829,000
Corporate Notes, Bonds
and Medium Term Notes 107,000,000 98,519,000 107,251,000 107,278,000
Taxable Municipal Bonds 14,500,000 14,500,000 14,520,000 14,500,000
Tax Exempt Municipal Bonds 12,000,000 12,000,000 12,000,000 12,000,000
Taxable Floating Preferred
Stock 16,000,000 16,000,000 16,000,000 16,000,000
Tax Exempt Floating Preferred
Stock 76,850,000 76,817,000 76,821,000 76,821,000
------------
$458,250,000
============
</TABLE>
S-1
<PAGE>
CONNER PERIPHERALS, INC.
------------------------
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged Charged to Balance
Beginning to Costs Other at End
Classification of Period and Expenses Accounts/1/ Deductions of Period
-------------- --------- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1991:
Allowance for accounts receivable $ 6,694,000 $ 3,360,000 $ -- $ -- $10,054,000
1992:
Allowance for accounts receivable $10,054,000 $19,339,000 $4,299,000 $ -- $33,692,000
1993:
Allowance for accounts receivable $33,692,000 $ 9,749,000 $ -- $(4,011,000) $39,430,000
</TABLE>
- -----------------------------
/1/ Charged to Other Accounts in 1992 includes reserves relating to Archive
Corporation.
S-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
To the Board of Directors
of Conner Peripherals, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 20, 1994 appearing on page 29 of the 1993 Annual Report to
Stockholders of Conner Peripherals, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedules listed in item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE
Price Waterhouse
San Jose, California
January 20, 1994
S-3
<PAGE>
CONNER PERIPHERALS, INC.
1993 Annual Report on Form 10-K
Index to Exhibits
Number Description
- ------ -----------
<TABLE>
<CAPTION>
<S> <C>
10.6 Registrant's Employee Stock Purchase Plan, as amended.
10.11 Sixth Amendment dated December 22, 1993 (the "Sixth
Amendment") to Note Purchase Agreement among Regis-
trant and Principal Mutual Life Insurance Company,
Northwestern National Life Insurance Company, Northern
Life Insurance Company, The North Atlantic Life
Insurance Company of America and Ministers Life - a
Mutual Life Insurance Company dated June 1, 1989 (the
"Note Purchase Agreement"). Exhibit A to the Sixth
Amendment is a copy of the Amended and Restated Note
Purchase Agreement which includes all amendments and
agreements entered into to date with respect to the
Note Purchase Agreement.
10.12 Fifth Amendment dated December 22, 1993 (the "Fifth
Amendment") to the Note Agreement dated as of
March 29, 1991 (the "Note Agreement") among the
Registrant and the Purchasers listed in such agreement
relating to the Registrant's Series A and Series B
Senior Notes. Exhibit A to the Fifth Amendment is a
copy of the Amended and Restated Note Agreement which
includes all amendments and agreements entered into to
date with respect to the Note Agreement.
10.18 Sublease Agreement between the Registrant and General
Signal Corporation for the property located at 195
South Milpitas Boulevard, Milpitas, California, dated
February 20, 1993.
10.19 Credit Agreement dated December 23, 1993 among the
Registrant Bank of America National Trust and Savings
Association, as Agent, and the other financial
institutions which are parties thereto.
11.1 Statement regarding computation of Registrant's
earnings per share.
13.1 1993 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Independent Accountants.
</TABLE>
<PAGE>
CONNER PERIPHERALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended through October 1993)
The following constitute the provisions of the Employee Stock Purchase Plan
of Conner Peripherals, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-------
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
------
(c) "Common Stock" shall mean the Common Stock, no par value, of the
--------------
Company.
(d) "Company" shall mean Conner Peripherals, Inc., a Delaware
---------
corporation.
(e) "Compensation" shall mean all regular straight time gross
--------------
earnings, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions or other compensation.
Effective beginning with the Plan offering period that commences on or about
April 30, 1994 and thereafter, "Compensation" shall mean all regular straight
time gross earnings and commissions, exclusive of payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses, or other
compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
----------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
<PAGE>
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
-------------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(h) "Employee" shall mean any person, including an officer, who is
----------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(i) "Exercise Date" shall mean the last day of each offering period
---------------
of the Plan.
(j) "Offering Date" shall mean the first day of each offering period
---------------
of the Plan.
(k) "Plan" shall mean this Employee Stock Purchase Plan.
------
(l) "Subsidiary" shall mean a corporation, domestic or foreign, of
------------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
offering period shall be eligible to participate in such offering period under
the Plan, subject to the requirements of paragraph 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 425(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) which permits his rights
to purchase stock under all employee stock purchase plans (described in Section
423 of the Code) of the Company and its subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
-2-
<PAGE>
4. Offering Periods. Effective October 5, 1993, the Plan shall be
----------------
implemented by offering periods of approximately six months in duration,
commencing on the first trading day following the last day of the preceding
offering period and ending on the last Friday in April or October, as the case
may be, that is not the end of a payroll period. Offering periods shall
continue thereafter until the Plan is terminated in accordance with paragraph 19
hereof. The Board of Directors of the Company shall have the power to change
the duration of offering periods with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first offering period to be affected.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction on the form
provided by the Company and filing it with the Company's payroll office prior to
the applicable Offering Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a given
offering.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of the
offering to which such authorization is applicable, unless sooner terminated by
the participant as provided in paragraph 10.
6. Payroll Deductions.
------------------
(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the offering
period in an amount not exceeding fifteen percent (15%) of the Compensation
which he received on the payday immediately preceding the Offering Date, and the
aggregate of such payroll deductions during the offering period shall not exceed
fifteen percent (15%) of his aggregate Compensation during said offering period.
(b) All payroll deductions made by a participant shall be credited to
his account under the Plan. A participant may not make any additional payments
into such account.
(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10, or may lower, but not increase, the rate of his
payroll deductions during the offering period by completing or filing with the
Company a new authorization for payroll deduction. The change in rate shall be
effective
-3-
<PAGE>
fifteen (15) days following the Company's receipt of the new authorization.
(d) A participant's subscription agreement shall remain in effect for
successive Offering Periods unless revised as provided herein or terminated as
provided in paragraph 10.
7. Grant of Option.
---------------
(a) On the Offering Date of each offering period, each eligible
Employee participating in the Plan shall be granted an option to purchase (at
the per share option price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions to be
accumulated during such offering period (not to exceed an amount equal to
fifteen percent (15%) of his Compensation as of the date of the commencement of
the applicable offering period) by eighty-five percent (85%) of the fair market
value of a share of the Company's Common Stock on the Offering Date, subject to
the limitations set forth in Section 3(b) and 12 hereof. Fair market value of a
share of the Company's Common Stock shall be determined as provided in Section
7(b) herein.
(b) The option price per share of the shares offered in a given
offering period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion; provided, however, that
where there is a public market for the Common Stock, the fair market value per
Share shall be the mean of the bid and asked prices of the Common Stock for such
date, as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per Share shall be the closing price on
such exchange on such date, as reported in the Wall Street Journal.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
-4-
<PAGE>
9. Delivery. As promptly as practicable after the Exercise Date of each
--------
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise
of his option. Any cash remaining to the credit of a participant's account
under the Plan after a purchase by him of shares at the termination of each
offering period, or which is insufficient to purchase a full share of Common
Stock of the Company, shall be returned to said participant.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his account under the Plan at any time prior to the
Exercise Date of the offering period by giving written notice to the Company.
All of the participant's payroll deductions credited to his account will be paid
to him promptly after receipt of his notice of withdrawal and his option for the
current period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the offering period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his account
will be returned to him or, in the case of his death, to the person or persons
entitled thereto under paragraph 14, and his option will be automatically
terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
offering period in which the employee is a participant, he will be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
his account will be returned to him and his option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 4,500,000 shares,
subject to adjustment upon changes in capital-
-5-
<PAGE>
ization of the Company as provided in paragraph 18. If the total number of
shares which would otherwise be subject to options granted pursuant to Section
7(a) hereof on the Offering Date of an offering period exceeds the number of
shares then available under the Plan (after deduction of all shares for which
options have been exercised or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available for option grant in as
uniform a manner as shall be practicable and as it shall determine to be
equitable. In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each Employee
affected thereby and shall similarly reduce the rate of payroll deductions, if
necessary.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his spouse.
13. Administration. The Plan shall be administered by the Board of the
--------------
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the grant
of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no member
of the Board who is eligible to participate in the Plan may be a member of the
Committee.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of the
offering period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of the offering period.
-6-
<PAGE>
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to
-7-
<PAGE>
have been "effected without receipt of consideration". Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issue by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
option.
In the event of the proposed dissolution or liquidation of the Company, the
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event that such successor corporation does not agree to assume the
option or substitute an equivalent option, the Board shall in lieu of such
assumption or substitution, provide for the participant to have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
19. Amendment or Termination. The Board of Directors of the Company may
------------------------
at any time terminate or amend the Plan. Except as provided in paragraph 18, no
such termination can affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant, nor may an amendment be made without prior approval
of the shareholders of the Company (obtained in the manner described in
paragraph 21) if such amendment would:
(a) Increase the number of shares that may be issued under the Plan;
-8-
<PAGE>
(b) Permit payroll deductions at a rate in excess of fifteen percent
(15%) of the participant's Compensation;
(c) Change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(d) If the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") at the time of such amendment, materially increase the benefits which may
accrue to participants under the Plan.
If any amendment requiring shareholder approval under this paragraph 19 of
the Plan is made subsequent to the first registration of any class of equity
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in paragraph 21 of the Plan.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Shareholder Approval.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, or if such
shareholder approval is obtained by written consent, it must be obtained by the
unanimous written consent of all shareholders of the Company; provided, however,
that approval at a meeting or by written consent may be obtained by a lesser
degree of shareholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adverse-
ly affect the qualification of the Plan under Section 423 of the Code.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
-9-
<PAGE>
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in paragraph 21(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of (1)
the first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section 14(a)
of the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection (i)
hereof not later than the date on which such information is first sent or given
to shareholders.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the afore-
mentioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in paragraph 21. It shall continue in effect for a
term of twenty (20) years unless sooner terminated under paragraph 19.
-10-
<PAGE>
CONNER PERIPHERALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Offering Date: ________________
Offering Period: ______________
___ Original Application
___ Change to Payroll Deduction Rate
___ Change to No Payroll Deduction, without Refund
___ Withdrawal from Plan with Refund
___ Change of Beneficiary(ies)
1.
---------------------------------------------------------------------------
Print Clearly Employee Last Name First Middle
Employee Number Department Number
--------------- ----------
hereby elects to participate in the Conner Peripherals, Inc. Employee Stock
Purchase Plan (the "Stock Purchase Plan") and subscribes to purchase shares
of Common Stock of Conner Peripherals, Inc. (the "Company") in accordance
with this Subscription Agreement and the Stock Purchase Plan.
2. I hereby authorize a payroll deduction from each paycheck in the amount of
_____ % of my base pay, I understand that payroll deductions for this
Offering Period will begin with my paycheck for the pay period which
includes ______ and will continue throughout the paycheck for the last full
pay period ending before _______, unless I terminate my deduction or
withdraw from the Stock Purchase Plan before the end of the Offering
Period.
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price
determined in accordance with the Stock Purchase Plan. I further
understand that, except as otherwise set forth in the Stock Purchase Plan,
shares will be purchased for me automatically at the end of the Offering
Period (the "Exercise Date") unless I otherwise withdraw from the Stock
Purchase Plan by giving written notice to the Company for such purpose.
4. I have received a copy of the Company's "Employee Stock Purchase Plan
Questions and Answers and I understand that I may obtain the complete
"Conner Peripherals, Inc. Employee Stock Purchase Plan" by contacting Human
Resources or Finance. I further understand that my participation in the
Stock Purchase Plan is in all respects subject to the terms of the Stock
Purchase Plan.
5. (This item describes U.S. tax consequences only and does not apply to all
participants.) I understand that if I sell any shares received by me
pursuant to the Stock Purchase Plan, I may be treated for income tax
purposes as having received ordinary income at the time of such sale in the
amount equal to the excess of the fair market value of the shares at the
time such shares were transferred to me over the price which I paid for the
shares. I further understand that the difference between the price of the
shares at the time of such sale and the fair market value at the time such
shares were transferred to me will be reportable as a capital gain or lost
for income tax purposes in the year in which the sale of the shares
occurred.
6. I hereby agree to notify the Company on the required form within 30 days
after the date of any such disposition of my shares as described in Item 5
above, if I dispose of such shares at any time within two (2) years after
the Offering Date or within one (1) year after the Exercise Date.
7. I hereby authorize the Company to act on my behalf to dispose of shares
acquired by me pursuant to the Stock Purchase Plan, if and when requested
to do so.
<PAGE>
8. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:
PLEASE PRINT CLEARLY:
---------------------------------------------------------------------------
NAME FIRST MIDDLE LAST RELATIONSHIP
---------------------------------------------------------------------------
ADDRESS NO. & STREET CITY STATE ZIP
---------------------------------------------------------------------------
NAME FIRST MIDDLE LAST RELATIONSHIP
---------------------------------------------------------------------------
ADDRESS NO. & STREET CITY STATE ZIP
I understand that this Subscription Agreement shall remain in effect
throughout successive offering periods unless terminated by me.
--------------- ------------------------------------
DATED SIGNATURE OF EMPLOYER
<PAGE>
CONNER PERIPHERALS, INC.
Note Agreement
Dated as of June 1, 1989
$15,000,000 Series A Senior Notes due 1992
$15,000,000 Series B Senior Notes due 1994
SIXTH AMENDMENT TO NOTE AGREEMENT
Dated as of December 22, 1993
To the Person Signatory
Hereto as Holder of Notes
Ladies and Gentlemen:
CONNER PERIPHERALS, INC. (together with its successors and assigns, the
"Company"), a Delaware corporation, hereby agrees with you as follows:
1. PRELIMINARY STATEMENT.
1.1 The Company entered into those certain separate Note Agreements, each
dated as of June 1, 1989 (collectively, as in effect immediately prior to the
Effective Date, the "Existing Note Agreement," and, as amended hereby, the
"Amended Note Agreement"), with each of Principal Mutual Life Insurance Company,
Northwestern National Life Insurance Company, Northern Life Insurance Company,
The North Atlantic Life Insurance Company of America, and Minsiters Life - A
Mutual Life Insurance Company (individually, a "Purchaser," and collectively,
the "Purchasers"), pursuant to which the Company issued and sold to the
Purchasers, and the Purchasers purchased from the Company, an aggregate
principal amount of Fifteen Million Dollars ($15,000,000) of the Company's
Series A Senior Notes (the "Series A Senior Notes") due 1992 and Fifteen Million
Dollars ($15,000,000) of the Company's Series B Senior Notes due 1994
(collectively, as in effect immediately prior to the Effective Date, the Series
B Senior Notes referred to herein as the "Notes.").
1.2 The Existing Note Agreement has been, prior to the Effective Date, and
by agreement by the parties thereto, amended pursuant to that certain First
Amendment to Note Agreement, dated as of January 21, 1992, that certain Second
Amendment to Note Agreement, dated as of July 29, 1992, that certain Third
Amendment and Assumption Agreement to Note Agreement, dated as of August 31,
1992, that certain Fourth Amendment to Note Agreement, dated as of March 31,
1993 and that certain Fifth Amendment to Note Agreement, dated as of June 25,
1993.
1.2 As of the date hereof, none of the Series A Senior Notes are
outstanding, and Principal Mutual Life Insurance Company holds one hundred
percent (100%) of the Notes outstanding on the Effective Date (the "Holder").
<PAGE>
1.3 The Company and the Holder desire to amend and restate in full Section
4, Section 5, Section 7 and Section 12(a) of the Existing Note Agreement and to
execute this Amendment (the "Amendment") to effect such amendment and
restatement.
1.4 The terms used herein and not defined herein have the meanings
specified in the Amended Note Agreement.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
2. AMENDMENTS TO THE EXISTING NOTE AGREEMENTS.
2.1 Amendment to Existing Note Agreement.
The Existing Note Agreement (excluding all Appendices and Exhibits thereto)
is hereby amended and restated in full in the form attached hereto as Exhibit A.
2.2 Waiver Letter.
That certain waiver agreement (the "Waiver") between the Company and the
Holder, dated as of November 12, 1993, as extended through the date hereof,
pursuant to which the Holder waived compliance with certain provisions of the
Existing Note Agreement, is hereby made permanent.
2.3 Understanding Re Definition of Liens.
The parties hereto agree and acknowledge that Section 4C of those certain
separate Note Agreements, dated as of March 29 1991, in respect of the Company's
Series A Senior Notes due 1996 and its Series B Senior Notes due 1998, does not
constitute or create a "Lien" under and as defined in the Amended Note
Agreement.
3. WARRANTIES AND REPRESENTATIONS.
To induce the Holder to enter into this Amendment, the Company warrants and
represents to the Holder that as of the Effective Date:
3.1 Organization, Existence and Authority.
Each of the Company and the Restricted Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. The Company has all requisite power and authority to execute and
deliver this Amendment.
3.2 Authorization, Execution and Enforceability.
The execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations hereunder and under the Amended
Note Agreement have been duly authorized by all necessary corporate action on
the part of the Company. This Amendment has been duly executed and delivered by
the Company and this Amendment and
2 Amendment Agreement
<PAGE>
the Amended Note Agreement (the "Transaction Documents"), are valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.
3.3 No Conflicts or Defaults.
Neither the execution and delivery by the Company of this Amendment, nor
the performance by the Company of its obligations under the Transaction
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
upon any Property of the Company or any Subsidiary under the provisions of:
(a) any charter document or the bylaws of the Company or any of the
Subsidiaries;
(b) any agreement, instrument or conveyance to which the Company or
any of the Subsidiaries or any of their respective Properties may be bound
or affected; or
(c) any statute, rule or regulation or any order, judgment or award
of any court, tribunal or arbitrator by which the Company or any of the
Subsidiaries or any of their respective Properties may be bound or
affected.
3.4 Governmental Consent.
Neither the execution and delivery by the Company of this Amendment, nor
the performance by the Company of its obligations under the Transaction
Documents, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of any one or more of the Company and the Subsidiaries as a condition
thereto under the circumstances and conditions contemplated by this Amendment.
3.5 Disclosure of Defaults under Existing Note Agreement.
After giving effect to the Waiver, no event has occurred and no condition
exists that would constitute a Default or an Event of Default under the Existing
Note Agreement, and no event has occurred and no condition exists that would
constitute a Default or an Event of Default under the Amended Note Agreement.
4. CONDITIONS PRECEDENT TO THIS AMENDMENT.
The amendment of the Existing Note Agreement provided for in Section 2
hereof shall not become effective until a counterpart of the certificate
attached hereto as Exhibit B shall have been executed and delivered by the
Holder to the Company, on or prior to December 22, 1993 (the date of such
satisfaction being herein referred to as the "Effective Date"). The Holder
shall not deliver such certificate until the following conditions precedent have
been satisfied in the opinion of the Holder.
3 Amendment Agreement
<PAGE>
4.1 No Default; Representations And Warranties True.
No Default or Event of Default under the Amended Note Agreement shall exist
and the warranties and representations set forth in Section 3 hereof shall be
true and correct on the Effective Date.
4.2 Authorization of Transactions.
The Company shall have authorized, by all necessary corporate action, the
execution and delivery of this Agreement and each of the other documents and
instruments executed and delivered in connection herewith and the performance of
all obligations of, and the satisfaction of all conditions precedent pursuant to
this Section 4 by, and the consummation of all transactions contemplated by
this Amendment by, the Company. The Holder shall have received a certificate,
in form and substance satisfactory to the Holder certifying the adoption of
resolutions of the board of directors of the Company authorizing such execution,
delivery, performance, satisfaction and consummation, which resolutions shall be
attached to such certificate and shall be in full force and effect. The
certificate shall indicate that there has been no resolution passed by the board
of directors of the Company which conflicts with, amends or rescinds such
resolutions.
4.3 Execution of Documents and Agreements.
The Company shall have entered into a binding commitment (the "Commitment")
with Bank of America whereby the Bank of America has agreed to arrange a
revolving loan facility (the "Revolving Loan") for the Company for a period of
not less than two (2) years from the Effective Date and in an amount of not less
than Fifty Million Dollars ($50,000,000). The Company shall have delivered to
each Holder a true and correct copy of the executed commitment with respect to
such revolving loan facility as in effect on the Effective Date, which shall be
in form and substance satisfactory to the Holder.
4.4 Arcada Holdings, Inc.
The Company shall have provided you with a true and correct copy of that
certain Letter of Intent dated as of December 13, 1993, as in effect on the
Effective Date, which Letter of Intent correctly describes the transactions
related to the acquisition of Quest Development Corporation by Arcada Holdings,
Inc., the formation and capitalization of Arcada Holdings, Inc. and the related
material transactions.
4.5 Expenses.
The Company shall have paid all costs and expenses of the Holder relating
to this Amendment and the Waiver, in accordance with Section 9 of the Existing
Note Agreement.
4.6 Proceedings Satisfactory.
All proceedings taken in connection with this Amendment and all documents
and papers relating thereto shall be satisfactory to the Holder and its special
counsel. The Holder
4 Amendment Agreement
<PAGE>
and its special counsel shall have received copies of such documents and
papers as they may reasonably request in connection therewith, in form and
substance satisfactory to them.
5. CONDITION SUBSEQUENT.
The amendment of the Existing Note Agreement provided for in Section 2
hereof shall terminate and be of no force or effect on and after January 31,
1994, unless on or prior to such date, the Revolving Loan shall have become
effective on substantially the same terms as provided in the Commitment, and the
Company shall have delivered to each Holder a true and correct copy of the
agreement constituting the Revolving Loan as in effect at the time of such
delivery.
6. WAIVER AND AFFIRMATION OF OBLIGATIONS.
The terms of this Amendment shall not operate as a waiver by the Holder of,
or otherwise prejudice the Holder's rights, remedies or powers under, the
Existing Note Agreement or under applicable law, except to the extent provided
herein. Except as expressly provided herein and in the Amended Note Agreement:
(a) no terms and provisions of any agreement (including, without
limitation, the Existing Note Agreement and the Existing Notes) are
modified or changed by this Amendment; and
(b) the terms and provisions of the Existing Note Agreement and the
Existing Notes shall continue in full force and effect.
The Company hereby acknowledges and affirms all of its obligations and duties
under the Amended Note Agreement.
7. MISCELLANEOUS.
7.1 Section Headings, etc.
The titles of the Sections appear as a matter of convenience only, do not
constitute a part hereof and shall not affect the construction hereof. The
words "herein," "hereof," "hereunder" and "hereto" refer to this Amendment as a
whole and not to any particular Section or other subdivision.
7.2 Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, INTERNAL NEW YORK LAW.
7.3 Duplicate Originals; Execution in Counterpart.
Two or more duplicate originals of this Amendment may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Amendment may be executed in one
or more counterparts and shall be
5 Amendment Agreement
<PAGE>
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts which, collectively, show execution by
each party hereto shall constitute one duplicate original.
7.4 Waivers and Amendments.
Neither this Amendment nor any term hereof may be changed, waived,
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by each of the parties signatory hereto. The terms
and provisions of the Amended Note Agreement may be further amended or modified
in accordance with the provisions of the Amended Note Agreement.
7.5 Successors and Assigns.
This Amendment shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder, whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign.
7.6 Entire Agreement.
This Amendment constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
[Remainder of Page Intentionally Blank. Next Page is Signature Page]
6 Amendment Agreement
<PAGE>
If this Amendment is satisfactory to you, please so indicate by signing the
acceptance at the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Amendment shall become binding between us in
accordance with its terms.
CONNER PERIPHERALS, INC.
By: /s/ P. Jackson Bell
--------------------------------
Name:
Title:
Agreed and Accepted by the Holder of the Notes:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Nora M. Everett
-------------------------------
Name:
Title:
By: /s/ Principal Mutual Life Insurance Company
-------------------------------
Name:
Title:
[SIGNATURE PAGE to AMENDMENT NO. 6, dated as of DECEMBER 22, 1993, to CONNER
PERIPHERALS, INC.'S NOTE AGREEMENT dated as of JUNE 1, 1989] Amendment Agreement
<PAGE>
EXHIBIT A
TO AMENDMENT NO. 6
AMENDED AND RESTATED NOTE AGREEMENT
[Exhibit A begins on the next page]
Exhibit A - 1
<PAGE>
================================================================================
CONNER PERIPHERALS, INC.
NOTE PURCHASE AGREEMENT
WITH
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
NORTHERN LIFE INSURANCE COMPANY
THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA
AND
MINISTERS LIFE--A MUTUAL LIFE INSURANCE COMPANY
Dated as of June 1, 1989
as amended by
First Amendment to Note Agreement, dated as of January 21, 1992
Second Amendment to Note Agreement, dated as of July 29, 1992
Third Amendment and Assumption Agreement to Note Agreement,
dated as of August 31, 1992
Fourth Amendment to Note Agreement, dated as of March 31, 1993
Fifth Amendment to Note Agreement, dated as of June 25, 1993.
Sixth Amendment to Note Agreement, dated as of December 22, 1993.
$15,000,000 11.55% Series A Senior Notes Due 1992
$15,000,000 12% Series B Senior Notes Due 1994
================================================================================
Exhibit A - 2
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. PURCHASE AND SALE OF NOTES........................................... 1
(a) The Series A Notes.............................................. 1
(b) The Series B Notes.............................................. 1
(c) Purchases to be Several......................................... 2
(d) Default Rate.................................................... 2
(e) Manner of Payment............................................... 2
2. VOLUNTARY PREPAYMENTS OF THE NOTES................................... 2
(a) Voluntary Prepayments With Premium.............................. 2
(b) Restrictions on Partial Prepayments............................. 3
(c) Manner of Effecting Prepayment.................................. 3
(d) Addenda to Notes................................................ 3
3. REPRESENTATIONS AND WARRANTIES....................................... 3
(a) Corporate Organization.......................................... 3
(b) No Prohibition.................................................. 4
(c) Due Authorization............................................... 4
(d) Legal Proceedings............................................... 4
(e) Financial Statements............................................ 5
(f) Title to Assets: Patents and Trademarks......................... 5
(g) Securities Matters.............................................. 5
(h) Licenses and Permits............................................ 6
(i) No Defaults on Indebtedness..................................... 6
(j) Tax Returns..................................................... 6
(k) No Margin Stock................................................. 6
(l) ERISA Matters................................................... 6
(m) Brokers and Finders............................................. 7
(n) Use of Proceeds................................................. 7
(o) Investment Company Act.......................................... 7
(p) Environmental Laws.............................................. 7
(q) Full Disclosure................................................. 7
4. AFFIRMATIVE COVENANTS................................................ 8
(a) Financial Statements............................................ 8
(b) Inspection of Property.......................................... 13
(c) Covenant to Secure Note Equally................................. 13
(d) ERISA Compliance................................................ 14
(e) Payment of Taxes and Claims..................................... 14
(f) Maintenance of Properties and Corporate Existence............... 14
(g) Payment of Notes and Maintenance of Office...................... 15
5. NEGATIVE COVENANTS................................................... 15
(a) Consolidated Tangible Net Worth................................. 15
(b) Consolidated Debt............................................... 16
(c) Consolidated Fixed Charges; Consolidated Net Income............. 18
(d) Liens........................................................... 18
(e) Sale/Leaseback Transactions..................................... 22
(f) Restricted Subsidiary Debt and Preferred Stock.................. 22
</TABLE>
Note Agreement Through 6th Amendment
Exhibit A - ii
<PAGE>
TABLE OF CONTENTS (Cont.)
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(g) Merger and Consolidation; Sale of Assets........................ 22
(h) Permitted Investments........................................... 27
(i) Transactions with Affiliates.................................... 31
(j) Line of Business................................................ 31
(k) Designation of Subsidiaries..................................... 31
(l) Private Offering................................................ 32
(m) Subordinated Debt............................................... 32
(n) Liquidity Coverage.............................................. 33
(o) Restricted Payments............................................. 33
(p) Accounting Period............................................... 33
6. CONDITIONS PRECEDENT................................................. 33
(a) Conditions to Closing........................................... 33
(b) Waiver of Conditions............................................ 34
7. EVENTS OF DEFAULT.................................................... 35
(a) Acceleration.................................................... 35
(b) Other Remedies.................................................. 37
(c) Annulment of Acceleration of Notes.............................. 38
8. PAYMENTS ON AND REGISTRATION AND TRANSFER OF NOTES................... 38
9. EXPENSES............................................................. 39
10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS; AMENDMENTS AND
CONSENTS............................................................. 39
(a) Delivery of Documents........................................... 39
(b) Pro Rata Payments............................................... 39
(c) Amendments and Consents......................................... 39
(d) Solicitation of Noteholders..................................... 40
11. REPRESENTATIONS AND AGREEMENTS OF PURCHASERS......................... 40
(a) Investment Purpose.............................................. 40
(b) ERISA Representation............................................ 40
(c) Confidentiality................................................. 41
12. DEFINITIONS.......................................................... 41
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 58
14. SUCCESSORS AND ASSIGNS............................................... 58
15. NOTICES.............................................................. 58
16. INTEGRATION.......................................................... 58
17. GOVERNING LAW........................................................ 58
</TABLE>
Note Agreement Through 6th Amendment
Exhibit A - iii
<PAGE>
TABLE OF CONTENTS (Cont.)
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
18. COUNTERPARTS......................................................... 58
19. CAPTIONS............................................................. 58
</TABLE>
APPENDIX I -- PURCHASERS
APPENDIX II -- ALLOCATION OF NOTES
EXHIBIT A-1 -- FORM OF SERIES A NOTE
EXHIBIT A-2 -- FORM OF SERIES B NOTE
EXHIBIT B -- SUBSIDIARIES
EXHIBIT C -- PERMITTED EXISTING INDEBTEDNESS AND LIENS
EXHIBIT D -- PERMITTED EXISTING INVESTMENTS
EXHIBIT E -- FORM OF OPINION OF COMPANY COUNSEL
EXHIBIT F -- FORM OF SUBORDINATION PROVISIONS
EXHIBIT G -- FORM OF STATISTICAL RELEASE
Note Agreement Through 6th Amendment
Exhibit A - iv
<PAGE>
CONNER PERIPHERALS, INC.
NOTE PURCHASE AGREEMENT
Dated as of June 1, 1989
TO THE PURCHASERS NAMED IN APPENDIX I HERETO:
Ladies & Gentlemen:
The undersigned, Conner Peripherals, Inc., a California corporation
(together with its successors and assigns, including, as of August 31, 1992,
Conner Peripherals, Inc. a Delaware corporation as successor by merger to Conner
Peripherals, Inc. a California corporation, the "Company"), hereby confirms its
agreements set forth below with the parties listed on Appendix I hereto (the
"Purchasers", comprised of the Series A Purchasers and the Series B Purchaser,
as defined in paragraphs 1(a) and 1(b) below). Reference is made to paragraph
12 hereof for definitions of capitalized terms used herein and not otherwise
defined.
1. PURCHASE AND SALE OF NOTES.
(a) The Series A Notes. Subject to the terms and conditions herein, the
Company will sell to Northwestern National Life Insurance Company, Northern Life
Insurance Company, The North Atlantic Life Insurance Company of America and
Ministers Life--A Mutual Life Insurance Company (collectively, the "Series A
Purchasers") on such date on or prior to July 15, 1989 as the Company shall
specify on not less than five days written notice to the Purchasers (the date of
sale being herein called the "Closing Date"), and each of the Series A
Purchasers will purchase from the Company on the Closing Date, at 100% of the
principal amount thereof, a promissory note of the Company (which, together with
any note or notes issued in exchange or substitution therefor, are herein
collectively called the "Series A Notes" and individually a "Series A Note"), in
the principal amount specified on Appendix II hereto, dated the Closing Date.
The principal amount of the Series A Notes shall be due in full on the third
anniversary date of the Series A Notes. The Series A Notes shall bear interest
from the Closing Date until payment in full of the principal amount thereof at
the rate of 11.55% per annum (provided that solely for the purpose of
determining the portion of annual interest allocable to any interest payment
period, it shall be assumed that a year is composed of 360 days and twelve 30-
day months), payable quarterly on the outstanding balance, commencing three
months after the Closing Date and continuing until payment in full of the
principal amount of the Series A Notes. The Series A Notes shall not be subject
to optional prepayment except as hereinafter provided, shall in all respects be
subject to the terms of this Agreement, and shall be substantially in the form
of Exhibit A-I hereto.
(b) The Series B Notes. Subject to the terms and conditions herein, the
Company will sell to Principal Mutual Life Insurance Company (the "Series B
Purchaser") on the Closing Date, and the Series B Purchaser will purchase from
the Company on the Closing Date, at 100% of the principal amount thereof, a
promissory note of the Company (which, together with any note or notes issued in
exchange or substitution therefor, is herein called the "Series B Note" or, as
the context may require, the "Series B Notes", and together with the Series A
Notes herein sometimes called collectively the "Notes" or individually a "Note")
in the principal amount specified on Appendix II hereto, dated the Closing Date.
The principal
Note Agreement Through 6th Amendment
Exhibit A - 1
<PAGE>
1. PURCHASE AND SALE OF NOTES
amount of the Series B Note shall be due in four equal consecutive annual
installments of $1,500,000 each commencing on the first anniversary date of
the Series B Note through and including the fourth anniversary date of the
Series B Note with a final payment of $9,000,000 due on the fifth anniversary
date of the Series B Note. The Series B Note shall bear interest from the
Closing Date until payment in full of the principal amount thereof at the rate
of 12% per annum (provided that solely for the purpose of determining the
portion of annual interest allocable to any interest payment period, it shall
be assumed that a year is composed of 360 days and twelve 30-day months),
payable semi-annually on the outstanding balance, commencing six months after
the Closing Date and continuing until payment in full of the principal amount
of the Series B Note. The Series B Note shall not be subject to optional
prepayment except as hereinafter provided, shall in all respects be subject to
the terms of this Agreement, and shall be substantially in the form of Exhibit
A-2 hereto.
(c) Purchases to be Several. The purchase of each of the Notes by the
respective Purchasers shall be separate and several, but the purchase of each
Note of each series shall be a condition concurrent to the purchase of each
other Note.
(d) Default Rate. If all or any portion of the principal amount of or
interest on any Note shall not be paid when due, such principal (and, if so
permitted by law, such interest) shall bear interest at a rate equal to the
lesser of the highest rate permitted by law or the sum of 2% and the rate borne
by such Note (computed on the basis of a 360-day year composed of twelve 30-day
months) from the date of nonpayment until payment in full.
(e) Manner of Payment. The Purchasers will pay the purchase price of the
Notes by wire transfer of immediately available Federal funds to such accounts
as shall be specified by the Company, or in such other funds or in such other
manner as may be mutually agreed upon by the Purchasers and the Company, against
delivery to the Purchasers of the Notes.
2. VOLUNTARY PREPAYMENTS OF THE NOTES.
(a) Voluntary Prepayments With Premium. The Company may at its option, at
any time, prepay either or both series of the Notes, in whole or in part (but if
in part only in the aggregate amount of $100,000 or integral multiples' thereof
for each series of Notes to be prepaid), upon 30 days' prior written notice to
the holders of the series of Notes to be prepaid, and upon payment of a
prepayment premium (calculated and payable separately for each series of Notes
to be prepaid) equal to the excess, if any, of
(i) the amount equal to the present value, discounted back to the
date of prepayment, of all installments (or portions thereof) of principal
and interest which are avoided by such prepayment, determined by
discounting such payments of principal and interest at a rate per annum
equal to the Treasury Yield Percentage, over
(ii) the principal amount to be prepaid.
In no event shall such prepayment premium be less than zero. Except in
accordance with this paragraph 2, the Company shall not be permitted to
voluntarily prepay the Notes.
Note Agreement Through 6th Amendment
Exhibit A - 2
<PAGE>
2. VOLUNTARY PREPAYMENTS OF THE NOTES
(b) Restrictions on Partial Prepayments. No partial prepayment shall be
made pursuant to paragraph 2(a) unless immediately prior to the time of such
partial prepayment the Company and its Restricted Subsidiaries, on a
consolidated basis, shall
(i) giving effect to such partial prepayment, have outstanding no
indebtedness other than indebtedness permitted by this Agreement, and
(ii) have delivered to the holders of the Notes a certificate signed
by a responsible officer of the Company to such effect and to the effect
that the partial prepayment will not reduce the working capital of the
Company and its Restricted Subsidiaries, on a consolidated basis, below an
amount which is considered adequate by the officers of the Company for the
safe conduct of the business of the Company and its Restricted
Subsidiaries.
(c) Manner of Effecting Prepayment. In the event the Company shall give
notice of any prepayment in accordance with paragraph 2(a) above, such notice
shall specify the series of Notes and the principal amount thereof to be prepaid
and the date of proposed prepayment and thereupon such principal amount,
together with accrued and unpaid interest thereon to the prepayment date and
together with the applicable premium, if any, shall become due and payable on
the prepayment date. No more than ten and no less than five business days prior
to such prepayment, the Company shall deliver to the holders of the Notes to be
prepaid a second notice, setting forth an estimate of the prepayment premium and
showing the Company's method of calculating the same. In the event any
prepayment shall be less than the entire unpaid principal amount of a series of
the Notes, the amount of such prepayment shall be applied pro rata on all Notes
of the series being prepaid, and shall be allocated pro rata to all
installments.
(d) Addenda to Notes. Upon any prepayment of a series of Notes which
causes a variation from the original payment schedule to be made thereunder, the
Company shall enter into an addendum to each Note of such series to better
evidence the payments to be made thereunder, but the new payment amounts shall
be operative whether or not such addenda are executed.
3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Purchasers as follows:
(a) Corporate Organization. The Company and its Subsidiaries are
corporations organized and existing and in good standing under the laws of the
jurisdictions of their incorporation, and are duly qualified to do business and
are in good standing under the laws of each jurisdiction where the nature of the
business done or property owned require such qualification and failure to so
qualify would have a material adverse effect upon the Company, Conner Singapore
or the Company and its Subsidiaries, taken as a whole. The Company is organized
under the laws of the State of California. Exhibit B hereto correctly
(i) sets forth the name of each Subsidiary, its jurisdiction of
incorporation and the percentage of the outstanding capital stock of such
Subsidiary owned by the Company or another Subsidiary, and
Note Agreement Through 6th Amendment
Exhibit A - 3
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
(ii) identifies each such Subsidiary as a Restricted or an
Unrestricted Subsidiary.
Except as set forth in Exhibit B and Exhibit D hereto, the Company does not own,
directly or indirectly, more than 1% of the total outstanding capital stock of
any class of any other corporation.
(b) No Prohibition. There is no provision in the charter documents of the
Company or its Subsidiaries, or in their bylaws, which prohibits the execution
and delivery by the Company of this Agreement or of the Notes, or the
performance or observance by the Company and its Subsidiaries of any of the
terms or conditions of this Agreement or of the Notes.
(c) Due Authorization. The execution, delivery and performance of this
Agreement and the Notes have been duly authorized by all necessary corporate
action of the Company and its Subsidiaries and do not and will not
(i) require any consent or approval of the stockholders of the
Company, or any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign,
(ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect having applicability
to the Company or any Subsidiary,
(iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement other than defaults which will be
waived on or prior to the Closing Date pursuant to the waiver described in
paragraph 6(a)(v) hereof,
(iv) result in a breach of or constitute a default under any other
agreement, lease or instrument to which the Company or any Subsidiary is a
party or by which it or its properties may be bound or affected which is
material to the Company, Conner Singapore or the Company and its
Subsidiaries, taken as a whole, or
(v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by the Company or any Subsidiary.
(d) Legal Proceedings. Except for the Company's patent litigation with
Rodime plc, there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries or against any property of the Company or its Subsidiaries in any
court or before any federal, state, municipal or other governmental agency,
which, if decided adversely to the Company or any of its Subsidiaries, would
have a material adverse effect upon the Company, Conner Singapore, or the
Company and its Subsidiaries taken as a whole, or upon the business and
properties of the Company, Conner Singapore, or the Company and its Subsidiaries
taken as a whole, and neither the Company nor Conner Singapore is in default
with respect to any order of any court or governmental agency. The description
of the Company's patent litigation with Rodime set
Note Agreement Through 6th Amendment
Exhibit A - 4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
forth in the Company's annual report on Form 10-K for the fiscal year ended
December 31, 1988 is accurate in all material respects.
(e) Financial Statements. The Company has furnished to the Purchasers a
consolidated balance sheet, statement of income, statement of shareholders'
equity and statement of cash flows of the Company and its Subsidiaries for the
fiscal years ended December 31, 1987 and December 31, 1988, certified by Price
Waterhouse, independent certified public accountants, and unaudited consolidated
and consolidating balance sheets, statement of operations and statement of cash
flows of the Company and its Subsidiaries for the three months ended March 31,
1989. Said financial statements fairly present the financial condition of the
Company and its Subsidiaries at the dates thereof and the results of operations
of the Company and its Subsidiaries for the periods indicated, all in conformity
with generally accepted accounting principles consistently followed throughout
the periods involved; provided, however, that the unaudited financial statements
are subject to audit and year-end adjustments and are not accompanied by
explanatory footnotes. There have been no material adverse changes in the
condition, financial or otherwise, of the Company and its Subsidiaries since the
fiscal year ended December 31, 1988.
(f) Title to Assets: Patents and Trademarks. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good title to all personal property they purport to own, including (except
as they have been affected by transactions in the ordinary course of business)
all properties and assets reflected in the most recent balance sheet referred to
in paragraph 3(e) hereof, except for such assets the absence of which would not,
individually or in the aggregate, have a materially adverse effect upon the
Company, Conner Singapore or the Company and its Subsidiaries taken as a whole
or upon the business or other properties of the Company, Conner Singapore or the
Company and its Subsidiaries taken as a whole. Without limiting the generality
of the foregoing, the Company and each Subsidiary owns or possesses, or can
obtain by the payment of royalties in amounts which, individually or in the
aggregate, do not and will not have a materially adverse effect upon the
Company, Conner Singapore or the Company and its Subsidiaries taken as a whole
or upon the business or properties of the Company, Conner Singapore or the
Company and its Subsidiaries taken as a whole, all the patents, trademarks,
trade names, service marks, copyrights, licenses and rights with respect to the
foregoing necessary for the present and planned future conduct of its business,
without any known conflict with the rights of others. In the case of property
used in their trades or businesses but not owned by them, the Company and its
Subsidiaries have a valid, binding and enforceable right to use all such
property which is material to the Company, Conner Singapore or the Company and
its Subsidiaries taken as a whole pursuant to a written lease, license or other
agreement. All of the assets of the Company and its Subsidiaries are free and
clear of all mortgages, liens, pledges, charges and encumbrances (other than
liens permitted by paragraph 5(d) hereof).
(g) Securities Matters. Neither the Company nor any of its Subsidiaries
nor any agent acting on the behalf of the Company or any of its Subsidiaries has
offered the Notes, or any part thereof, or any similar obligation for sale to,
or solicited any offers to buy such Notes, or any part thereof, or any similar
obligation from, any person or persons so as to bring the issue or sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933, as
amended, and neither the Company nor any of its Subsidiaries will sell or offer
for sale any note or any similar obligation of the Company or any Subsidiary to,
or solicit any offer to buy any similar obligation of the Company or any
Subsidiary from, any person or persons so as
Note Agreement Through 6th Amendment
Exhibit A - 5
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
to bring the issue or sale of the Notes within the provisions of Section 5 of
the Securities Act of 1933, as amended.
(h) Licenses and Permits. The Company and its Subsidiaries have procured
and are now in possession of and in substantial compliance with all licenses or
permits (including, without limitation, environmental permits) required by
federal, state or local laws for the operation of the business of the Company
and its Restricted Subsidiaries in each jurisdiction wherein the Company or any
Restricted Subsidiary is now conducting or proposes to conduct business, other
than such licenses and permits the absence of which, individually or in the
aggregate, would not have a material adverse effect upon the Company, Conner
Singapore or the Company and its Subsidiaries taken as a whole or upon the
business or properties of the Company, Conner Singapore or the Company and its
Subsidiaries taken as a whole.
(i) No Defaults on Indebtedness. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest on any
indebtedness for borrowed money nor is in default under any instrument or
agreement under and subject to which any indebtedness for borrowed money has
been issued, and no event has occurred under the provisions of any such
instrument or agreement which with or without the passing of time or the giving
of notice, or both, constitutes or would constitute an event of default
thereunder.
(j) Tax Returns. The Company and its Subsidiaries have filed all Federal
and State income tax returns which, to the knowledge of the officers of the
Company, are required to be filed, and have paid all taxes shown on said returns
and all assessments received by them to the extent that they have become due.
The Federal income tax returns of the Company have been finally determined by
the Internal Revenue Service to be satisfactory (or have been closed by the
applicable statute of limitations) for all years prior to and including the year
ended December 31, 1985. No claims have been asserted against the Company in
respect of Federal income tax returns for any subsequent year.
(k) No Margin Stock. Neither the Company nor any of its Subsidiaries owns
any Margin Stock and none of the proceeds received by the Company or any
Subsidiary from the sale of the Notes will be used for the purpose of purchasing
or carrying a Margin Stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase a Margin Stock or for any
other purpose not permitted by Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System, as amended from time to time.
(l) ERISA Matters. Each qualified retirement plan of the Company and each
ERISA Affiliate in which any employees of the Company or any ERISA Affiliate
participate that is subject to any provisions of ERISA (a "Qualified Plan") is
being administered in all material respects in accordance with the documents and
instruments governing such Qualified Plan, and such documents and instruments
are consistent with those provisions of ERISA which have become effective and
operative with respect to such Plan as of the date of this Agreement. No such
Qualified Plan has incurred any accumulated funding deficiency within the
meaning of Section 302 of ERISA (whether or not waived), and neither the
Company nor any ERISA Affiliate has incurred any material liability (including
any material contingent liability) to the PBGC in connection with any such
Qualified Plan. No such Qualified Plan nor any trust created thereunder nor any
trustee or administrator thereof has engaged in a "prohibited transaction"
within the meaning of ERISA or Section 4975 of the Internal Revenue
Note Agreement Through 6th Amendment
Exhibit A - 6
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
Code and the issuance and sale of the Notes as contemplated hereby will not
constitute a "prohibited transaction". The representation of the Company in
the immediately preceding sentence is made in reliance upon and subject to the
paragraph 11(b) hereof as to the source of the funds to be used accuracy of the
representations of the Purchasers appearing in to pay the purchase price of
the Notes to be purchased by the Purchasers. No such Qualified Plan nor any
trust created thereunder has been terminated, nor have there been any
"reportable events" within the meaning of Section 4043 of ERISA with respect
to any such Qualified Plan. Neither the Company nor any ERISA Affiliate
contributes to or has any employees who are covered by any "multi-employer
plan," as such term is defined in Section 3(37) of ERISA, and neither the
Company nor any ERISA Affiliate has incurred any withdrawal liability with
respect to any such multi-employer plan.
(m) Brokers and Finders. Neither the Company, any agent acting on its
behalf nor any person controlling, controlled by or under common control with
the Company has taken any action the effect of which would be to cause the
Purchasers to be liable for any broker's, finder's or agent's fee or commission
in connection with the placement of the Notes or any other transactions
contemplated by this Agreement. The Company has retained The Chase Manhattan
Bank, N.A. as its agent in connection with the placement of the Notes and is
solely responsible for any fees and expenses payable to such agent.
(n) Use of Proceeds. The Company will use the proceeds of the Notes for
general working capital purposes and for the purchase of equipment and capital
improvements to plants or for the repayment of bank indebtedness incurred in
June 1989, the proceeds of which will be used for the foregoing purposes.
(o) Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
(p) Environmental Laws. The Company is in compliance with all applicable
Federal, state or local laws, statutes, rules, regulations or ordinances
relating to public health, safety or the environment, including, without
limitation, those relating to releases, discharges, emissions or disposals to
air, water, land or ground water, to the withdrawal or use of ground water, to
the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or
urea formaldehyde, to the treatment, storage, disposal or management of
hazardous substances (including, without limitation, petroleum, its derivatives,
by-products or other hydrocarbons), to exposure to toxic, hazardous or other
controlled, prohibited or regulated substances the failure to comply with which
could have a material adverse effect on the Company, Conner Singapore or the
Company and its Subsidiaries, taken as a whole, or upon the business and
properties of the Company, Conner Singapore or the Company and its Subsidiaries,
taken as a whole. The Company does not know of any liability of the Company or
any Subsidiary under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (42 U.S.C. Section 9601).
(q) Full Disclosure. Neither this Agreement, the financial statements
referred to in paragraph 3(e) hereof, the Private Placement Offering
Memorandum of The Chase Manhattan Bank, N.A. dated February 1989 nor any other
document, certificate or instrument delivered to the Purchasers on behalf of
the Company or any Subsidiary in connection with the
Note Agreement Through 6th Amendment
Exhibit A - 7
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading. There is no material fact (other
than general economic conditions or facts or information available to the
public generally) that has not been disclosed in writing to the Purchasers
that materially adversely affects or, as far as the Company can now reasonably
foresee, may materially adversely affect, the business operations or financial
or other condition of the Company or any Subsidiary, or the ability of the
Company or any Subsidiary to perform this Agreement or to pay the principal of
or interest on the Notes and other sums payable under this Agreement when due.
4. AFFIRMATIVE COVENANTS.
(a) Financial Statements. The Company covenants that it will deliver to
each holder of Notes (except with respect to the information referred to in
clause (viii) below which shall only be delivered to Significant Holders of
Notes) in duplicate:
(i) as soon as available and in any event within 90 days after the
end of each fiscal year (except in the case of subclause (C), as to which
the period shall be 120 days after the end of such fiscal year),
(A) consolidated statements of income and cash flows of the
Company and the Subsidiaries for such year, and a consolidated balance
sheet of the Company and the Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding
consolidated figures from the preceding fiscal year, all in reasonable
detail and accompanied by the unqualified opinion of independent
certified public accountants of recognized national standing selected
by the Company,
(B) consolidating statements of income and cash flows of the
Company and the Subsidiaries for such year, and consolidating balance
sheets of the Company and the Subsidiaries as at the end of such year,
all in reasonable detail; provided that such financial statements
shall not be required to be delivered if financial statements for the
same dates and periods are delivered pursuant to subclause (C) of this
clause (i), and
(C) consolidated statements of income and cash flows of the
Company and the Restricted Subsidiaries for such year, and a
consolidated balance sheet of the Company and the Restricted
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
fiscal year, all in reasonable detail and reviewed in accordance with
generally accepted auditing standards by independent public
accountants of recognized national standing selected by the Company
whose report on such review shall state that such accountants are not
aware of any material modifications that should be made to such
financial statements in order for them to be in conformity with
generally accepted accounting principles; provided that such financial
statements shall not be required to be delivered if no Material
Unrestricted Subsidiaries exist as of the end of the period covered by
such financial statements;
Note Agreement Through 6th Amendment
Exhibit A - 8
<PAGE>
4. AFFIRMATIVE COVENANTS
(ii) as soon as available and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year,
(A) consolidated statements of income and cash flows of the
Company and the Subsidiaries for such quarterly period and for the
period from the beginning of the current fiscal year to the end of
such quarterly period, and a consolidated balance sheet of the Company
and the Subsidiaries as at the end of such quarterly period, setting
forth in each case in comparative form figures for the corresponding
periods in the preceding fiscal year, all in reasonable detail,
subject to changes resulting from year-end adjustments,
(B) consolidating statements of income and cash flows of the
Company and the Subsidiaries for such quarterly period and for the
period from the beginning of the current fiscal year to the end of
such quarterly period, and consolidating balance sheets of the Company
and the Subsidiaries as at the end of such quarterly period, subject
to changes resulting from year-end adjustments, all in reasonable
detail; provided that such financial statements shall not be required
to be delivered if financial statements for the same dates and periods
are delivered pursuant to subclause (C) of this clause (ii), and
(C) consolidated statements of income and cash flows of the
Company and the Restricted Subsidiaries for such quarterly period and
for the period from the beginning of the current fiscal year to the
end of such quarterly period, and a consolidated balance sheet of the
Company and the Restricted Subsidiaries as at the end of such
quarterly period, setting forth in each case in comparative form
figures for the corresponding periods in the preceding fiscal year,
all in reasonable detail, subject to changes resulting from year-end
adjustments; provided that such financial statements shall not be
required to be delivered if no Material Unrestricted Subsidiaries
exist as of the end of the period covered by such financial
statements;
(iii) together with each set of financial statements delivered
pursuant to clause (i) and clause (ii) of this paragraph 4(a), a
certificate of a Responsible Officer,
(A) stating that (I) the accompanying financial statements
described in clause (A) of clause (i) or clause (ii), as the case may
be, of this paragraph 4(a), present fairly the financial position and
results of operations of the companies being reported on, in
accordance with generally accepted accounting principles subject, in
the case of interim financial statements, to the absence of footnotes
and changes resulting from year-end adjustments, and (II) with
respect to the accompanying financial statements described in clause
(C) of clause (i) or clause (ii), as the case may be, of this
paragraph 4(a) (if such financial statements are required to be
delivered), such officer is not aware of any material modifications
that should be made to such financial statements in order for them to
be in conformity with generally accepted accounting principles
subject, in the case of interim financial statements, to the absence
of footnotes and changes resulting from year-end adjustments,
Note Agreement Through 6th Amendment
Exhibit A - 9
<PAGE>
4. AFFIRMATIVE COVENANTS
(B) stating that no Default or Event of Default then exists, or
if a Default or Event of Default exists, disclosing the nature and
period of existence of each such Default or Event of Default, and
describing all actions the Company has taken and intends to take in
respect to each such Default and Event of Default,
(C) certifying compliance, as of the last day of the period to
which such financial statements relate, with paragraph 5(a),
paragraph 5(b), paragraph 5(c), paragraph 5(d)(xv), paragraph 5(e),
paragraph 5(f), paragraph 5(g)(ii), and paragraph 5(h)(xx) of this
Agreement, and setting forth in reasonable detail the calculations
necessary to demonstrate such compliance, in a form reasonably
acceptable to the Required Holders,
(D) either
(I) stating that, during the period of eight consecutive
fiscal quarters of the Company most recently ended as of the date
of such certificate (the "Two Year Period"), the Company and the
Restricted Subsidiaries have not consummated any Transfer subject
to paragraph 5(g)(ii)(D) which requires any deduction pursuant
to subclause (cc) of paragraph 5(g)(ii)(D)(1) or paragraph
5(g)(ii)(D)(2) in order for such Transfer to be in compliance
with paragraph 5(g)(ii) or
(II) (aa) containing a brief description of all Transfers
consummated during the Two Year Period as to which such
deduction was necessary in order for such compliance to be
achieved,
(bb) setting forth the respective dates on which such
Transfers were consummated,
(cc) setting forth the respective amounts required to
be so deducted in respect of such Transfers, and
(dd) setting forth a brief description of the
application of any of the amounts referred to in the
foregoing subclause (cc) to the purposes identified in
subclause (cc) of paragraph 5(g)(ii)(D)(1) and paragraph
5(g)(ii)(D)(2); and
(E) the notice, if any, required by paragraph 5(b)(iii);
(iv) within five days of a Responsible Officer obtaining knowledge of
an Event of Default or Default, a certificate of a Responsible Officer
specifying the nature and period of existence thereof and what action the
Company has taken and proposes to take with respect to such Default or
Event of Default;
(v) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it sends to its public
stockholders generally, copies of all final registration statements on Form
S-1 or Form S-3 (without exhibits) or their successor forms relating to
offerings of debt or equity Securities on behalf of
Note Agreement Through 6th Amendment
Exhibit A - 10
<PAGE>
4. AFFIRMATIVE COVENANTS
the Company, and copies of all Form 10-Ks, Form 10-Qs, and Form 8-Ks or
their successor forms, and all amendments to such forms, that the Company
files with the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Securities and Exchange
Commission);
(vi) promptly upon receipt thereof by the Company, a copy of the final
management letter, if any, submitted by the Company's independent
accountants in connection with any annual audit made by them of the books
of the Company and the Subsidiaries;
(vii) promptly upon the request of any holder of Notes, any
information required to be delivered (to the extent not already delivered
to such holder pursuant to the other requirements of this paragraph 4(a))
to any transferee of Notes by Rule 144A (17 C.F.R. (S) 230.144A) under
the Securities Act (or any successor provision) as a condition to the
transfer of any Note pursuant to such Rule;
(viii) subject to the second and third provisos to paragraph 4(b) of
this Agreement, with reasonable promptness, such other financial data as
any Significant Holder of Notes may reasonably request (including, without
limitation, a copy of each report, in addition to those referred to in
clauses (i) and (vi) of this paragraph 4(a), submitted to the Company or
any Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any
Subsidiary);
(ix) immediately upon becoming aware of the occurrence of any
(A) material "reportable event" (as such term is defined in
Section 4043 of ERISA), or
(B) "prohibited transactions" (as such term is defined in
Section 406 or Section 4975 of the IRC)
in connection with any Pension Plan or any trust created thereunder, a
certificate of the a Responsible Officer specifying the nature thereof,
what action the Company is taking or proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(x) prompt written notice and a description of
(A) any failure to make a contribution to a Pension Plan if such
failure has given rise to a Lien pursuant to Section 302(f)(1) of
ERISA, or
(B) any request pursuant to Section 303 of ERISA or Section 412
of the IRC for, or notice of the granting pursuant to said Section 303
or Section 412 of, a waiver in respect of all or part of the minimum
funding standard set forth in ERISA or the IRC, as the case may be, of
any Pension Plan, and, in connection with the granting of any such
waiver, the amount of any waived
Note Agreement Through 6th Amendment
Exhibit A - 11
<PAGE>
4. AFFIRMATIVE COVENANTS
funding deficiency (as such term is defined in said Section 303 or
said Section 412) and the terms of such waiver; and
(xi) prompt written notice of and, where applicable, a description of
(A) any notice from the PBGC in respect of the commencement of
any proceedings pursuant to Section 4042 of ERISA to terminate any
Pension Plan or for the appointment of a trustee to administer any
Pension Plan,
(B) any distress termination notice delivered to the PBGC under
Section 4041 of ERISA in respect of any Pension Plan, and any
determination of the PBGC in respect thereof,
(C) the placement of any Multiemployer Plan in reorganization
status under Title IV of ERISA,
(D) any Multiemployer Plan becoming "insolvent" (as such term is
defined in Section 4245 of ERISA under Title IV of ERISA),
(E) the whole or partial withdrawal of the Company or any ERISA
Affiliate from any Multiemployer Plan and the withdrawal liability
incurred in connection therewith, and
(F) the withdrawal of the Company or any ERISA Affiliate from any
Pension Plan with respect to which it is a "substantial employer"
under, and as defined in, ERISA and the withdrawal liability under
ERISA incurred in connection therewith.
Together with each delivery of financial statements required by clause (i)
(A) above, the Company will deliver to each holder of Notes a statement by
such accountants certifying that, in making the examination upon which such
opinion was based, no information came to their attention which, to their
knowledge, indicated that an Event of Default existed as the result of the
failure of the Company to comply with the covenants specified below or a
statement specifying such failure (it being understood that such
accountants' audit will not be directed toward obtaining knowledge of any
such failure):
(1) paragraph 5(a), as of the Company's fiscal year end,
(2) paragraph 5(b), as of the Company's fiscal year end, based solely
on amounts included in the consolidated financial statements or disclosed
in the notes thereto,
(3) paragraph 5(c), for the Company's fiscal year, based solely on
amounts included in the consolidated financial statements or disclosed in
the notes thereto,
(4) paragraph 5(d)(xv), as of the Company's fiscal year end, based
solely on amounts included in the consolidated financial statements or
disclosed in the notes thereto,
Note Agreement Through 6th Amendment
Exhibit A - 12
<PAGE>
4. AFFIRMATIVE COVENANTS
(5) paragraph 5(e), but only as to individual transactions in excess
of $5,000,000, and
(6) paragraph 5(f), as of the Company's fiscal year end, based solely
on the amounts included in the consolidating balance sheets of the
Restricted Subsidiaries.
Such accountants, however, shall not be liable to anyone by reason of their
failure to obtain knowledge of any Event of Default or Default that would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards.
(b) Inspection of Property. The Company covenants that it will permit any
employee of, or any financial, legal, environmental or other professional
consultant or advisor to, any Significant Holder that is designated by such
Significant Holder in writing, at such Significant Holder's expense or, so long
as an Event of Default shall exist, at the expense of the Company, upon
reasonable notice to the Company, to visit and inspect any of the properties of
the Company and the Subsidiaries, to examine the corporate books and financial
records of the Company and the Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent
public accountants (the "Inspection Rights") and by this paragraph the Company
authorizes such officers and accountants to discuss such affairs, finances and
accounts, all at such reasonable times and as often as such holder may
reasonably request, provided that, in the event that the Company reasonably
objects to any Significant Holder within two Business Days of such notice that
any Person so designated by such Significant Holder is a Competitor or an
employee thereof, the Company shall not be required to afford such Person any of
the foregoing Inspection Rights, provided, further, that the Company and the
Restricted Subsidiaries will not be required to disclose, permit the inspection,
examination, copying or making extracts of, or discuss, any portion of, any
document, or any information,
(i) that constitutes non-financial trade secrets, non-financial
proprietary information or product-by-product information relating to
production, pricing, profitability or failure rates, or
(ii) in respect of which disclosure to such Significant Holder is
then prohibited by
(A) law, or
(B) an agreement binding on the Company or any Subsidiary that
was not entered into by the Company or such Subsidiary for the primary
purpose of concealing information from such Significant Holder,
and in respect of which a Responsible Officer has provided a certificate to
such holder setting forth a brief description of the law or agreement
(including, in the case of an agreement, without limitation, the nature and
purpose of the agreement, the parties to the agreement, and the provision
of the agreement that prohibits such disclosure), provided, however, that
if disclosure of the existence of any agreement is prohibited by the
provisions thereof, such certificate may state generally, with respect to
such agreement, that there are agreements pertaining to the matter as to
which information
Note Agreement Through 6th Amendment
Exhibit A - 13
<PAGE>
4. AFFIRMATIVE COVENANTS
was requested which are binding on the Company or a Subsidiary and which
prohibit disclosure of the existence thereof.
(c) Covenant to Secure Note Equally. The Company will, if it or any
Restricted Subsidiary creates or assumes any Lien upon any of its Property,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 5(d) of this Agreement (unless prior written consent
to the creation or assumption thereof shall have been obtained pursuant to
paragraph 10(c) of this Agreement), make or cause to be made, pursuant to such
agreements and instruments as shall be approved by the Required Holders,
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Debt thereby secured so long as any such other
Debt shall be so secured.
(d) ERISA Compliance. The Company covenants that it will, and will cause
each ERISA Affiliate to, at all times
(i) with respect to each Pension Plan, make timely payments of
contributions required to meet the minimum funding standard set forth in
ERISA or the IRC with respect thereto and, with respect to each
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as would
not have a material adverse effect on the business, prospects, Properties or
financial condition of the Company and the Subsidiaries taken as a whole.
(e) Payment of Taxes and Claims. The Company will, and will cause each
Subsidiary to, pay before they become delinquent, all material taxes,
assessments and governmental charges or levies imposed upon it or its Property,
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings as long as adequate
reserves, to the extent required by generally accepted accounting principles,
have been established and maintained and exist with respect thereto and,
provided, further, that the contesting Person's right to use any material
Property is not materially adversely affected thereby.
(f) Maintenance of Properties and Corporate Existence. The Company will,
and will cause each Restricted Subsidiary to,
(i) Property -- maintain in good working order and condition all of
its Property which is material to the continued conduct of the business of
the Company and the Restricted Subsidiaries taken as a whole;
(ii) Insurance -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types (including, without limitation,
loss or damage, public liability, business interruption, larceny,
embezzlement or other criminal misappropriation) and in such amounts as is
customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated;
Note Agreement Through 6th Amendment
Exhibit A - 14
<PAGE>
4. AFFIRMATIVE COVENANTS
(iii) Financial Records -- maintain sound accounting policies and an
adequate and effective system of accounts and internal accounting control
that will safeguard assets, properly record income, expenses and
liabilities, and assure the production of proper financial statements in
accordance with generally accepted accounting principles;
(iv) Corporate Existence and Rights -- do or cause to be done all
things necessary to preserve and keep in full force and effect its
existence, rights and franchises, except as otherwise permitted by
paragraph 5(g) or paragraph 5(k) of this Agreement and except, in each
case, where the failure to take any such action would not have a material
adverse effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Restricted Subsidiaries
taken as a whole or the ability of the Company to perform its obligations
set forth in this Agreement and in the Notes; provided that the corporate
existence of any Restricted Subsidiary may be terminated, and any rights
and franchises may be terminated or permitted to lapse, if, in the good
faith judgment of the Company, such determination or lapse is in the best
interests of the Company and is not disadvantageous to the holders of the
Notes; and
(v) Compliance with Law -- (a) comply with all applicable laws,
rules, regulations, orders, judgments and decrees of any governmental
authority, except where any failure to comply would not have a material
adverse effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Restricted Subsidiaries
taken as a whole or the ability of the Company to perform its obligations
set forth in this Agreement and in the Notes and (b) obtain all licenses,
permits, franchises and other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business, except where
any failure to so obtain would not have a material adverse effect on the
business, Properties or condition (financial or otherwise) of the Company
and the Restricted Subsidiaries taken as a whole or the ability of the
Company to perform its obligations set forth in this Agreement and in the
Notes.
(g) Payment of Notes and Maintenance of Office. The Company will
punctually pay, or cause to be paid, the principal and interest (and premium, if
any) to become due in respect of the Notes according to the terms thereof and
will maintain an office in compliance with paragraph 15 of this Agreement (or
such other address which the Company shall have specified in writing in
accordance with paragraph 15) where notices, presentations and demands in
respect of this Agreement or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company will notify the
holders of the Notes of any change of location of such office, which will in any
event be located in the United States of America.
5. NEGATIVE COVENANTS.
(a) Consolidated Tangible Net Worth. The Company will not permit
Consolidated Tangible Net Worth, determined as of any Determination Date, to be,
(i) if such Determination Date is prior to December 22, 1993, then
less than the sum of
Note Agreement Through 6th Amendment
Exhibit A - 15
<PAGE>
5. NEGATIVE COVENANTS
(A) $525,000,000, plus
(B) 45% of Consolidated Net Income for each fiscal year ended
during the period beginning on January 1, 1991 and ending on or prior
to such Determination Date (unless Consolidated Net Income shall be a
loss in any fiscal year, in which event the amount determined pursuant
to this clause (B) for such fiscal year shall be zero), plus
(C) the net proceeds to the Company from the sale of any capital
stock of the Company made during the period beginning on January 1,
1991 and ending on such Determination Date, plus
(D) without duplication with clauses (i)(B) or (i)(C) above, an
amount equal to the aggregate principal amount of any Debt Security
of the Company (other than Debt Securities held by Restricted
Subsidiaries), minus the costs and fees incurred upon the original
issuance of such Debt Security, any unamortized original issue
discount with respect to any such Debt Security and any costs and
expenses of conversion, which has been converted into or exchanged
for capital stock during the period beginning on January 1, 1991 and
ending on such Determination Date, but only to the extent such
conversion or exchange increases Consolidated Tangible Net Worth,
and
(ii) if such Determination Date is on or after December 22, 1993,
then less than the sum of
(A) $125,000,000, plus
(B) 50% of Consolidated Net Income for each fiscal quarter ended
during the period beginning on October 3, 1993 and ending on or prior
to such Determination Date (unless Consolidated Net Income shall be a
loss in any fiscal quarter, in which event the amount determined
pursuant to this clause (B) for such fiscal quarter shall be zero),
plus
(C) the net proceeds to the Company from the sale of any capital
stock of the Company made during the period beginning on October 3,
1993 and ending on such Determination Date, plus
(D) without duplication with clauses (ii)(B) or (ii)(C) above,
an amount equal to the aggregate principal amount of any Debt Security
of the Company (other than Debt Securities held by Restricted
Subsidiaries), minus the costs and fees incurred upon the original
issuance of such Debt Security, any unamortized original issue
discount with respect to any such Debt Security and any costs and
expenses of conversion, which has been converted into or exchanged for
capital stock during the period beginning on October 3, 1993 and
ending on such Determination Date, but only to the extent such
conversion or exchange increases Consolidated Tangible Net Worth.
Note Agreement Through 6th Amendment
Exhibit A - 16
<PAGE>
5. NEGATIVE COVENANTS
(b) Consolidated Debt.
(i) Consolidated Senior Debt. The Company will not permit, on any
Determination Date, Consolidated Senior Debt, to exceed the percentage of
Consolidated Tangible Net Worth set forth in the following table opposite
such Determination Date, in each case determined as of such Determination
Date:
<TABLE>
<CAPTION>
================================================================================
Determination Date Percentage
- --------------------------------------------------------------------------------
<S> <C>
All Determination Dates occurring between March 29, 1991 to and 75%
including the Determination Date occurring nearest to September
30, 1993
- --------------------------------------------------------------------------------
Determination Date occurring nearest to December 31, 1993 115%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to March 31, 1994 90%
- --------------------------------------------------------------------------------
All Determination Dates occurring after the Determination Date 75%
occurring nearest to March 31, 1994
================================================================================
</TABLE>
(ii) Consolidated Debt. The Company will not permit, on any
Determination Date, Consolidated Debt to exceed the percentage of
Consolidated Tangible Net Worth set forth in the following table opposite
such Determination Date, in each case determined as of such Determination
Date:
<TABLE>
<CAPTION>
================================================================================
Determination Date Percentage
- --------------------------------------------------------------------------------
<S> <C>
All Determination Dates occurring between March 29, 1991 to and 125%
including the Determination Date occurring nearest to September 30,
1993
- --------------------------------------------------------------------------------
Determination Date occurring nearest to December 31, 1993 515%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to March 31, 1994 455%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to June 30, 1994 405%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to September 30, 1994 365%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to December 31, 1994 335%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to March 31, 1995 295%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to June 30, 1995 275%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to September 30, 1995 255%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to December 31, 1995 240%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to March 31, 1996 220%
- --------------------------------------------------------------------------------
All Determination Dates occurring after the Determination Date 200%
occurring nearest to March 31, 1996
================================================================================
</TABLE>
Note Agreement Through 6th Amendment
Exhibit A - 17
<PAGE>
5. NEGATIVE COVENANTS
(iii) Adjustments to Consolidated Debt Percentages. The percentages set
forth in the table in paragraph 5(b)(ii) hereof shall be adjusted as of each
Determination Date to be equal to the Adjusted Consolidated Debt Percentage
calculated in respect thereof if
(A) during the fiscal quarter ended on such Determination Date
the Company issues capital stock, other than issuances of capital
stock pursuant to (or pursuant to options, warrants or other
securities issued pursuant to) employee stock option plans, director
stock options plans, employee stock purchase plans or any similar
arrangements intended to provide incentives for employee and
directors, and
(B) the percentage set forth in such table in respect of such
Determination Date, as then previously adjusted as provided in this
subparagraph (iii), is greater than 125%.
The Company shall provide a notice with respect to each Determination Date
as to which an adjustment in such percentage is required by this
subparagraph (iii), together with the certificate required by paragraph
4(a)(iii) delivered in respect of such fiscal quarter, to all holders of
Notes, providing in detail the calculation of the Adjusted Consolidated
Debt Percentages determined in respect of such fiscal quarter and all
subsequent fiscal quarters. The Adjusted Consolidated Debt Percentages
specified in such notice shall apply to such fiscal quarter and to all
subsequent fiscal quarters and such table shall be deemed to be amended in
accordance with such notice. Such notice shall be satisfactory in all
respects to the Required Holders.
(c) Consolidated Fixed Charges; Consolidated Net Income.
(i) Consolidated Fixed Charges. The Company will not permit the
ratio of (i) the sum of Consolidated Net Income plus Consolidated Fixed
Charges plus taxes deducted from revenues in the computation of such
Consolidated Net Income, to (ii) Consolidated Fixed Charges to be less for
any period of two consecutive fiscal quarters of the Company than the ratio
set forth opposite the relevant period in the table below:
<TABLE>
<CAPTION>
===============================================================================
Two Fiscal Quarter Period Ending Ratio
- -------------------------------------------------------------------------------
<S> <C>
On the Determination Date occurring nearest to March 31, 1994 1.0 : 1.0
- -------------------------------------------------------------------------------
On the Determination Date occurring nearest to June 30, 1994 1.85 : 1.0
- -------------------------------------------------------------------------------
On the Determination Date occurring nearest to September 30, 1994 2.0 : 1.0
- -------------------------------------------------------------------------------
On the Determination Date occurring nearest to December 31, 1994 2.0 : 1.0
===============================================================================
</TABLE>
The Company will not permit, at any time on or after the Determination Date
occurring nearest to March 31, 1995, the ratio of (i) the sum of
Consolidated Net Income plus Consolidated Fixed Charges plus taxes deducted
from revenues in the computation of such Consolidated Net Income, to (ii)
Consolidated Fixed Charges to be less for any period of four consecutive
fiscal quarters of the Company than 2.0 to 1.0.
Note Agreement Through 6th Amendment
Exhibit A - 18
<PAGE>
5. NEGATIVE COVENANTS
(ii) Consolidated Net Income. The Company will not permit
Consolidated Net Income for the three-month period ending on the
Determination Date occurring nearest to December 31, 1993 to be less than a
deficit of $12,000,000.
(d) Liens. The Company will not, and will not permit any Restricted
Subsidiary to, create, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired (whether or not provision is
made for the equal and ratable securing of the Notes in accordance with the
provisions of paragraph 4(c) of this Agreement), except
(i) Liens in existence on the Closing Date and described on Annex 2
to this Agreement;
(ii) Liens for taxes that are not yet due or that are being actively
contested in good faith by appropriate proceedings, and in respect of which
adequate reserves are being maintained to the extent required by generally
accepted accounting principles;
(iii) Liens incurred or deposits made in the ordinary course of
business,
(A) in respect of leases, statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons that are not yet due or that are being actively
contested in good faith by appropriate proceedings, and in respect of
which adequate reserves are carried on the books of the Person liable
therefor to the extent required by generally accepted accounting
principles,
(B) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(C) to secure the performance of letters of credit, bids,
leases, tenders, sales contracts, statutory obligations, government
contracts, surety and performance bonds 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,
(D) incidental to the conduct of its business or ownership of
its Property, provided that,
(1) such obligations shall not have arisen in connection
with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of Property, and
(2) such Liens shall not in the aggregate materially
detract from the value of the Property encumbered thereby or
materially interfere with the use of such Property in the
ordinary conduct of the owning Person's business,
(E) which constitute purchase money security interests with
respect to advances or the payment of deferred purchase price in
connection with the purchase of goods and services in the ordinary
course of business, provided
Note Agreement Through 6th Amendment
Exhibit A - 19
<PAGE>
5. NEGATIVE COVENANTS
that, at the time any such security interest is created, the Company
or such Restricted Subsidiary intends to pay the amount secured
thereby within 180 days after such creation, provided further that any
such security interest runs in favor of the provider of such goods or
services and is not part of a floor plan financing arrangement or any
other arrangement with any Person that is primarily in the business of
making loans or extending other financial accommodations, or
(F) which constitute Liens with respect to conditional sale or
other title retention agreements and any lease in the nature thereof,
provided that any such Lien with respect to conditional sales or other
title retention agreements encumbers only Property and accretions
thereto (and proceeds arising from the disposition thereof) which are
subject to such conditional sale or other title retention agreement or
lease in the nature thereof and, provided, further, that the aggregate
amount secured by all such conditional sale or other title retention
agreements and leases in the nature thereof shall not be more than
$5,000,000 (it being understood that additional amounts may be so
secured if permissible under any other provision of this paragraph
5(d) including, without limitation, clause (xv) of this paragraph
5(d));
(iv) reservations, exceptions, encroachments, easements, rights-of-
way, covenants, conditions, restrictions and other similar title exceptions
or encumbrances affecting real Property, provided such Liens do not
interfere with the use of such Property in the ordinary conduct of the
business of the Company and the Restricted Subsidiaries, taken as a whole;
(v) Liens on Property of a Restricted Subsidiary to secure
obligations of such Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(vi) Liens with respect to Capitalized Lease Obligations (together
with any related interest), provided, that such Liens encumber only
Property and accretions thereto (and proceeds arising from the disposition
thereof) acquired with the proceeds of the indebtedness secured thereby;
(vii) leases and subleases of, and licenses and sub-licenses with
respect to, Property where the Company or a Restricted Subsidiary is the
lessor or licensor (or sublessor or sublicensor), provided that such
leases, subleases, licenses and sub-licenses do not in the aggregate
materially interfere with the business of the Company and the Restricted
Subsidiaries taken as a whole;
(viii) (A) Liens to secure appeal bonds, supersedeas bonds and other
similar Liens 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 the aggregate
amount so secured, together with the aggregate amount secured pursuant
to paragraph 5(d)(viii)(B), shall not at any time exceed $5,000,000
(it being understood that additional amounts may be so secured if
permissible under any other provision of this paragraph 5(d)
including, without limitation, clause (xv) of this paragraph 5(d)),
Note Agreement Through 6th Amendment
Exhibit A - 20
<PAGE>
5. NEGATIVE COVENANTS
(B) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution or
other enforcement of such Liens is effectively stayed and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings and provided further, that the aggregate
amount so secured, together with the aggregate amount secured pursuant
to paragraph 5(d)(viii)(A) of this Agreement, shall not exceed
$5,000,000 (it being understood that additional amounts may be so
secured if permissible under any other provision of this paragraph
5(d) including, without limitation, clause (xv) of this paragraph
5(d)),
(ix) Liens on the Property of any corporation at the time such
corporation becomes a Restricted Subsidiary, or such corporation is
acquired by, consolidated with or merged into the Company or a Restricted
Subsidiary, and Liens on any Property at the time acquired by the Company
or a Restricted Subsidiary, provided, in each case, that such Lien was not
incurred in contemplation of such transaction;
(x) any Lien permitted by this paragraph 5(d) securing Debt that is
being renewed, extended or refunded, provided that the principal amount of
such Debt outstanding at the time of such renewal, extension or refunding
is not increased and such Lien is not extended to any other Property (other
than pursuant to its original terms);
(xi) Purchase Money Mortgages, provided that each such Purchase Money
Mortgage secures an amount not exceeding 100% of the lesser of the cost
(including liabilities assumed) or the Fair Market Value at the time of
acquisition or construction of the Property to which it relates (as
determined in good faith by the Board of Directors);
(xii) Liens consisting of an agreement to file or give a financing
statement set forth in operating leases (it being understood that, upon the
filing of any such financing statement, the Lien created thereby must be
permissible under any other provision of this paragraph 5(d) including,
without limitation, clause (iii)(F) and clause (xv) of this paragraph
5(d));
(xiii) Liens which constitute rights of set-off of a customary nature
or bankers' Liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with working capital
facilities, lines of credit, term loans, or other credit facilities and
similar arrangements entered into with banks in the ordinary course of
business;
(xiv) Liens in the nature of rights of first refusal and restrictions
on transfer on the capital stock of Arcada Holdings, Inc. arising in
connection with the purchase of Quest Development Corporation and described
in that certain Letter of Intent dated as of December 13, 1993, related
thereto; and
(xv) Liens not otherwise permitted by this paragraph 5(d) on Property
of the Company or any Restricted Subsidiary, provided that, as of each
Determination Date, the amount of
Note Agreement Through 6th Amendment
Exhibit A - 21
<PAGE>
5. NEGATIVE COVENANTS
(A) all Debt secured by Liens permitted only by this paragraph
5(d)(xv), plus
(B) all Debt of Restricted Subsidiaries (other than Debt owed by
a Restricted Subsidiary to the Company or another Restricted
Subsidiary) and all Preferred Stock of Restricted Subsidiaries (other
than Preferred Stock of a Restricted Subsidiary owned by the Company
or another Restricted Subsidiary), plus
(C) the Sale/Leaseback Transaction Amount,
(without duplication) does not exceed 20% of Consolidated Tangible Net
Worth, in each case determined as of such Determination Date.
(e) Sale/Leaseback Transactions.
The Company will not, nor will it permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction at any time, unless after giving
effect thereto, the sum of
(i) the Sale/Leaseback Transaction Amount, plus
(ii) the amount of all Debt secured only by Liens permitted by
paragraph 5(d)(xv) of this Agreement, plus
(iii) all Debt of Restricted Subsidiaries (other than Debt owed by a
Restricted Subsidiary to the Company or another Restricted Subsidiary) and
all Preferred Stock of Restricted Subsidiaries (other than Preferred Stock
of a Restricted Subsidiary owned by the Company or another Restricted
Subsidiary),
(without duplication) does not exceed 20% of Consolidated Tangible Net Worth, in
each case determined as of such time.
(f) Restricted Subsidiary Debt and Preferred Stock. The Company will not,
at any time, permit any Restricted Subsidiary to create, incur or assume any
Debt, or to issue any Preferred Stock, unless, immediately after the creation,
incurrence or assumption of such Debt, or the issuance of such Preferred Stock,
and after giving effect thereto, the sum of
(i) the Sale/Leaseback Transaction Amount, plus
(ii) the amount of all Debt secured by Liens permitted only by
paragraph 5(d)(xv) of this Agreement, plus
(iii) all Debt of Restricted Subsidiaries (other than Debt owed by a
Restricted Subsidiary to the Company or another Restricted Subsidiary) and
all Preferred Stock of Restricted Subsidiaries (other than Preferred Stock
of a Restricted Subsidiary owned by the Company or another Restricted
Subsidiary),
(without duplication) does not exceed 20% of Consolidated Tangible Net Worth, in
each case determined as of such time. Notwithstanding the foregoing, the
prepayment of the 8-7/8%
Note Agreement Through 6th Amendment
Exhibit A - 22
<PAGE>
5. NEGATIVE COVENANTS
Convertible Subordinated Debentures issued by Archive pursuant to the
Convertible Subordinated Debenture Agreement dated as of May 11, 1990, as
heretofore amended, and outstanding on the Merger Date, not to exceed in
aggregate amount $10,000,000 shall be permitted.
(g) Merger and Consolidation; Sale of Assets.
(i) Merger and Consolidation.
(A) The Company will not permit any other Person to consolidate
with or merge into it (except that a Restricted Subsidiary may
consolidate with or merge into the Company); provided that the
foregoing restriction does not apply to the merger or consolidation of
the Company with another corporation, if:
(1) either (aa) the Company shall be the continuing or
surviving corporation or (bb) the successor corporation that
results from such merger or consolidation (the "Surviving
Corporation") is organized under the laws of any State of the
United States (or the District of Columbia), and the due and
punctual payment of the principal of and premium, 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 in writing by the Surviving
Corporation; and
(2) 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 under any
provision of this Agreement.
(B) The Company will not permit any Restricted Subsidiary to
consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it (except that a Restricted
Subsidiary may consolidate with or merge into the Company as
contemplated by paragraph 5(g)(i)(A) and a Restricted Subsidiary may
consolidate with or merge into another Restricted Subsidiary);
provided that a Restricted Subsidiary may merge or consolidate with
another Person if
(1) such transaction would be permitted under the
provisions of paragraph 5(g)(ii) (deeming such transaction to be
a Transfer of all of the assets and liabilities of such
Restricted Subsidiary, in the case of any such merger or
consolidation which results in a surviving entity which is not a
Restricted Subsidiary); or
(2) the surviving corporation is the Company or a
Restricted Subsidiary.
Note Agreement Through 6th Amendment
Exhibit A - 23
<PAGE>
5. NEGATIVE COVENANTS
(ii) Sale of Assets. The Company will not, nor will it permit any
Restricted Subsidiary to, sell, lease as lessor, transfer or otherwise
dispose of Property (collectively, "Transfers"), except
(A) Transfers in the ordinary course of business,
(B) Transfers to the Company or a Restricted Subsidiary other
than an Arcada Restricted Subsidiary;
(C) Transfers which (I) constitute dispositions of cash or cash
equivalents not prohibited by this Agreement, (II) constitute
Investments which are Permitted Investments or (III) constitute the
liquidation of any Permitted Investment; and
(D) any other Transfer if all of the following conditions shall
have been satisfied:
(1) the sum (without duplication) of
(aa) the net book value of such Property on the date of
the Transfer (the "Asset Disposition Date"), expressed as a
percentage of Consolidated Total Assets on the Determination
Date most recently preceding the Asset Disposition Date,
plus
(bb) the net book value of each other item of Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 5(g)(ii)(D)
(including, without limitation, a Transfer by merger or
consolidation, as contemplated by paragraph 5(g)(i)) during
the period ending on the Asset Disposition Date and
commencing on the first day of the period of 12 consecutive
calendar months most recently ended as of the Asset
Disposition Date (the "Annual Disposition Measurement
Period") (Subsidiary Stock being deemed to have a net book
value equal to the net book value of all assets of the
issuer of such Subsidiary Stock at such time, or the
appropriate portion thereof if less than all Subsidiary
Stock of such issuer is the subject of such Transfer),
expressed in each case as a percentage of Consolidated Total
Assets on the Determination Date most recently preceding the
date of each such Transfer, minus
(cc) the aggregate net book value of all Property
Transferred pursuant to this paragraph 5(g)(ii)(D) during
the Annual Disposition Measurement Period to the extent that
the net proceeds arising therefrom have been either
reinvested in the business of the Company and the Restricted
Subsidiaries or applied to, or irrevocably committed to
make, Senior Debt Prepayments within the period of 12
consecutive months after the respective Transfers of such
Property pursuant to this
Note Agreement Through 6th Amendment
Exhibit A - 24
<PAGE>
5. NEGATIVE COVENANTS
paragraph 5(g)(ii)(D), such aggregate net book value (or the
portion thereof corresponding to the portion of such net
proceeds so applied or to be so applied) being expressed as
a percentage of Consolidated Total Assets determined on the
Determination Date most recently preceding the date of each
such Transfer; provided, that any such net proceeds spent
for operating expenses or principal, premium or interest in
respect of Debt or held in deposit accounts or otherwise as
short term investments shall not be deemed to have been
reinvested in the business of the Company and the Restricted
Subsidiaries, provided, further, that such percentage shall
not, in any event, exceed 10%;
will not exceed 15%;
(2) the sum (without duplication) of
(aa) the Cash Flow Contribution of such Property
during the period of four consecutive fiscal quarters of the
Company most recently ended prior to the Asset Disposition
Date (the "Four Quarter Period"), plus
(bb) the Cash Flow Contribution of each other item of
Property of the Company and the Restricted Subsidiaries that
was Transferred pursuant to this paragraph 5(g)(ii)(D)
(including, without limitation, a Transfer by merger or
consolidation, as contemplated by paragraph 5(g)(i)) during
the Annual Disposition Measurement Period, such Cash Flow
Contribution for any particular Property being measured for
the period of four consecutive fiscal quarters of the
Company most recently ended prior to the Transfer of such
Property, minus
(cc) the Cash Flow Contribution of all Property
Transferred by the Company and the Restricted Subsidiaries
during the Annual Disposition Measurement Period to the
extent that the net proceeds arising therefrom have been
either reinvested in the business of the Company and the
Restricted Subsidiaries or applied to, or irrevocably
committed to make, Senior Debt Prepayments within the period
of 12 consecutive months after the respective Transfers of
such Property pursuant to this paragraph 5(g)(ii)(D), such
Cash Flow Contribution (or the portion thereof corresponding
to the portion of such net proceeds so applied or to be so
applied) for any particular Property being measured for the
period of four consecutive fiscal quarters of the Company
most recently ended prior to the disposition of such
Property, provided, that any such net proceeds spent for
operating expenses or principal, premium or interest in
respect of Debt or held in deposit accounts or otherwise as
short term investments shall not be deemed to have been
reinvested in the business of the Company and the Restricted
Subsidiaries,
Note Agreement Through 6th Amendment
Exhibit A - 25
<PAGE>
5. NEGATIVE COVENANTS
provided, further, that the Cash Flow Contribution of all
such Property shall not, in any event, exceed 10% of
Consolidated Operating Cash Flow during the Four Quarter
Period,
will not exceed 15%;
(3) the sum (without duplication) of
(aa) the net book value of such Property on the Asset
Disposition Date, expressed as a percentage of Consolidated
Total Assets on the Determination Date most recently
preceding the Asset Disposition Date, plus
(bb) the net book value of each other item of Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 5(g)(ii)(D)
(including, without limitation, a Transfer by merger or
consolidation, as contemplated by paragraph 5(g)(i))
during the period ending on the Asset Disposition Date and
commencing on the first day of the period of 36
consecutive calendar months most recently ended as of the
Asset Disposition Date (the "Three Year Disposition
Measurement Period") (Subsidiary Stock being deemed to
have a net book value equal to the net book value of all
assets of the issuer of such Subsidiary Stock, or the
appropriate portion thereof if less than all Subsidiary
Stock of such issuer is the subject of such Transfer),
expressed in each case as a percentage of Consolidated
Total Assets on the Determination Date most recently
preceding the date of each such Transfer,
will not exceed 40%;
(4) the sum (without duplication) of
(aa) the Cash Flow Contribution of such Property
during the Four Quarter Period, plus
(bb) the Cash Flow Contribution of all other Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 5(g)(ii)(D)
(including, without limitation, a Transfer by merger or
consolidation, as contemplated by paragraph 5(g)(i))
during such Three Year Disposition Measurement Period,
such Cash Flow Contribution for any particular Property
being measured for the period of four consecutive fiscal
quarters of the Company most recently ended prior to the
disposition of such Property,
will not exceed 40%;
Note Agreement Through 6th Amendment
Exhibit A - 26
<PAGE>
5. NEGATIVE COVENANTS
(5) with respect to any Transfer, or series of related
Transfers, of Property pursuant to this paragraph 5(g)(ii)(D) for
consideration in an amount which is at least equal to the sum of
$25,000,000 plus 5% of the amount, if any, by which Consolidated
Total Assets, determined as of the most recent Determination Date
at the time of such Transfer, exceeds Consolidated Total Assets,
determined as of December 31, 1990, in the opinion of the Board
of Directors, the sale is for Fair Market Value and is in the
best interests of the Company and the Restricted Subsidiaries;
and
(6) 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 under any
provision of this Agreement.
If the Company shall make any Transfer which would be prohibited by this
paragraph 5(g) but for the deduction provided for in subclause (cc) of
either or both of paragraph 5(g)(ii)(D)(1) or paragraph 5(g)(ii)(D)(2),
the Company shall be deemed to have covenanted that the net proceeds from
such Transfer shall be reinvested in the business of the Company and the
Restricted Subsidiaries (subject to the limitations of the first proviso
to such subclause) or applied to, or irrevocably committed to make,
Senior Debt Prepayments within the period of 12 consecutive months after
such Transfer.
(h) Permitted Investments. The Company will not and will not permit any
Restricted Subsidiary to purchase or make investments in, purchase stock or
Securities of, or make loans or advances to, or make other investments in, or
guarantee the obligations of, any other Person (including investments in or
loans or advances to any corporation proposed to be acquired or created as a
Subsidiary) (all of the foregoing referred to as "Investments," and all of the
below-listed Investments referred to as "Permitted Investments") except:
(i) obligations of, or obligations guaranteed by, the United States
government, its agencies, or any public instrumentality thereof with
maturities not to exceed (or an unconditional right to compel purchase
within) seven years from the date of acquisition;
(ii) Investments in or to the Company or Restricted Subsidiaries and
Investments in or to companies which simultaneously with such Investments
become Restricted Subsidiaries, and guarantees by the Company of the
obligations of the Restricted Subsidiaries and guarantees by Restricted
Subsidiaries of obligations of the Company or other Restricted
Subsidiaries;
(iii) commercial paper or loan participations maturing within seven
years of the date of acquisition issued by a Person organized under the
laws of the United States, Canada, a country that is a member of the
European Community, Singapore, Taiwan, Malaysia or Japan, rated at the time
of acquisition (or issued by Persons organized under the laws of such
jurisdiction with other outstanding unsecured and unsupported debt
securities ranking pari passu with such commercial paper or loan
participations and rated at the time of acquisition) in the top rating
classification by Moody's
Note Agreement Through 6th Amendment
Exhibit A - 27
<PAGE>
5. NEGATIVE COVENANTS
Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
Inc. or any other rating agency nationally recognized in the United
States, Japan or any country which is a member of the European Community
at the time of acquisition thereof;
(iv) Investments arising from transactions by the Company or the
Restricted Subsidiaries with customers or suppliers (including Investments
received in settlement of trade receivables which trade receivables are
fully reserved against on the books of the Company or such Restricted
Subsidiary or are less than one year overdue) in the ordinary course of
business;
(v) Investments consisting of
(A) travel advances, employee relocation loans, and other
employee loans and advances in the ordinary course of business,
(B) loans to employees, officers or directors relating to the
purchase of equity securities of the Company or the Restricted
Subsidiaries, or
(C) other loans to officers and employees approved by the Board
of Directors in an aggregate amount not in excess of $10,000,000
outstanding at any time;
(vi) operating deposit accounts maintained in the ordinary course of
business for operating fund purposes including Investments therein
denominated in French francs, Deutsche marks, Chinese renminbi and
otherwise with Permitted Banks, consistent with past practice;
(vii) Securities issued by any state of the United States or any
political subdivision of any such state or any public instrumentality
thereof with maturities not to exceed (or an unconditional right to compel
purchase within) seven years of the date of acquisition, that are rated in
one of the highest two rating classifications by Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff & Phelps Inc. or any other rating
agency nationally recognized in the United States;
(viii) demand and time deposits with, Eurodollar deposits with,
certificates of deposit issued by, or obligations or securities fully
backed by letters of credit issued by
(A) any bank organized under the laws of the United States, any
state thereof, the District of Columbia or Canada having combined
capital and surplus aggregating at least $100,000,000, and outstanding
unsecured and unsupported Debt rated "A" or better at the time of
acquisition thereof by Standard and Poor's Corporation, Moody's
Investor Service, Inc., Duff & Phelps Inc. or any other rating agency
nationally recognized in the United States, Japan or any country which
is a member of the European Community,
(B) the banks listed on Annex 2 to this Agreement, and
Note Agreement Through 6th Amendment
Exhibit A - 28
<PAGE>
5. NEGATIVE COVENANTS
(C) any other bank organized under the laws of a country that is
a member of the European Community (or any political subdivision of
any such country), Japan, Singapore, Taiwan, Malaysia, the Cayman
Islands, the British West Indies or the Bahamas, having combined
capital and surplus of not less than $500,000,000 or the equivalent
thereof in a currency other than United States dollars,
(the banks described in the foregoing subclauses (A) to (C), inclusive,
being referred to in this Agreement as "Permitted Banks");
(ix) bankers' acceptances accepted by a Permitted Bank and eligible
for rediscount under the requirements of the Board of Governors of the
Federal Reserve System;
(x) repurchase agreements with any of
(A) the Permitted Banks,
(B) Alex. Brown & Sons Incorporated, Bear, Stearns & Co., Dean
Witter Reynolds Inc., The First Boston Corporation, Goldman Sachs &
Co., J.P. Morgan Securities, Inc., Kidder, Peabody & Co.,
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, Paine Webber Incorporated, Salomon
Brothers, Inc., Shearson Lehman Hutton, Inc., Smith Barney, Harris
Upham & Co., Incorporated, or
(C) any other bank or securities dealer of a similar quality
approved by a Responsible Officer, or
(D) any affiliate of the foregoing,
such repurchase agreements to be (at the time entered into) fully
collateralized by securities of a type described in clause (i), clause
(iii), clause (vii) or clause (viii) above, in each case made in accordance
with the Company's internal investment policy in effect at such time;
(xi) Investments in money market programs that would be classified on
the balance sheet of the investing Person as a current asset in accordance
with generally accepted accounting principles, which money market programs
have total invested assets in excess of $1,000,000,000;
(xii) Investments in money market preferred stocks or other
equivalent Dutch-auction preferred stock of any corporation maturing within
seven years of the date of acquisition thereof and with a credit rating at
the time of acquisition thereof of "AA+" or "aa1" or better (or a
comparable rating) by Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff & Phelps Inc. or any other rating agency nationally
recognized in the United States, Japan or any country which is a member of
the European Community;
Note Agreement Through 6th Amendment
Exhibit A - 29
<PAGE>
5. NEGATIVE COVENANTS
(xiii) notes receivable of, or prepaid royalties and other credit
extensions to, customers and suppliers in the ordinary course of business
so long as such notes, prepaid royalties or other credit extensions are due
within one year of the date of acquisition thereof or cover no more than a
reasonable estimate of one year's obligations to such customers or
suppliers, as the case may be;
(xiv) foreign currency swaps and hedging arrangements entered into in
the ordinary course of business to protect against currency losses, and
interest rate swaps and caps entered into in the ordinary course of
business to protect against interest rate exposure on Debt of the Company
and the Restricted Subsidiaries bearing interest at a variable or adjusting
rate so long as, at the time any such transaction shall be entered into,
the counterparty in such transaction has outstanding Debt Securities rated
(A) "A1" or better, or "A+" or better (or a comparable rating),
or
(B) "A2" or "A-" (or a comparable rating) provided that the term
of each such swap or arrangement is less than 2 years,
by Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff &
Phelps Inc. or any other rating agency nationally recognized in the United
States, Japan or any country which is a member of the European Community;
(xv) (A) guarantees by the Company and Restricted Subsidiaries of
the obligations of Unrestricted Subsidiaries and of vendors and
suppliers of Unrestricted Subsidiaries, in each case in respect of
transactions of such Unrestricted Subsidiaries entered into in the
ordinary course of business of such Unrestricted Subsidiaries and
such vendors and suppliers and directly related to the business
conducted by such vendors and suppliers with such Unrestricted
Subsidiaries, provided that such guarantees shall not at any time
exceed 5% of Consolidated Tangible Net Worth, and
(B) guarantees by the Company and Restricted Subsidiaries of the
obligations of Restricted Subsidiaries and of vendors and suppliers of
Restricted Subsidiaries, in each case in respect of transactions of
such Restricted Subsidiaries entered into in the ordinary course of
business of such Restricted Subsidiaries and such vendors and
suppliers and directly related to the business conducted by such
vendors and suppliers with such Restricted Subsidiaries;
(xvi) Investments existing on the Closing Date not in excess, in the
aggregate, of $20,000,000;
(xvii) regardless of the occurrence or non-occurrence of the Merger
Date, and in any event, prior to the occurrence of the Merger Date,
investments in (a) the stock of Archive and its subsidiaries as
contemplated by the Archive Tender Offer, and (b) Investments to enable
Archive to repay its outstanding obligations for borrowed money not to
exceed in the aggregate $150,000,000;
(xviii) Investments made by any corporation at the time it becomes a
Restricted Subsidiary, or such corporation is acquired by, consolidated
with or merged into the
Note Agreement Through 6th Amendment
Exhibit A - 30
<PAGE>
5. NEGATIVE COVENANTS
Company or a Restricted Subsidiary, provided that such Investments were
not made in contemplation of such transaction;
(xix) Investments consisting of repurchases of Subordinated Debt
permitted by paragraph 5(m); and
(xx) Investments not otherwise permitted by the other provisions of
this paragraph 5(h), if, on the date of the making of any such Investment,
and after giving effect to such Investment,
(A) the aggregate cost of all Investments outstanding on such
date made pursuant to this paragraph 5(h)(xx), minus
(B) the net return of capital received by the Company and the
Restricted Subsidiaries on or prior to such date from all Investments
made pursuant to this paragraph 5(h)(xx) during the period
commencing on January 1, 1991 and ending on such date,
does not exceed 15% of Consolidated Tangible Net Worth on such date.
No Investments can be made pursuant to the provisions of paragraph 5(h)(xx) of
this Agreement during any period when a Default or Event of Default has occurred
and is then continuing. Notwithstanding any provision herein to the contrary,
none of the following shall constitute Investments for purposes of this
Agreement: (a) any dividends or other distributions paid or made in respect of
the stock of the Company or any Restricted Subsidiary (whether in cash,
Property, or stock of the Company or any Restricted Subsidiary), or (b) any
payments (whether in cash, Property or stock of the Company or any Restricted
Subsidiary) to redeem, purchase or otherwise acquire, directly or indirectly,
any stock of the Company or any Restricted Subsidiary. For purposes of the
preceding sentence, the term "stock" shall include warrants, options and
rights to purchase stock. For purposes of calculations required by this
paragraph 5(h), Investments denominated in currencies other than U.S. dollars
shall be translated into U.S dollars in accordance with generally accepted
accounting principles applicable to such types of Investments.
(i) Transactions with Affiliates. The Company will not, nor will it
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the rendering
of any service, with any Affiliate unless
(i) such transaction, when taken in the light of a series of
transactions of which such transaction is a part (if any), is upon fair and
reasonable terms no less favorable to the Company or such Restricted
Subsidiary than could be obtained in a comparable arm's-length transaction
with a Person not an Affiliate, or
(ii) if, at the time of such transaction, such Affiliate is an
officer, director or employee of the Company or such Restricted Subsidiary
and such transaction relates to such Person's compensation, (a) such
transaction is in the best interests of the Company and the Restricted
Subsidiaries, taken as a whole, and has been approved by the Board of
Directors or the board of directors of such Restricted Subsidiary, as
Note Agreement Through 6th Amendment
Exhibit A - 31
<PAGE>
5. NEGATIVE COVENANTS
the case may be, and (b) at the time of such transaction, the Company is
required to file reports pursuant to Section 13 of the Exchange Act.
It is acknowledged that the Archive Tender Offer, the merger of Archive into
Conner Acquisition Corp., and the repayment by the Company of the debt of
Archive and its subsidiaries outstanding on the Acquisition Date in an amount
not to exceed in the aggregate $150,000,000 shall be deemed permitted
transactions hereunder. The purchase by the Company or any Restricted
Subsidiaries of shares of outstanding capital stock of the Company's
Subsidiary formed under the laws of China shall be deemed to comply with this
paragraph 5(i) so long as the Company or such Restricted Subsidiary pays fair
value for such shares, as determined by the Board of Directors of the Company.
The transactions described in the Arcada Letter of Intent shall be deemed to
comply with this paragraph 5(i).
(j) Line of Business. The Company will not, nor will it permit any
Restricted Subsidiary to, engage in any business other than the businesses
currently engaged in by the Company and the Subsidiaries and any business
substantially similar or substantially related thereto.
(k) Designation of Subsidiaries. The Board of Directors may at any time
designate any Restricted Subsidiary as an Unrestricted Subsidiary provided that
no Default or Event of Default shall exist immediately after, and after giving
effect to, any such designation (whether or not caused by such designation), but
it may not thereafter redesignate such Subsidiary as a Restricted Subsidiary.
(l) Private Offering. The Company will not, nor will it permit anyone
acting on its behalf to, offer the Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
(m) Subordinated Debt. The Company will not, and will not permit any
Restricted Subsidiary to, make any payment or redemption of Subordinated Debt,
other than mandatory prepayments or mandatory redemptions scheduled at the time
of issuance of such Subordinated Debt, or otherwise purchase or acquire any
Subordinated Debt, directly or indirectly, or give any notice that irrevocably
binds it to take any such action, unless:
(i) no Default or Event of Default shall exist immediately prior to,
or immediately after, the consummation of any such action or the giving of
such notice, whichever shall first occur, and the Company has delivered a
certificate to such effect to each holder of Notes prior to, but not more
than 30 days prior to, taking such action or giving such notice, whichever
shall first occur, together with a brief description of such action or the
action contemplated by such notice; and
(ii) at the time it shall become irrevocably bound to take such
action, or the time it shall take such action, whichever shall first occur,
one of the following conditions shall be satisfied:
(A) the Company or such Restricted Subsidiary, as the case may
be, could incur Senior Debt in an amount equal to the amount of
Subordinated Debt to be so prepaid, redeemed or otherwise purchased or
acquired;
Note Agreement Through 6th Amendment
Exhibit A - 32
<PAGE>
5. NEGATIVE COVENANTS
(B) the Subordinated Debt to be so prepaid, redeemed or
otherwise purchased or acquired is convertible into a number of shares
of capital stock of the Company having a Fair Market Value at the time
that the Company or such Restricted Subsidiary becomes obligated to
take such action which is at least 25% in excess of the principal
amount of such Subordinated Debt; or
(C) the Subordinated Debt to be so prepaid, redeemed or
otherwise purchased or acquired is convertible into a number of shares
of capital stock of the Company having a Fair Market Value at the time
that the Company or such Restricted Subsidiary becomes obligated to
take such action which is a least 15% in excess of the principal
amount of such Subordinated Debt, and the Company has entered into a
firm commitment underwriting agreement with one or more underwriters,
which agreement contains terms and conditions no less favorable to the
Company than those generally included in comparable agreements for
similarly situated issuers at such time (as determined by the Company
in its reasonable judgment), and pursuant to which such underwriters
have agreed to purchase capital stock of the Company for an amount
sufficient to prepay, redeem or otherwise purchase or acquire all or
any part of such Subordinated Debt that is not so converted into such
capital stock prior to such prepayment, redemption, purchase or
acquisition;
provided that no such action shall be taken and no such notice given during the
period beginning on October 3, 1993 and ending on the Determination Date
occurring nearest to March 31, 1995, inclusive.
Nothing set forth in this paragraph 5(m) shall prevent the Company or any
Restricted Subsidiary from purchasing or acquiring any Subordinated Debt in
privately negotiated transactions or in open-market transactions if
(a) the price paid is less than par plus accrued interest;
(b) no Default or Event of Default shall exist immediately prior to,
or immediately after, such purchase or acquisition; and
(c) the aggregate amount paid by the Company for all such purchases
or acquisitions in any period of twelve consecutive months, which purchases
or acquisitions are not otherwise permitted pursuant to this paragraph
5(m), shall not exceed $25 million;
provided that the Company will not enter into, or agree to enter into, any such
transactions during the period beginning on October 3, 1993 and ending on the
Determination Date occurring nearest to March 31, 1995, inclusive.
(n) Liquidity Coverage. The Company will not permit, on any Determination
Date, the Liquidity Coverage to be less than the percentage set forth in the
following table opposite such Determination Date, in each case determined as of
such Determination Date:
Note Agreement Through 6th Amendment
Exhibit A - 33
<PAGE>
5. NEGATIVE COVENANTS
<TABLE>
<CAPTION>
===============================================================================
Determination Date Percentage
- -------------------------------------------------------------------------------
<S> <C>
All Determination Dates occurring during the period beginning 200%
with the Determination Date occurring nearest to June 30, 1993
to and including the Determination Date occurring nearest to
September 30, 1993
- -------------------------------------------------------------------------------
All Determination Dates occurring during the period beginning 125%
with the Determination Date occurring nearest to December 31,
1993 to and including the Determination Date occurring nearest
to March 31, 1995
===============================================================================
</TABLE>
(o) Restricted Payments. The Company shall not make any Restricted
Payments during the period beginning of October 3, 1993 and ending on the
Determination Date occurring nearest to March 31, 1995, inclusive.
(p) Accounting Period. The Company shall not change the method in which
it determines its fiscal year or its fiscal quarters.
6. CONDITIONS PRECEDENT.
(a) Conditions to Closing. The obligations of the Purchasers to purchase
the Notes, as provided in paragraph 1 hereof, shall be subject to the
satisfaction, on or before the Closing Date, of the following conditions:
(i) The representations and warranties contained in paragraph 3
hereof shall be true and correct as of the Closing Date; the Company shall
not be in default with respect to any of the provisions hereof and there
shall exist no event which, with the passage of time or the giving of
notice, or both, would constitute such a default; neither the Company nor
any Subsidiary shall have suffered a material adverse change in financial
condition, nor shall there exist any material action, suit or proceeding
pending, or to the knowledge of the Company threatened, against the Company
or any of its Subsidiaries which, if decided adversely to the Company or
any of its Subsidiaries, would have a materially adverse effect upon the
Company, Conner Singapore or the Company and its Subsidiaries taken as a
whole or upon any of the business or properties of the Company, Conner
Singapore or the Company and its Subsidiaries taken as a whole; and the
Company shall have delivered to the Purchasers a certificate signed by a
responsible officer of the Company to such effects.
(ii) The Purchasers shall have received from Wilson Sonsini Goodrich
& Rosati, counsel for the Company, a favorable opinion in form and
substance satisfactory to the Purchasers as to all matters specified in
Exhibit E hereto and such other matters incident to the transaction herein
contemplated as the Purchasers may reasonably request.
(iii) The Purchasers shall have received from their special counsel,
Faegre & Benson, a favorable opinion in form and substance satisfactory to
the Purchasers, as to such matters incident to the transaction herein
contemplated as the Purchasers may reasonably request.
(iv) The Purchasers shall have received a Uniform Commercial Code
Search against the Company from the States of California and Colorado, and
from such other jurisdictions as the Purchasers may reasonably request, as
of a date no more than
Note Agreement Through 6th Amendment
Exhibit A - 34
<PAGE>
6. CONDITIONS PRECEDENT
fifteen days prior to the Closing Date, certified by a reporting service
satisfactory to the Purchasers, and disclosing no security under
paragraph 5(d) of this Agreement.
(v) The Company shall have received a waiver from Bank of the West,
Banque Nationale de Paris and The First National Bank of Boston under their
Loan Agreement with the Company dated as of November 21, 1988, as amended,
permitting the issuance and sale of the Notes and the performance by the
Company hereunder.
(vi) All proceedings to be taken in connection with the transaction
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in form and substance to the Purchasers and their counsel and
the Purchasers shall have received copies of all documents which the
Purchasers may reasonably request.
(b) Waiver of Conditions. If on the Closing Date the Company fails to
tender to each Purchaser the Notes to be issued to it on such date or if the
conditions specified in paragraph 6(a) above have not been fulfilled, the
Purchasers may thereupon elect to be relieved of all further obligations under
this Agreement. Without limiting the foregoing, if the conditions specified in
paragraph 6(a) above have not been fulfilled, the Purchasers may waive
compliance by the Company with any such condition to such extent as the
Purchasers may in their sole discretion determine. Nothing in this paragraph
6(b) shall operate to relieve the Company of any of its obligations hereunder
or to waive any of the Purchasers' rights against the Company.
7. EVENTS OF DEFAULT.
(a) Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of or
premium on any Note when the same shall become due, either by the terms
thereof or otherwise as provided in this Agreement; or
(ii) the Company defaults in the payment of any interest on any Note
for more than 5 Business Days after the date due; or
(iii) the Company fails to perform or observe any agreement contained
in paragraph 5 or paragraph 4(c) of this Agreement; or
(iv) the Company fails to perform or observe any other agreement
contained in this Agreement and such failure shall not be remedied within
thirty (30) days after any Responsible Officer obtains actual knowledge
thereof; or
(v) any representation or warranty made by the Company in this
Agreement or in any writing furnished in connection with or pursuant to
this Agreement shall be false in any material respect on the date as of
which made; or
Note Agreement Through 6th Amendment
Exhibit A - 35
<PAGE>
7. EVENTS OF DEFAULT
(vi) the Company or any Restricted Subsidiary,
(A) defaults in any payment of principal of or interest on any
other obligation for money borrowed (or any Capitalized Lease
Obligation, any obligation under a conditional sale or other title
retention agreement, any obligation issued or assumed as full or
partial payment for Property whether or not secured by a purchase
money mortgage or any obligation under notes payable or drafts
accepted representing extensions of credit, but not any obligation in
respect of trade credit incurred in the ordinary course of business)
beyond any period of grace in effect prior to the occurrence of such
default, or
(B) fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation
is created (or if any other event thereunder or under any such
agreement shall occur and be continuing)
and the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to any originally
stated maturity, or to require that such obligation be repurchased by the
Company or any Subsidiary, provided that the aggregate amount of all
obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration or repurchase shall occur and be continuing exceeds
$10,000,000 and provided further that this paragraph 7(a)(vi) shall not
apply to the Specified Debt, so long as the Specified Debt is paid in
full within 30 days after it becomes due; or
(vii) the Company or any Restricted Subsidiary makes an assignment
for the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the Company or
any Restricted Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect (herein
called the "Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary
(A) petitions or applies to any tribunal for, or consents to,
the appointment of, or the taking of possession by, a trustee,
receiver, custodian, liquidator or similar official of the Company or
any Restricted Subsidiary, or of any substantial part of the Property
of the Company or any Restricted Subsidiary, or
(B) commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Restricted Subsidiary)
relating to the Company or any Restricted Subsidiary under the
Bankruptcy Law of any other jurisdiction; or
Note Agreement Through 6th Amendment
Exhibit A - 36
<PAGE>
7. EVENTS OF DEFAULT
(x) any petition or application referred to in paragraph 7(a)(ix) is
filed, or any such proceedings are commenced, against the Company or any
Restricted Subsidiary, and the Company or such Restricted Subsidiary by any
act indicates its approval thereof, consent thereto, or acquiescence
therein, or an order, judgment or decree is entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Restricted Subsidiary decreeing a split-up of
the Company or such Restricted Subsidiary that requires the divestiture of
assets representing a Substantial Part, or the divestiture of the stock of
a Restricted Subsidiary whose assets represent a Substantial Part, of the
consolidated assets of the Company and the Restricted Subsidiaries
(determined in accordance with generally accepted accounting principles) or
that requires the divestiture of assets, or stock of a Restricted
Subsidiary, that shall have contributed a Substantial Part of the
Consolidated Net Income for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(xiii) a final judgment for the payment of money or the transfer of
Property in an amount in excess of $5,000,000 (excluding that portion of
any such judgment covered by insurance in respect of which coverage is
undisputed) is rendered against the Company or any Restricted Subsidiary
and, within 60 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 60 days after the
expiration of any such stay, such judgment is not discharged or execution
thereof stayed pending further appeal;
then
(A) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7(a) with respect to the Company, all of the
Notes at the time outstanding shall automatically become immediately due
and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company,
(B) if such event is any other Event of Default, the Required Holders
may at their option, by notice in writing to the Company, declare all of
the Notes to be, and all of the Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each
Note, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Company, provided that the Yield-
Maintenance Amount, if any, with respect to each Note shall be due and
payable upon such declaration only if
Note Agreement Through 6th Amendment
Exhibit A - 37
<PAGE>
7. EVENTS OF DEFAULT
(1) such event is an Event of Default specified in any of clause
(i) to clause (vi), inclusive, or clause (xiii) of this paragraph
7(a),
(2) the Required Holders shall have given to the Company, at
least 10 Business Days before such declaration, written notice stating
its or their intention so to declare the Notes to be immediately due
and payable and identifying one or more such Events of Default whose
occurrence on or before the date of such notice permits such
declaration and
(3) one or more of the Events of Default so identified shall be
continuing at the time of such declaration, and
(C) if such event is an Event of Default specified in clause (i) or
clause (ii) of this paragraph 7(a) and irrespective of whether the Required
Holders shall have declared the Notes to be due and payable pursuant to the
foregoing clause (B), any holder of Notes may at its option, by notice in
writing to the Company, declare all of the Notes held by such holder to be,
and all of such Notes shall thereupon be and become, immediately due and
payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each such Note, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company.
(b) Other Remedies. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights
under this Agreement and such Note by exercising such remedies as are available
to such holder in respect thereof under applicable law, either by suit in equity
or by action at law, or both, whether for specific performance of any covenant
or other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy conferred in this Agreement or now or hereafter existing at law
or in equity or by statute or otherwise.
(c) Annulment of Acceleration of Notes. If a declaration is made pursuant
to paragraph 7(a)(b) of this Agreement by the Required Holders or paragraph
7(a)(c) of this Agreement by any holder of Notes, then and in every such case,
the Required Holders may, by written instrument filed with the Company,
rescind and annul such declaration within 90 days thereafter, and the
consequences thereof, provided that at the time such declaration is annulled
and rescinded:
(i) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant to the Notes or this Agreement;
(ii) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal of,
or interest or premium on, the Notes which shall have become due and
payable by reason of such declaration under paragraph 7(a)(b) or paragraph
7(a)(c) of this Agreement) shall have been duly paid; and
Note Agreement Through 6th Amendment
Exhibit A - 38
<PAGE>
7. EVENTS OF DEFAULT
(iii) each and every other Default and Event of Default shall have
been waived pursuant to paragraph 10(c) of this Agreement or otherwise made
good or cured,
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
8. PAYMENTS ON AND REGISTRATION AND TRANSFER OF NOTES.
The Company agrees that it will make payment of the principal of, premium,
if any, and interest on the Notes by wire transfer of immediately available
Federal funds with sufficient information to identify the source and application
of funds to each of the Purchasers in accordance with the wire transfer
instructions set forth in Appendix I hereto, or to such other accounts within
the United States or in such other commercial manner as may from time to time be
designated by the holder of a Note, without presentment of the Notes and without
the rendering of any bills therefor. Each Purchaser agrees (and any transferee
of any Note, by its purchase of such Note agrees) that if it sells or transfers
any Note it will, prior to the delivery thereof, make a notation thereon of the
date to which interest has been paid thereon and the amount of any prepayments
or installments made on account of the principal thereof. The Company shall
keep at its principal executive office a register in which the Company shall
provide for the registration of the Notes and of transfers of the Notes (the
"Note Register"). Upon surrender of any Note for transfer at the principal
executive office of the Company, subject to compliance with applicable federal
and state securities laws, the Company shall execute and deliver, in the name of
the designated transferee, a new Note of the same series as that surrendered in
a principal amount equal to the unpaid principal amount of, and dated the date
to which interest has been paid on, the Note so surrendered. When a Note shall
be presented or surrendered for transfer it shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the holder
thereof or his attorney duly authorized in writing. The Company may treat the
person in whose name the Note is registered on the Note Register as the owner of
the Note for the purpose of receiving payment of principal of and interest on
the Note and for all other purposes and the Company shall not be affected by
notice to the contrary. The Company may require payment by the transferor of a
Note (or its transferee) of the amount of any stamp tax or governmental charge
otherwise payable by the Company with respect to the transfer of a Note by
such transferor.
9. EXPENSES.
The Company agrees, whether or not the purchase of the Notes herein
contemplated shall be consummated, to pay and save the Purchasers harmless
against liability for the payment of all out-of-pocket expenses arising in
connection with this transaction including any documentary stamp taxes payable
upon original issue of the Notes (including interest and penalties, if any) or
printing expenses, which may be determined to be due and payable with respect to
the execution and delivery of the Notes, and the reasonable fees and expenses of
counsel to the Purchasers. The Company also agrees to pay, and to save the
Purchasers harmless against liability for the payment of, the reasonable fees
and expenses of counsel to the Purchasers in connection with any documentation
and related services arising after the Closing Date in connection with the
preparation of waivers or amendments of any provisions of this Agreement or the
Notes. In addition, the Company agrees to pay, and to save the holders of the
Notes harmless against, any loss or damage arising from any claim of any
Note Agreement Through 6th Amendment
Exhibit A - 39
<PAGE>
9. EXPENSES
person claiming by, under or through the Company for brokerage or finders fees
incurred in connection with the transaction contemplated by this Agreement.
10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS; AMENDMENTS AND CONSENTS.
(a) Delivery of Documents. All notices, certificates, requests,
statements and other documents required or permitted to be delivered to the
Purchasers or the holders of Notes by any provision hereof shall also be
delivered to each Significant Holder.
(b) Pro Rata Payments. Until the occurrence of a default in the payment
of principal or interest on any Notes, all interest payments and payments or
prepayments of principal shall be made and applied to the Notes in accordance
with their respective terms and the terms of paragraph 2 hereof. If a default
in the payment of principal or interest on any Note has occurred and is
continuing, all interest payments and payments or prepayments of principal shall
be made and applied pro rata on all Notes outstanding in accordance with the
respective unpaid principal amounts thereof.
(c) Amendments and Consents. The registered holder or holders of at least
two-thirds of the unpaid principal amount of the Notes at the time outstanding
may by agreement with the Company amend this Agreement, and any consent, notice,
request, demand or waiver required or permitted to be given by the Purchasers or
the holders of the Notes by any provision hereof shall be sufficient if given by
the holder or holders of at least two-thirds of the unpaid principal amount of
the Notes at the time outstanding, except that, without the written consent of
the holder or holders of all Notes at the time outstanding, no amendment to this
Agreement shall change the maturity of any Note, or decrease the rate of
interest or any premium payable with respect to any Note, or alter the
preference between holders of the Notes or between holders of the Notes and
other creditors of the Company and its Restricted Subsidiaries, or affect the
amount or timing of any required payments or prepayments of principal or
interest, or reduce the proportion of the principal amount of the Notes required
with respect to any amendment or consent.
(d) Solicitation of Noteholders. The Company will not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement or the Notes unless each holder of the Notes
(irrespective of the amount of Notes then owned by it) shall be informed thereof
by the Company and shall be afforded the opportunity of considering the same for
a period of not less than 15 business days and shall be supplied by the Company
with a brief statement regarding the reasons for any such proposed waiver or
amendment, a copy of the proposed waiver or amendment and such other information
as any holder of the Notes shall reasonably request regarding such amendment or
waiver to enable it to make an informed decision with respect thereto. Executed
or true and correct copies of any waiver or amendment effected pursuant to the
provisions of this paragraph 10 shall be delivered by the Company to each
holder of outstanding Notes within 30 days following the date on which the same
shall have been executed and delivered by the holder or holders of the requisite
percentage of outstanding Notes. 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, to any holder of the Notes as
consideration for or as an inducement to the entering into by any holder of the
Notes of any waiver or amendment of any of the terms and provisions of this
Agreement unless such
Note Agreement Through 6th Amendment
Exhibit A - 40
<PAGE>
10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS; AMENDMENTS AND CONSENTS
remuneration is concurrently paid, on the same terms, ratably to the holders of
all of the Notes then outstanding.
11. REPRESENTATIONS AND AGREEMENTS OF PURCHASERS.
(a) Investment Purpose. Each Purchaser represents that the acquisition of
the Notes by it will be for investment for its own account and not with a view
to resale in connection with any distribution thereof nor with any present
intention of distributing or selling such Notes, it being understood, however,
that the disposition of the property of each Purchaser shall at all times be
within its control. Each of the Purchasers acknowledges that the Note to be
purchased by it has not been registered under the Securities Act of 1933, as
amended, or registered and/or qualified under the securities laws of any state
and, therefore, cannot be resold unless
(i) registered under the Securities Act of 1933, as amended, and
applicable state securities laws, or
(ii) an exemption from registration is available.
(b) ERISA Representation. Unless a Purchaser shall have made contrary
disclosures to the Company, each of the Purchasers separately and severally
represents either
(a) that no part of the funds to be used by it to make the loan
evidenced by the Note to be purchased by it constitutes assets allocated to
any separate account maintained by it or
(b) that no part of the funds to be used by it to make the loan
evidenced by the Note to be purchased by it constitutes assets allocated to
any separate account maintained by it such that the application of such
funds constitutes a prohibited transaction under Section 406(a) of ERISA.
As used in this paragraph, the term "separate account" shall have the meaning
assigned to such term in Section 3 of ERISA.
(c) Confidentiality. It is understood that each holder of a Note will
from time to time receive from the Company or another holder of a Note certain
data and documents regarding the business and operations of the Company and its
Subsidiaries and/or the Notes which are not publicly available and which the
Company and its Subsidiaries consider to be confidential, proprietary or trade
secrets (all such data and documents, collectively, being hereinafter referred
to as "Confidential Information"). The term "Confidential Information" does not
include information which
(a) becomes generally available to the public other than as a result
of disclosure by such holder of a Note,
(b) was available on a non-confidential basis prior to its disclosure
to such holder of a Note by the Company, any of its Restricted Subsidiaries
or their respective representative or
Note Agreement Through 6th Amendment
Exhibit A - 41
<PAGE>
11. REPRESENTATIONS AND AGREEMENTS OF PURCHASERS
(c) becomes available to such holder of a Note on a nonconfidential
basis from a source other than the Company, any of its Restricted
Subsidiaries or their respective representative, provided, that such source
is not bound by a confidentiality agreement. No holder of a Note will
disseminate any Confidential Information except, and the Company hereby
consents to the dissemination of Confidential Information by any holder of
a Note:
(a) to any transferee or proposed transferee of a Note;
(b) to officers, employees, attorneys, certified public
accountants and (to the extent required by their involvement) other
outside consultants and experts of any holder of a Note, its
affiliates and any transferee or proposed transferee of a Note; or
(c) to any other person as may be necessary with respect to
enforcement or protection of rights with respect to the Notes, or
otherwise as may be required pursuant to legal process or regulatory
requirements.
Except in connection with the transactions contemplated by this Agreement or as
otherwise contemplated or permitted herein, no holder of a Note will make any
use of any Confidential Information, and each holder of a Note will disseminate
all Confidential Information to others under a prior or contemporaneous notice
of confidentiality unsubstantially to the effect hereof. Each transferee of a
Note, by its acceptance of such Note, agrees to be bound to the provisions of
this paragraph 11(c).
12. DEFINITIONS.
For purposes of this Agreement the following terms shall have the following
meanings:
"Acquisition Date" means the date on which the Archive Tender Offer is
consummated.
"Adjusted Consolidated Debt Percentage" means, with respect to any sale of
capital stock to which paragraph 5(b)(iii) applies, the greater of
(a) the lesser of
(I) the percentage in effect in accordance with paragraph
5(b)(ii) in respect of the Determination Date immediately preceding
such sale of capital stock, or
(II) the percentage determined by dividing the Adjusted
Consolidated Debt Amount by the Adjusted Consolidated Tangible Net
Worth Amount, in each case determined after giving effect to such
sale, or
(b) 125%.
The Adjusted Consolidated Debt Percentage determined by the foregoing
calculation shall apply to the first period, as set forth in the table in
paragraph 5(b)(ii) hereof, immediately following the date of the sale of such
capital stock. If the Adjusted Consolidated Debt
Note Agreement Through 6th Amendment
Exhibit A - 42
<PAGE>
12. DEFINITIONS
Percentage for such first period is greater than 125%, then the Adjusted
Consolidated Debt Percentage in each period succeeding such first period shall
be determined by deducting 20 percentage points from the Adjusted Consolidated
Debt Percentage determined as herein provided for the immediately preceding
period until a period is reached where the Adjusted Consolidated Debt
Percentage is reduced to, but not below 125% (the last deduction to arrive at
125% being 20 percentage points or such lesser number of percentage points as
is necessary to arrive at 125%). Thereafter, the Adjusted Consolidated Debt
Percentage shall be 125%. As used in this definition,
"Adjusted Consolidated Debt Amount" means, with respect to any sale of
capital stock to which paragraph 5(b)(iii) hereof applies, the Existing
Consolidated Debt Amount with respect thereto plus 50% of the Net Cash
Proceeds of such sale of capital stock.
"Adjusted Consolidated Tangible Net Worth Amount" means, with respect
to any sale of capital stock to which paragraph 5(b)(iii) hereof applies,
the Existing Consolidated Tangible Net Worth Amount with respect thereto
plus 100% of the Net Cash Proceeds of such sale of capital stock.
"Existing Consolidated Debt Amount" means, with respect to any sale of
capital stock to which paragraph 5(b)(iii) hereof applies, the amount of
Consolidated Debt outstanding on the Determination Date immediately
preceding such sale.
"Existing Consolidated Tangible Net Worth Amount" means, with
respect to any sale of capital stock to which paragraph 5(b)(iii) hereof
applies, the amount of Consolidated Tangible Net Worth determined on the
Determination Date immediately preceding such sale.
"Net Cash Proceeds" means, with respect to any sale of capital stock
to which paragraph 5(b)(iii) hereof applies, the net cash proceeds of the
sale of such stock of the Company, net of all costs related to the sale
thereof, and net of the Fair Market Value of any contingent obligations the
Company has assumed with respect to any Person in connection with such
sale.
"Affiliate" means any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, the Company, except a
Restricted Subsidiary. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"Annual Disposition Measurement Period" has the meaning assigned to such
term in paragraph 5(g)(ii)(D)(1) of this Agreement.
"Arcada Holdings, Inc." means that certain corporation formed, or to be
formed, pursuant the Arcada Letter of Intent to act as the holding company for
the Company's software disk backup, data management, hierarchical storage
management and related applications business.
Note Agreement Through 6th Amendment
Exhibit A - 43
<PAGE>
12. DEFINITIONS
"Arcada Letter of Intent" means that certain Letter of Intent, entered into
as of December 13, 1993, between Archive, the Company and Quest Development
Corporation.
"Arcada Restricted Subsidiary" means, at any time,
(i) Arcada Holdings, Inc., provided that
(a) at least
(I) 65% of the Voting Stock of which, except directors
qualifying shares and any shares issued to comply with local
ownership legal requirements (provided that such directors
qualifying shares and other shares shall not represent in excess
of 3% of the outstanding shares of the stock of any class of such
Restricted Subsidiary and, after taking such shares into account,
the Company shall, directly or indirectly, own a majority of the
Voting Stock of such Subsidiary), and
(II) 65% of all non-voting stock of every other class of
which,
is, at such time, owned by the Company either directly or through
Restricted Subsidiaries other than Restricted Subsidiaries that
qualify as such solely by virtue of this definition of "Arcada
Restricted Subsidiary,"
(b) Arcada Holdings, Inc. has at such time never been designated
an Unrestricted Subsidiary by the Board of Directors pursuant to
paragraph 5(k) of this Agreement, and
(c) Arcada Holdings, Inc. qualifies at such time as a
Subsidiary, and
(ii) any other Subsidiary of the Company provided that
(a) (I) 100% of the Voting Stock of which, except directors
qualifying shares and any shares issued to comply with local
ownership legal requirements (provided that such directors
qualifying shares and other shares shall not represent in excess
of 3% of the outstanding shares of the stock of any class of such
Restricted Subsidiary and, after taking such shares into account,
the Company shall, directly or indirectly, own a majority of the
Voting Stock of such Subsidiary), and
(II) 100% of all non-voting stock of every other class of
which,
is, at such time, owned by Arcada Holdings, Inc. either directly or
through other Restricted Subsidiaries,
(b) such Subsidiary has at such time never been designated an
Unrestricted Subsidiary by the Board of Directors pursuant to
paragraph 5(k) of this Agreement, and
Note Agreement Through 6th Amendment
Exhibit A - 44
<PAGE>
12. DEFINITIONS
(c) Arcada Holdings, Inc. qualifies at such time as a Restricted
Subsidiary.
Any Subsidiary that qualifies as a Restricted Subsidiary under the definition of
"Restricted Subsidiary" in this paragraph 12 without reference to this
definition of "Arcada Restricted Subsidiary" shall be deemed to be a Restricted
Subsidiary but not an Arcada Restricted Subsidiary.
"Archive" means Archive Corporation, a Delaware corporation.
"Archive Tender Offer" means the offer by the Company for all of the shares
of the outstanding capital stock of Archive pursuant to an Offer to Purchase
dated November 24, 1992.
"Asset Disposition Date" has the meaning assigned to such term in paragraph
5(g)(ii)(D)(1) of this Agreement.
"Bankruptcy Law" has the meaning assigned to it in paragraph 7(a)(viii)
of this Agreement.
"Board of Directors" means, at any time, the board of directors of the
Company or any committee thereof which, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
"Capital Lease" means a lease with respect to which the rental obligation
thereunder is a Capitalized Lease Obligation.
"Capitalized Lease Obligation" means, with respect to any Person, any
rental obligation that, under generally accepted accounting principles, is
required to be capitalized on the books of such Person, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"Cash Equivalents" means
(a) cash,
(b) all Investments permitted by subparagraph 5(h) (i), (iii), (vi),
(vii), (viii), (ix), (x), (xi) and (xii), and
(c) any other Investments which would properly be classified as "cash
equivalents" in accordance with generally accepted accounting principles.
"Cash Flow Contribution" means, for any period, in respect of any Property
of the Company or a Restricted Subsidiary, the amount of Consolidated Operating
Cash Flow fairly attributable to such Property during such period, expressed as
a percentage of such Consolidated Operating Cash Flow.
"Closing Date" shall have the meaning set forth in paragraph 1(a).
Note Agreement Through 6th Amendment
Exhibit A - 45
<PAGE>
12. DEFINITIONS
"Company" shall have the meaning set forth in the preamble.
"Competitor" means any Person who, at the time of determination, is
commonly known to have a portion of its business in the same line of business as
the Company or the Subsidiaries, or is commonly known to be an affiliate of such
Person provided, that neither you, any of your affiliates, any Purchaser, any
affiliate of any Purchaser, nor any Financial Institution (other than a finance
company or a pension plan) shall be deemed to be Competitors.
"Confidential Information" has the meaning assigned to it in paragraph
11(c) of this Agreement.
"Conner Singapore" shall mean, collectively, Conner Peripherals Singapore,
Ltd., a Cayman Islands corporation and Conner Peripherals Singapore, Ltd., a
Singapore branch of Conner Peripherals Singapore, Ltd., a Cayman Islands
corporation.
"Consolidated Debt" means, at any time, without duplication, the amount of
Debt of the Company and the Restricted Subsidiaries outstanding at such time,
determined on a consolidated basis.
"Consolidated Fixed Charges" means, with respect to any period, the greater
of zero and the amount of all expenses of the Company and the Restricted
Subsidiaries during such period of the following types:
(i) interest due on, or with respect to, Consolidated Debt (including,
without limitation, interest due on the Notes), amortization of debt
discount and expense with respect to Consolidated Debt, and imputed
interest on Capitalized Lease Obligations, plus
(ii) Rentals with respect to all leases,
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that, if the net earnings (or loss) of any
Person shall not be taken into account pursuant to clauses (f) or (h) of the
definition of "Consolidated Net Income" in determining Consolidated Net Income
for any period in respect of which Consolidated Fixed Charges is being
determined, all of the foregoing items attributable to such Person for such
period shall only be taken into account to the extent that, in the aggregate,
they exceed the net earnings of such Person, provided further that, if the net
earnings (or loss) of any Person shall not be taken into account pursuant to
clauses (c), (d) or (g) of the definition of "Consolidated Net Income" in
determining Consolidated Net Income for any period in respect of which
Consolidated Fixed Charges is being determined, all of the foregoing items
attributable to such Person for such period shall be excluded from Consolidated
Fixed Charges for such period.
As used in this definition,
"Rentals" means, with respect to any period, all fixed payments which the
lessee is required to make during such period by the terms of any lease of one
year or more, but shall not include amounts required to be paid in respect of
Capital Leases.
Note Agreement Through 6th Amendment
Exhibit A - 46
<PAGE>
12. DEFINITIONS
"Consolidated Net Income" -- for any fiscal period means net earnings (or
loss) after income taxes of the Company and the Restricted Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles, but excluding:
(a) any gain or loss arising from the sale of capital assets (other
than any gain or loss of less than $100,000 from any such sale);
(b) any gain or loss arising from any write-up of assets subsequent
to December 31, 1990 (other than as a consequence of a physical review of
inventory or other assets), any gain arising from the acquisition of any
Securities of the Company or any Restricted Subsidiary, or any other
extraordinary item;
(c) earnings of any Restricted Subsidiary accrued prior to the date
it became a Restricted Subsidiary;
(d) earnings of any Person, substantially all the assets of which
have been acquired in any manner, realized by such other Person prior to
the date of such acquisition;
(e) 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 or
cancellation of Debt;
(f) any portion of the net earnings of any Restricted Subsidiary that
for any reason is unavailable, by law or pursuant to any contractual
restriction, for payment of dividends to the Company or any other
Restricted Subsidiary;
(g) the earnings of any Person to which assets of the Company shall
have been sold, transferred or disposed of, or into which the Company shall
have merged, prior to the date of such transaction; and
(h) any portion of the net earnings of the Company that cannot be
converted into United States dollars;
all determined in accordance with generally accepted accounting principles.
"Consolidated Operating Cash Flow" means, for any period,
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of depreciation and amortization accrued for
such period by the Company and the Restricted Subsidiaries (to the extent,
but only to the extent, each component of such aggregate amount was
reflected in the computation of Consolidated Net Income for such period),
determined on a consolidated basis.
"Consolidated Senior Debt" means, at any time, without duplication, the
amount of Senior Debt outstanding at such time, determined on a consolidated
basis.
Note Agreement Through 6th Amendment
Exhibit A - 47
<PAGE>
12. DEFINITIONS
"Consolidated Tangible Net Worth" means at any time:
(a) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation and other proper reserves relating to
such assets) at which the Tangible Assets of the Company and all Restricted
Subsidiaries would be shown on a consolidated balance sheet at such time
prepared in accordance with generally accepted accounting principles
(subject to any modification required by the definition of "Tangible
Assets" below), but excluding any amount on account of write-ups of assets
after December 31, 1990 (other than as a consequence of a physical review
of inventory or other assets), at such time, minus
(b) the amount at which the liabilities of the Company and the
Restricted Subsidiaries would be shown on such balance sheet, and
including as liabilities all reserves for contingencies and other
potential liabilities (specifically including therein, without
limitation, actuarially determined unfunded vested pension liabilities
and liabilities in respect of other post-retirement benefits) and all
minority interests in Restricted Subsidiaries at such time, all
determined in accordance with generally accepted accounting principles
(subject to any modification required by the preceding parenthetical
expression in this clause (b)), plus
(c) if such time is on or after the Determination Date occurring
nearest to December 31, 1993, $0, and if such time is prior to such
Determination Date,
(i) the aggregate amount paid by the Company to Compaq Computer
Corporation during the Company's fiscal quarter ended October 3, 1992
for the purchase of outstanding shares of the Company's common stock
owned by Compaq Computer Corporation subject to an aggregate limit of
$150 million, plus
(ii) following the Acquisition Date, an amount representing
intangibles, including goodwill, in an aggregate amount equal, on the
relevant date of reference thereto, to the amount specified in the
table below opposite the period during which such date occurs:
<TABLE>
<CAPTION>
===============================================================================
Period Amount
- -------------------------------------------------------------------------------
<S> <C>
Acquisition Date to the Determination Date occurring nearest to $245,000,000
June 30, 1993, inclusive 0
- -------------------------------------------------------------------------------
From the date immediately following the Determination Date $215,000,000
occurring nearest to June 30, 1993 to the date immediately 0
preceding the Determination Date occurring nearest to December
31, 1993, inclusive
===============================================================================
</TABLE>
As used in this definition,
"Tangible Assets" means all assets (including, without duplication,
the capitalized value of any leasehold interest under any Capitalized Lease
Obligation) except:
Note Agreement Through 6th Amendment
Exhibit A - 48
<PAGE>
12. DEFINITIONS
(i) the aggregate amount of deferred assets, other than prepaid
insurance and prepaid taxes, in excess of $10,000,000;
(ii) patents, copyrights, trademarks, trade names, franchises,
goodwill and other similar intangible assets;
(iii) all Investments made pursuant to paragraph 5(h)(xx) and
any other Investments not permitted by any other provision of
paragraph 5(h) of this Agreement (except that "Tangible Assets"
shall include outstanding Investments made pursuant to paragraph
5(h)(xx) at any time when "Consolidated Tangible Net Worth" is being
determined for purposes of determining the amount of Investments
which may be made pursuant to such paragraph); and
(iv) unamortized debt discount and expense (other than not more
than $6,500,000 of unamortized debt expense attributable to the
issuance of Debt prior to the date hereof (which expense shall be
included in "Tangible Assets").
"Consolidated Total Assets" means, at any time of determination, the net
book value of all assets of the Company and the Restricted Subsidiaries that
would be shown on a consolidated balance sheet of the Company and the Restricted
Subsidiaries prepared at such time of determination in accordance with generally
accepted accounting principles, excluding changes in the net book value of
assets resulting from write-ups of assets subsequent to December 31, 1990 (other
than as a consequence of a physical review of inventory or other assets).
"Debentures" means the 6 3/4% Convertible Subordinated Debentures Due 2001
of the Company issued pursuant to that certain Indenture, dated as of March 1,
1991, between the Company and The First National Bank of Boston, as trustee, and
the 6 1/2% Convertible Subordinated Debentures Due 2002 of the Company issued
pursuant to that certain Indenture, dated as of March 1, 1992, between the
Company and The First National Bank of Boston, as trustee.
"Debt" of any Person, at any time, means
(i) indebtedness for money borrowed of such Person;
(ii) indebtedness that is secured by any Lien on Property owned by
such Person, whether or not the indebtedness secured thereby shall have
been assumed by such Person;
(iii) Capitalized Lease Obligations of such Person;
(iv) guarantees, endorsements (other than endorsements of negotiable
instruments for collection in the ordinary course of business) and other
contingent liabilities (whether direct or indirect) of such Person in
connection with the obligations, stock or dividends of any other Person,
provided that guarantees by such Person of contingent obligations of
other Persons shall be excluded from this clause (iv);
Note Agreement Through 6th Amendment
Exhibit A - 49
<PAGE>
12. DEFINITIONS
(v) obligations of such Person under any contract providing for the
making of loans, advances or capital contributions to any other Person, or
for the purchase of any Property from any other Person, in each case
primarily in order to enable such other Person to maintain working capital,
net worth or any other balance sheet condition or to pay debts, dividends
or expenses, to the extent that such other Person is obligated to maintain
such condition or make such payments and has failed to do so;
(vi) obligations of such Person under any contract for the purchase
of materials, supplies or other Property or services if such contract (or
any related document) requires that payment for such materials, supplies or
other Property or services shall be made regardless of whether or not
delivery of such materials, supplies or other Property or services is ever
made or tendered; and
(vii) obligations under any other contract which, in legal effect, is
substantially equivalent to a guarantee, provided that guarantees by such
Person of contingent obligations of other Persons shall be excluded from
this clause (vii),
all as determined in accordance with generally accepted accounting principles,
provided that such items shall only constitute Debt to the extent that, in
accordance with generally accepted accounting principles, such items would be
(and only to the extent such items would be) included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
(assuming that such Person were the primary obligor in respect of the underlying
obligation with respect to any guarantee or other contingent obligation, as
contemplated by the next succeeding sentence), provided further that,
notwithstanding the foregoing, "Debt" shall not include
(a) accrued compensation,
(b) taxes payable and deferred taxes,
(c) trade payables, including intercompany payables in the nature of
trade payables,
(d) any obligations payable, at the option of the obligor, in equity
Securities of the obligor,
(e) any guarantee or contingent liability or obligation with respect
to any of the items set forth in the foregoing clauses (a) to (d),
inclusive or
(f) obligations of Archive and its Subsidiaries which would otherwise
constituting "Debt" hereunder, to the extent that such obligations are
repaid in full within 60 days following the Acquisition Date.
For purposes of computing the amount of any obligation specified in either of
the foregoing clauses (iv) and (vii), it shall be assumed that the indebtedness
or other obligations which are the subject of such guarantee, endorsement or
other contingent liability are direct obligations of the obligor on such
guarantee, endorsement or contingent liability (but not in an amount in excess
of the maximum liability of such obligor) and, therefore, are of the nature
and type of, and bear interest at the rate applicable to, such indebtedness or
other obligations.
Note Agreement Through 6th Amendment
Exhibit A - 50
<PAGE>
12. DEFINITIONS
"Default" means any of the events specified in paragraph 7 of this
Agreement, whether or not there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act.
"Determination Date" means the last day of each fiscal quarter of the
Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or trade or business that
(a) is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the IRC) as the Company or
(b) is under common control (within the meaning of Section 414(c) of
the IRC) with the Company.
"Event of Default" means any of the events specified in paragraph 7 of
this Agreement, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time, 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, under no compulsion to buy or sell, respectively.
"Financial Institution" means
(i) any bank, savings bank, savings and loan association or insurance
company,
(ii) any pension plan or portfolio or investment fund managed or
administered by any bank, savings bank, savings and loan association or
insurance company,
(iii) any investment company owned by any bank, savings bank, savings
and loan association or insurance company, or the majority of the shares of
the capital stock of which are traded on a national securities exchange or
in the National Association of Securities Dealers automated quotation
system,
(iv) any investment banking company, or
(v) any finance company.
"Four Quarter Period" has the meaning assigned to such term in paragraph
5(g)(ii)(D)(2).
Note Agreement Through 6th Amendment
Exhibit A - 51
<PAGE>
12. DEFINITIONS
"Inspection Rights" has the meaning assigned to such term in paragraph
4(b) of this Agreement.
"Investment" has the meaning assigned to such term in paragraph 5(h) of
this Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations promulgated thereunder.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction).
"Liquidity Coverage" means the ratio (expressed as a percentage) of
(i) Cash Equivalents, to
(ii) Senior Debt of the Company and the Restricted Subsidiaries,
in each case determined on a consolidated basis.
"Margin Stock" shall have the meaning ascribed to that term in Section
207.2(i) of Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve Board.
"Material Unrestricted Subsidiaries" shall be deemed to exist with respect
to any consolidated financial statement of the Company and the Subsidiaries if
the amounts of either revenue or total assets (as the case may be), reflected on
such consolidated financial statement vary by more than 10% from the amount of
the same item reflected on the same type of consolidated financial statement of
the Company and the Restricted Subsidiaries, prepared as of the same date, or
covering the same period, as the case may be.
"Merger Date" means the date on which Archive is merged into Conner
Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of the
Company.
"Multiemployer Plan" means any "multiemployer plan" (as such term is
defined in ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as such term is defined in ERISA).
"Note" or "Notes" shall have the meaning set forth in paragraph 1(b).
"Note Register" shall have the meaning set forth in paragraph 8.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Pension Plans" means any "employee pension benefit plan" (as such term is
defined in ERISA) maintained by the Company or any ERISA Affiliate for employees
of the Company
Note Agreement Through 6th Amendment
Exhibit A - 52
<PAGE>
12. DEFINITIONS
or such ERISA Affiliate, excluding any Multiemployer Plan, but including,
without limitation, any Multiple Employer Pension Plan.
"Permitted Banks" has the meaning assigned to such term in paragraph
5(h)(viii)(C) of this Agreement.
"Permitted Investment" has the meaning assigned to such term in paragraph
5(h) of this Agreement.
"Person" means any of an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Preferred Stock" means, at any time, with respect to any Person, capital
stock of such Person that is preferred as to the payment of dividends, or as to
the distribution of Property on any voluntary or involuntary liquidation or
dissolution of such Person, over any other class of capital stock of such Person
(in each case, taken at the greater of its voluntary or involuntary liquidation
preference at the time of calculation thereof, but exclusive of accrued
dividends) provided that the term "Preferred Stock" shall not include preferred
stock issued by Arcada Holdings, Inc. so long as Arcada Holdings, Inc. is a
Restricted Subsidiary.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Purchase Money Mortgages" means a Lien held by any Person (whether or not
the seller of such assets) on tangible Property (other than assets acquired to
replace, repair, upgrade or alter tangible Property owned by the Company or any
Restricted Subsidiary on the date of this Agreement), provided that such Lien
(a) secures all or a portion of the related purchase price or
construction costs of such assets,
(b) encumbers only tangible Property, accretions and accessions
thereto and any theretofore unimproved real property on which such Property
is located (and the proceeds of the disposition thereof) acquired or
constructed with the proceeds of the indebtedness secured thereby, and
(c) is created concurrently with or within one year of the
acquisition or substantial completion of construction of such tangible
Property.
"Purchaser" or "Purchasers" shall have the meaning set forth in the
preamble.
"Qualified Plan" has the meaning assigned to such term in paragraph 3(l) of
this Agreement.
"Required Holders" means the holder or holders of more than 50% of the
aggregate principal amount of the Notes from time to time outstanding.
"Responsible Officer" means each of the Chairman of the Board of Directors,
the President, any Vice President and the Treasurer of the Company.
Note Agreement Through 6th Amendment
Exhibit A - 53
<PAGE>
12. DEFINITIONS
"Restricted Payments" means, in respect of any corporation,
(a) dividends or other distributions on capital stock of the
corporation (except distributions in such capital stock); and
(b) the redemption or acquisition made by or on behalf of such
corporation of such capital stock or of warrants, rights, other options to
purchase such stock or securities convertible into or exchangeable for such
capital stock (except when solely in exchange for such capital stock)
unless made, contemporaneously, from the net proceeds of a sale of such
capital stock.
"Restricted Subsidiary" means, at any time, any of a Subsidiary that is an
Arcada Restricted Subsidiary and a Subsidiary
(i) at least
(a) 80% (a majority in the case of Conner Peripherals Europe or
any Subsidiary organized under the laws of Japan, Taiwan or Singapore)
of the Voting Stock of which, except directors qualifying shares and
any shares issued to comply with local ownership legal requirements
(provided that such directors qualifying shares and other shares shall
not represent in excess of 3% of the outstanding shares of the stock
of any class of such Restricted Subsidiary and, after taking such
shares into account, the Company shall, directly or indirectly, own a
majority of the Voting Stock of such Subsidiary), and
(b) 80% of all non-voting stock of every other class, except
Preferred Stock, of which,
is, at such time, owned by the Company either directly or through other
Subsidiaries meeting the requirements of clause (i) and clause (ii) of this
definition, and
(ii) that has never been designated an Unrestricted Subsidiary by the
Board of Directors pursuant to paragraph 5(k) of this Agreement.
"Sale/Leaseback Transaction" means any transaction or series of related
transactions in which the Company or a Restricted Subsidiary sells or transfers
any of its assets to any Person (other than to the Company or to a Restricted
Subsidiary) and within one year thereafter rents or leases such transferred
Property or substantially similar Property from any Person.
"Sale/Leaseback Transaction Amount" means, on any date, after giving effect
to all Sale/Leaseback Transactions occurring on such date, the greater of
(a) the present value, discounted at 9% per annum, of all unpaid
payment obligations of the Company and the Restricted Subsidiaries in
respect of all Sale/Leaseback Transactions in effect on such date, or
(b) the depreciated purchase price of all Property subject to
Sale/Leaseback Transactions at such time, on such date,
Note Agreement Through 6th Amendment
Exhibit A - 54
<PAGE>
12. DEFINITIONS
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security" has the meaning specified in Section 2(1) of the Securities
Act.
"Senior Debt" means, at any time, Debt of the Company outstanding at such
time that is not Subordinated Debt, except for Subordinated Debt that the
Company has become obligated to prepay, redeem or otherwise purchase or acquire
(other than obligations to make mandatory prepayments or mandatory redemptions
scheduled at the time of issuance of such Subordinated Debt), and all Debt and
Preferred Stock of Restricted Subsidiaries.
"Senior Debt Prepayments" means, at any time, an optional principal
prepayment of Senior Prepayment Debt made in accordance with the following
procedure:
(a) such offer shall be made in writing by the Company, pro rata, to
all holders of Senior Prepayment Debt with an outstanding principal amount
at such time of at least $1 million, such pro rata portion to be determined
on the basis of the principal amount of such Senior Prepayment Debt;
(b) such offer shall be deemed to be rejected by a holder if not
accepted within 30 days of the receipt of such offer by such holder; and
(c) in the case of the holders of Notes who accept such offer, the
prepayment shall be made in conformity with the terms of paragraph 2(a) of
this Agreement, provided that those holders of Senior Prepayment Debt who
have accepted such offer shall also be offered promptly in writing a pro
rata portion of the amounts in respect of which such offer of prepayment
was not accepted, such pro rata portion to be determined on the basis of
the principal amount of the Senior Prepayment Debt held by all such
accepting holders and provided further that such offer shall be deemed to
be rejected by a holder if not accepted within 30 days of the receipt of
such offer by such holder.
Required prepayments of Senior Debt shall not be "Senior Debt Prepayments." As
used in this definition
"Senior Prepayment Debt" means, at any time, all Debt for money
borrowed owed directly by the Company that is not at such time Subordinated
Debt and which, at such time, can be prepaid in whole or in substantial
part by the Company.
"Series A Notes" shall have the meaning set forth in paragraph 1(a).
"Series A Purchasers" shall have the meaning set forth in paragraph 1(a).
"Series B Notes" shall have the meaning set forth in paragraph 1(b).
"Series B Purchaser" shall have the meaning set forth in paragraph 1(b).
"Significant Holder" means
Note Agreement Through 6th Amendment
Exhibit A - 55
<PAGE>
12. DEFINITIONS
(i) you or any of your affiliates, so long as you or such affiliate
shall hold (or shall be committed under this Agreement to purchase) any
Note,
(ii) during the period on or prior to March 30, 1996 (or such later
date as of which all of the Series A Notes shall have been paid in full),
any other holder of at least 2% of the aggregate principal amount of the
Notes from time to time outstanding which is an immediate transferee of a
Purchaser, and any other holder of at least 5% of the aggregate principal
amount of the Notes from time to time outstanding and
(iii) at any time after March 30, 1996 (or such later date as of
which the Series A Notes shall have been paid in full), any other holder of
at least 5% of the aggregate principal amount of the Notes from time to
time outstanding which is an immediate transferee of a Purchaser, and any
other holder of at least 10% of the aggregate principal amount of the Notes
from time to time outstanding.
"Specified Debt" means that certain Indebtedness incurred by Conner
Peripherals Europe S.p.A., in an aggregate principal amount (expressed in
Italian Lire) equivalent to approximately $16,800,000 as of December 22, 1993,
and not to exceed such principal amount except as a result of currency
fluctuations, plus accrued interest in respect thereof, arising under the
following agreements:
(i) the agreement dated as of December 10, 1991, entered into with
Finaosta S.p.A. in the original principal amount of Lire 9,000,000,000,
(ii) the agreement dated as of December 29, 1992, entered into with
Finaosta S.p.A., in the original principal amount of Lire 4,500,000,000,
(iii) agreement dated as of June 25, 1991, entered into with Finaosta
S.p.A., in the original principal amount of Lire 10,000,000,000,
(iv) agreement dated as of October 31, 1989, entered into with I.M.I.
Instituto Mobiliare Italiano and Olivetti System & Network S.r.l., in the
original principal amount of Lire 10,350,000,000, and
(v) agreement dated as of April 30, 1991, entered into with I.M.I.
Instituto Mobiliare Italiano and Olivetti System & Network S.r.l., in the
original principal amount of Lire 6,400,000,000.
"Statistical Release" shall mean, as of any date,
(i) the Federal Reserve Statistical Release (Form H.15(519) Selected
Interest Rates), an illustrative copy of which is attached hereto as
Exhibit G, or
(ii) if such release is not then published, any Federal Reserve Board
release comparable thereto or
(iii) if a Federal Reserve Board release comparable thereto is not
then published, any official publication or release of any other United
States Government department or agency comparable thereto.
Note Agreement Through 6th Amendment
Exhibit A - 56
<PAGE>
12. DEFINITIONS
"Subordinated Debt" means the Debentures and any Debt of the Company that
(a) is subject to subordination provisions no less favorable to the
holders of the Notes than those set forth in the form attached to this
Agreement as Annex 4 or other subordination provisions consented to by the
Required Holders,
(b) has a maturity date of later than March 30, 1998, and
(c) has a Weighted Average Life to Maturity at any time greater than
the Weighted Average Life to Maturity of both of the Series A Notes and the
Series B Notes at such time.
As used in this definition,
"Weighted Average Life to Maturity" at any time with respect to any
indebtedness for borrowed money means the number of years obtained by
dividing the then Remaining Dollar-Years of such indebtedness by the then
outstanding principal amount of such indebtedness.
"Remaining Dollar-Years" at any time with respect to any indebtedness
for borrowed money means the result obtained by
(a) multiplying
(i) the amount of each then remaining required principal payment
(including repayment of principal at final maturity) of such borrowing
unpaid immediately prior to such time, by
(ii) the number of years (calculated to the nearest one-twelfth)
that will elapse between such time and the date each such required
principal payment is due, and
(b) calculating the sum of the products obtained in the preceding
subsection (a).
"Subsidiary" means, at any time, any corporation that would be included in
the consolidated financial statements of the Company prepared at such time in
accordance with generally accepted accounting principles.
"Subsidiary" or "Subsidiaries" shall mean any corporation, association or
partnership a majority of which or more of the voting stock is owned directly or
indirectly by the parent corporation or any one or more of its Subsidiaries.
"Subsidiary Stock" means common stock, preferred stock, warrants, stock
rights and other securities convertible into common stock and preferred stock,
in each case issued by a Subsidiary.
"Substantial Part" means, when used with respect to assets at any time,
more than 10% of consolidated assets of the Company and the Restricted
Subsidiaries at such time,
Note Agreement Through 6th Amendment
Exhibit A - 57
<PAGE>
12. DEFINITIONS
and, when used with respect to Consolidated Net Income in respect of any
period, more than 10% of Consolidated Net Income for such period.
"Surviving Corporation" has the meaning assigned to such term in paragraph
5(g)(i)(A)(1) of this Agreement.
"Three Year Disposition Measurement Period" has the meaning assigned to
such term in paragraph 5(g)(ii)(D)(3) of this Agreement.
"Transfer" has the meaning assigned to such term in paragraph 5(g)(ii) of
this Agreement.
"Treasury Yield Percentage" shall mean, as of any date, the most recent
weekly average yield (as of a date no more than five business days before the
scheduled prepayment) on actively traded U.S. Treasury obligations having a
final maturity approximately equal to the then-remaining average life of the
principal of the Notes to be prepaid as determined by reference to the week-
ending figures published in the most recent Statistical Release which shall have
become available at least two business days prior to the date as of which such
yield is to be determined, or, if a Statistical Release is not then published,
the arithmetic average (rounded to the nearest .01%) of the per annum yields to
maturity for each business day during the week ending at least two business days
prior to the date as of which such determination is made, of all the issues of
actively traded marketable United States Treasury fixed interest rate securities
with a constant maturity equal to, or not more than 30 days longer or 30 days
shorter than the average life of the payments of principal and interest that are
avoided by any prepayment (excluding all such securities which can be
surrendered at the option of the holder at face value in payment of any Federal
estate tax, which provide for tax benefits to the holder or which were issued at
substantial discount) as published in The Wall Street Journal or, if The Wall
Street Journal shall cease such publication, based on average asked prices (or
yields) as quoted by each of three United States government securities dealers
of recognized national standing selected by the holders of the Notes. If the
average life of the payments of Principal and interest that are avoided by any
prepayment is not equal to the constant maturity of a U.S. Treasury obligation
for which a weekly average yield is published or quoted, the Treasury Yield
Percentage shall be calculated by linear interpolation (to the nearest one-
twelfth of a year) from the most recent weekly average yields of actively traded
U.S. Treasury obligations for which such yields are published or quoted;
provided, however, that if the average life of the payments of principal and
interest that are avoided by any prepayment is less than one year, the Treasury
Yield Percentage shall equal the most recent weekly average yield published or
quoted on actively traded U.S. Treasury obligations with a constant maturity of
one year.
"Two Year Period" has the meaning assigned to such term in paragraph
4(a)(iii)(D) of this Agreement.
"Unrestricted Subsidiary" shall mean any Subsidiary which does not qualify
as a Restricted Subsidiary or which is designated by the Company in a writing
duly delivered to the holders of the Notes as an Unrestricted Subsidiary. A
Subsidiary that has been designated an Unrestricted Subsidiary may not
subsequently be designated a Restricted Subsidiary.
Note Agreement Through 6th Amendment
Exhibit A - 58
<PAGE>
12. DEFINITIONS
"Voting Stock" means, with respect to any corporation, any shares of stock
of such corporation whose holders are entitled under ordinary circumstances to
vote for the election of directors of such corporation (irrespective of whether
at the time stock of any other class or classes has or might have such voting
power by reason of the happening of any contingency).
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein or made in writing in
connection herewith shall survive the execution and delivery of this Agreement
and of the Notes.
14. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
15. NOTICES.
All communications provided for hereunder shall be sent by first class mail
and, if to the Purchasers, addressed to the Purchasers at the notice address
listed on Appendix I hereto, and if to the Company, addressed to 3081 Zanker
Road, San Jose, California 95134-2128, Attention: Treasurer, or to such other
address with respect to any party as such party shall notify the others in
writing.
16. INTEGRATION.
This Agreement supersedes, replaces and terminates any prior oral offers,
negotiations, understandings or agreements and any commitment letters or similar
writings relating to any of the matters contemplated herein.
17. GOVERNING LAW.
This Agreement is being delivered and is intended to be performed in the
State of Minnesota, and shall be construed and enforced in accordance with the
laws of such State.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be an original, but all of which shall constitute but one
agreement.
19. CAPTIONS.
The captions in this Agreement are for convenience only and shall not be
considered in the interpretation of any of the provisions hereof.
Note Agreement Through 6th Amendment
Exhibit A - 59
<PAGE>
19. CAPTIONS
If the Purchasers are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterpart of this letter and return the same to
the undersigned. Upon acceptance by all the Purchasers, this letter shall
become a binding agreement between the Purchasers and the undersigned.
Very truly yours,
CONNER PERIPHERALS, INC.
By
Its
Note Agreement Through 6th Amendment
Exhibit A - 60
<PAGE>
EXHIBIT B
TO AMENDMENT NO. 6
CERTIFICATE OF CLOSING
December 22, 1993
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134
Attn: Mr. P. Jackson Bell
Reference is made to that certain Sixth Amendment, dated as of December 22,
1993, in respect of that Note Agreement dated as of June 1, 1989, as amended
through December 21, 1993, between Conner Peripherals, Inc. and the person
identified therein as Purchaser, in respect of Conner Peripherals, Inc.'s Series
A Senior Notes due 1992 and its Series B Senior Notes due 1994. In accordance
with Section 4 of the Sixth Amendment, the undersigned hereby notifies you that
the conditions precedent set forth in such Section 4 have been satisfied.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
<PAGE>
CONNER PERIPHERALS, INC.
Note Agreement
Dated as of March 29, 1991
$80,000,000 Series A Senior Notes due March 30, 1996
$25,000,000 Series B Senior Notes due March 30, 1998
FIFTH AMENDMENT TO NOTE AGREEMENT
Dated as of December 22, 1993
To Each of the Persons Signatory
Hereto as Holders of Notes
Ladies and Gentlemen:
CONNER PERIPHERALS, INC. (together with its successors and assigns, the
"Company"), a Delaware corporation, hereby agrees with you as follows:
1. PRELIMINARY STATEMENT.
1.1 The Company entered into those certain separate Note Agreements, each
dated as of March 29, 1991 (collectively, as in effect immediately prior to the
Effective Date, the "Existing Note Agreement," and, as amended hereby, the
"Amended Note Agreement"), with each of The Prudential Insurance Company of
America, Principal Mutual Life Insurance Company, Connecticut Mutual Life
Insurance Company, CIGNA Property and Casualty Insurance Company, Connecticut
General Life Insurance Company, New England Mutual Life Insurance Company, AID
Association for Lutherans, and General American Life Insurance Company
(individually, a "Purchaser," and collectively, the "Purchasers"), pursuant to
which the Company issued and sold to the Purchasers, and the Purchasers
purchased from the Company, an aggregate principal amount of Eighty Million
Dollars ($80,000,000) of the Company's Series A Senior Notes due March 30, 1996
and Twenty Five Million Dollars ($25,000,000) of the Company's Series B Senior
Notes due March 30, 1998 (collectively, as in effect immediately prior to the
Effective Date, the "Existing Notes," and as amended hereby, the "Amended
Notes").
1.2 The Existing Note Agreement has been, prior to the Effective Date, and
by agreement by the parties thereto, amended pursuant to that certain Waiver and
First Amendment to Note Agreement, dated as of February 5, 1992, that certain
Second Amendment to Note Agreement, dated as of July 29, 1992, that certain
Third Amendment to Note Agreement, dated as of December 18, 1992, that certain
Fourth Amendment to Note Agreement, dated as of June 25, 1993, and that certain
Assumption Agreement, dated as of August 31, 1992.
1.3 As of the date hereof, The Prudential Insurance Company of America
holds Thirty-Five Million Dollars ($35,000,000) in principal amount of the
Existing Notes, Principal Mutual Life Insurance Company holds Twenty-Five
Million Dollars ($25,000,000) in principal amount of the Existing Notes,
Connecticut General Life Insurance Company holds Forty Million
<PAGE>
Dollars ($40,000,000) in principal amount of the Existing Notes, and General
American Life Insurance Company holds Five Million Dollars ($5,000,000) in
principal amount of the Existing Notes. The Persons signatory hereto as
holders of the Notes (the "Holders") are the holders of one hundred percent
(100%) of the Existing Notes outstanding as of the Effective Date.
1.4 The Company and each of the Holders desire to amend and restate in
full the Existing Note Agreement and the Existing Notes, and to execute this
Amendment (the "Amendment") to effect such amendment and restatement.
1.5 The terms used herein and not defined herein have the meanings
specified in the Amended Note Agreement.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
2. AMENDMENTS TO THE EXISTING NOTE AGREEMENTS.
2.1 Amendment to Existing Note Agreement.
The Existing Note Agreement (including Exhibit A1 and Exhibit A2 thereto,
but not including Exhibit B1, Exhibit B2, Exhibit C, Exhibit D, Annex 1, Annex
2, Annex 3 and Annex 4 thereto) is hereby amended and restated in full in the
form attached hereto as Exhibit A.
2.2 Amendment of Existing Notes.
(a) The form of 8.84% Senior Note due March 30, 1996 attached to the
Existing Note Agreement as Exhibit A1 is hereby amended and restated in
full in the form attached as Exhibit A1 to the Amended Note Agreement.
(b) The form of 9.08% Senior Note due March 30, 1998 attached to the
Existing Note Agreement as Exhibit A2 is hereby amended and restated in
full in the form attached as Exhibit A2 to the Amended Note Agreement.
(c) All Existing Notes outstanding on the Effective Date are hereby,
without any further action being required on the part of the holders
thereof or on the part of any other Person, deemed to be conformed to the
form of, and have the terms provided in, the Amended Notes attached to the
Amended Note Agreement as Exhibit A1 or Exhibit A2, as the case may be.
The outstanding Amended Notes shall be and are entitled to all of the
rights and benefits provided therefor in the Amended Note Agreement. Upon
the request of any holder of Notes, made in accordance with paragraph 11D
of the Amended Note Agreement, the Company shall deliver, pursuant to
paragraph 11D of the Amended Note Agreement, a new Note or Notes, in the
form of Exhibit A1 or Exhibit A2 attached to the Amended Note Agreement, as
the case may be.
2
<PAGE>
2.3 Waiver Letter.
That certain waiver agreement (the "Waiver") among the Company and the
Holders, dated as of November 12, 1993, as extended to the date hereof, pursuant
to which the Holders waived compliance with certain provisions of the Existing
Note Agreement, is hereby made permanent.
2.4 Understanding Re Definition of Liens.
The parties hereto agree and acknowledge that Section 4C of those certain
separate Note Agreements, dated as of June 1, 1989, in respect of the Company's
Series B Senior Notes due 1994, does not constitute or create a "Lien" under and
as defined in the Amended Note Agreement.
3. WARRANTIES AND REPRESENTATIONS.
To induce the Holders to enter into this Amendment, the Company warrants
and represents to the Holders that as of the Effective Date:
3.1 Organization, Existence and Authority.
Each of the Company and the Restricted Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. The Company has all requisite power and authority to execute and
deliver this Amendment and the Amended Notes.
3.2 Authorization, Execution and Enforceability.
The execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations hereunder and under the Amended
Note Agreement and the Amended Notes have been duly authorized by all necessary
corporate action on the part of the Company. This Amendment has been duly
executed and delivered by the Company and this Amendment, the Amended Note
Agreement and the Amended Notes (the "Transaction Documents"), are valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.
3.3 No Conflicts or Defaults.
Neither the execution and delivery by the Company of this Amendment, nor
the performance by the Company of its obligations under the Transaction
Documents, conflicts with, results in any breach in any of the provisions of,
constitutes a default under, violates or results in the creation of any Lien
upon any Property of the Company or any Subsidiary under the provisions of:
(a) any charter document or the bylaws of the Company or any of the
Subsidiaries;
3
<PAGE>
(b) any agreement, instrument or conveyance to which the Company or
any of the Subsidiaries or any of their respective Properties may be bound
or affected; or
(c) any statute, rule or regulation or any order, judgment or award
of any court, tribunal or arbitrator by which the Company or any of the
Subsidiaries or any of their respective Properties may be bound or
affected.
3.4 Governmental Consent.
Neither the execution and delivery by the Company of this Amendment or the
Amended Notes, nor the performance by the Company of its obligations under the
Transaction Documents, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of any one or more of the Company and the
Subsidiaries as a condition thereto under the circumstances and conditions
contemplated by this Amendment.
3.5 Disclosure of Defaults under Existing Note Agreement.
After giving effect to the Waiver, no event has occurred and no condition
exists that would constitute a Default or an Event of Default under the Existing
Note Agreement, and no event has occurred and no condition exists that would
constitute a Default or an Event of Default under the Amended Note Agreement.
4. CONDITIONS PRECEDENT TO THIS AMENDMENT.
The amendment of the Existing Note Agreement and the Existing Notes
provided for in Section 2 hereof shall not become effective until a counterpart
of the certificate attached hereto as Exhibit B shall have been executed and
delivered by each of the Holders to the Company, on or prior to December 22,
1993 (the date of such satisfaction being herein referred to as the "Effective
Date"). The Holders shall not deliver such certificate until the following
conditions precedent have been satisfied in the opinion of the Holders.
4.1 No Default; Representations And Warranties True.
No Default or Event of Default under the Amended Note Agreement shall exist
and the warranties and representations set forth in Section 3 hereof shall be
true and correct on the Effective Date.
4.2 Authorization of Transactions.
The Company shall have authorized, by all necessary corporate action, the
execution and delivery of this Amendment and each of the other documents and
instruments executed and delivered in connection herewith and the performance of
all obligations of, and the satisfaction of all conditions precedent pursuant to
this Section 4 by, and the consummation of all transactions contemplated by
this Amendment by, the Company. The Holders shall have received a certificate,
in form and substance satisfactory to the Holders certifying the adoption of
resolutions of the board of directors of the Company authorizing such execution,
delivery, performance, satisfaction and consummation, which resolutions shall be
attached
4
<PAGE>
to such certificate and shall be in full force and effect. The certificate
shall indicate that there has been no resolution passed by the board of
directors of the Company which conflicts with, amends or rescinds such
resolutions.
4.3 Payment of Restructuring Fee.
The Company shall have paid to the Holders on the Effective Date, by wire
transfer of immediately available funds, an aggregate amount of One Hundred Five
Thousand Dollars ($105,000) as a restructuring fee in respect of the
transactions contemplated by this Amendment. Such payment shall be divided
among and paid to each of the Holders in proportion, as nearly as practicable,
to the respective unpaid principal amount of Existing Notes held by each Holder
at such time, in the manner provided in the Existing Note Agreement for the
payment of principal.
4.4 Execution of Documents and Agreements.
The Company shall have entered into a binding commitment (the "Commitment")
with Bank of America whereby the Bank of America has agreed to arrange a
revolving loan facility (the "Revolving Loan") for the Company for a period of
not less than two (2) years from the Effective Date and in an amount of not less
than Fifty Million Dollars ($50,000,000). The Company shall have delivered to
each Holder a true and correct copy of the executed commitment with respect to
such revolving loan facility as in effect on the Effective Date, which shall be
in form and substance satisfactory to the Holders.
4.5 Arcada Holdings, Inc.
The Company shall have provided you with a true and correct copy of that
certain Letter of Intent dated as of December 13, 1993, as in effect on the
Effective Date, which Letter of Intent correctly describes the transactions
related to the acquisition of Quest Development Corporation by Arcada Holdings,
Inc., the formation and capitalization of Arcada Holdings, Inc. and the related
material transactions.
4.6 Expenses.
The Company shall have paid all costs and expenses of the Holders relating
to this Amendment and the Waiver, in accordance with paragraph 11B of the
Existing Note Agreement.
4.7 Proceedings Satisfactory.
All proceedings taken in connection with this Amendment and all documents
and papers relating thereto shall be satisfactory to the Holders and their
special counsel. The Holders and their special counsel shall have received
copies of such documents and papers as they may reasonably request in connection
therewith, in form and substance satisfactory to them.
5. CONDITION SUBSEQUENT.
5
<PAGE>
The amendment of the Existing Note Agreement and the Existing Notes
provided for in Section 2 hereof shall terminate and be of no force or effect
on and after January 31, 1994, unless on or prior to such date, the Revolving
Loan shall have become effective on substantially the same terms as provided in
the Commitment, and the Company shall have delivered to each Holder a true and
correct copy of the agreement constituting the Revolving Loan as in effect at
the time of such delivery.
6. WAIVER AND AFFIRMATION OF OBLIGATIONS.
The terms of this Amendment shall not operate as a waiver by the Holders
of, or otherwise prejudice the Holders' rights, remedies or powers under, the
Existing Note Agreement, the Existing Notes or under applicable law, except to
the extent provided herein. Except as expressly provided herein and in the
Amended Note Agreement and the Amended Notes:
(a) no terms and provisions of any agreement (including, without
limitation, the Existing Note Agreement and the Existing Notes) are
modified or changed by this Amendment; and
(b) the terms and provisions of the Existing Note Agreement and the
Existing Notes shall continue in full force and effect.
The Company hereby acknowledges and affirms all of its obligations and duties
under the Amended Note Agreement and the Amended Notes.
7. MISCELLANEOUS.
7.1 Section Headings, etc.
The titles of the Sections appear as a matter of convenience only, do not
constitute a part hereof and shall not affect the construction hereof. The
words "herein," "hereof," "hereunder" and "hereto" refer to this Amendment as a
whole and not to any particular Section or other subdivision.
7.2 Governing Law.
THIS AMENDMENT AND THE AMENDED NOTES SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
7.3 Duplicate Originals; Execution in Counterpart.
Two or more duplicate originals of this Amendment may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Amendment may be executed in one
or more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts which,
collectively, show execution by each party hereto shall constitute one duplicate
original.
6
<PAGE>
7.4 Waivers and Amendments.
Neither this Amendment nor any term hereof may be changed, waived,
discharged or terminated orally, or by any action or inaction, but only by an
instrument in writing signed by each of the parties signatory hereto. The terms
and provisions of the Amended Note Agreement and the Amended Notes may be
further amended or modified in accordance with the provisions of the Amended
Note Agreement.
7.5 Successors and Assigns.
This Amendment shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder, whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign.
7.6 Entire Agreement.
This Amendment constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
[Remainder of Page Intentionally Blank. Next Page is Signature Page]
7
<PAGE>
If this Amendment is satisfactory to you, please so indicate by signing the
acceptance at the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Amendment shall become binding between us in
accordance with its terms.
CONNER PERIPHERALS, INC.
By: /s/ P. Jackson Bell
---------------------------------------
Name:
Title:
Agreed and Accepted by the Holders of the Notes:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ The Prudential Insurance Company of America
---------------------------------------
Name:
Title:
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Principal Mutual Life Insurance Company
---------------------------------------
Name:
Title:
By: /s/ Principal Mutual Life Insurance Company
---------------------------------------
Name:
Title:
[SIGNATURE PAGE to AMENDMENT NO. 5, dated as of DECEMBER 22, 1993, to CONNER
PERIPHERALS, INC.'S NOTE AGREEMENT dated as of MARCH 29, 1991].
8
<PAGE>
CIG & CO.
c/o CIGNA Investments, Inc.
By: /s/ CIG & CO
---------------------------------------
Name:
Title:
GENERAL AMERICAN LIFE INSURANCE COMPANY
By: /s/ General American Life Insurance Company
---------------------------------------
Name:
Title:
[SIGNATURE PAGE to AMENDMENT NO. 5, dated as of DECEMBER 22, 1993, to CONNER
PERIPHERALS, INC.'S NOTE AGREEMENT dated as of MARCH 29, 1991].
9
<PAGE>
EXHIBIT A
TO AMENDMENT NO. 5
AMENDED AND RESTATED NOTE AGREEMENT
[Exhibit A begins on the next page]
Exhibit A-1
<PAGE>
================================================================================
CONNER PERIPHERALS, INC.
------------------------
NOTE AGREEMENT
------------------------
Dated as of March 29, 1991
as amended by
Waiver and First Amendment to Note Agreement, dated as of February 5, 1992
Second Amendment to Note Agreement, dated as of July 29, 1992
Third Amendment to Note Agreement, dated as of December 18, 1992
Fourth Amendment to Note Agreement, dated as of June 25, 1993
Fifth Amendment to Note Agreement, dated as of December 22, 1993
Assumption Agreement, dated as of August 31, 1992
$80,000,000 Series A Senior Notes Due March 30, 1996
$25,000,000 Series B Senior Notes Due March 30, 1998
================================================================================
Exhibit A-2
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. AUTHORIZATION OF ISSUE OF NOTES...................................... 1
2. PURCHASE AND SALE OF NOTES........................................... 2
3. CONDITIONS OF CLOSING................................................ 2
3A. Opinion of Purchaser's Special Counsel........................ 2
3B. Opinion of Company's Counsel.................................. 2
3C. Representations and Warranties; No Default.................... 2
3D. Sale of Notes to Other Purchasers............................. 2
3E. Purchase Permitted by Applicable Laws......................... 3
3F. Private Placement Number...................................... 3
3G. Closing Expenses.............................................. 3
3H. Proceedings................................................... 3
4. PREPAYMENTS.......................................................... 3
4A. Required Prepayments.......................................... 3
4B. Optional Prepayment With Yield-Maintenance Amount............. 4
4C. Notice of Optional Prepayment................................. 4
4D. Partial Payments Pro Rata..................................... 4
4E. Required Prepayments Upon Change in Control................... 4
4F. Retirement of Notes........................................... 5
5. AFFIRMATIVE COVENANTS................................................ 5
5A. Financial Statements.......................................... 5
5B. Inspection of Property........................................ 10
5C. Covenant to Secure Note Equally............................... 11
5D. ERISA Compliance.............................................. 11
5E. Payment of Taxes and Claims................................... 11
5F. Maintenance of Properties and Corporate Existence............. 12
5G. Payment of Notes and Maintenance of Office.................... 13
6. NEGATIVE COVENANTS................................................... 13
6A. Consolidated Tangible Net Worth............................... 13
6B. Consolidated Debt............................................. 14
6C. Consolidated Fixed Charges; Consolidated Net Income........... 16
6D. Liens......................................................... 16
6E. Sale/Leaseback Transactions................................... 19
6F. Restricted Subsidiary Debt and Preferred Stock................ 20
6G. Merger and Consolidation; Sale of Assets...................... 20
6H. Permitted Investments......................................... 24
6I. Transactions with Affiliates.................................. 29
6J. Line of Business.............................................. 29
6K. Designation of Subsidiaries................................... 29
6L. Private Offering.............................................. 29
6M. Subordinated Debt............................................. 29
</TABLE>
Exhibit A-ii
<PAGE>
TABLE OF CONTENTS (Cont.)
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
6N. Liquidity Coverage............................................ 31
6O. Restricted Payments........................................... 31
6P. Accounting Period............................................. 31
7. EVENTS OF DEFAULT.................................................... 31
7A. Acceleration.................................................. 31
7B. Other Remedies................................................ 34
7C. Annulment of Acceleration of Notes............................ 34
8. REPRESENTATIONS AND WARRANTIES....................................... 35
8A. Corporate Organization and Authority; Compliance with Law..... 35
8B. Conflicting Agreements and Other Matters...................... 36
8C. Sale is Legal and Authorized; Notes are Enforceable........... 36
8D. Financial Statements.......................................... 36
8E. Material Adverse Change....................................... 37
8F. Actions Pending............................................... 37
8G. Outstanding Debt.............................................. 37
8H. Taxes......................................................... 37
8I. Title to Properties; Patents and Copyrights................... 37
8J. Environmental Compliance...................................... 38
8K. ERISA......................................................... 38
8L. No Defaults................................................... 39
8M. Regulation G, etc............................................. 39
8N. Offering of Notes............................................. 39
8O. Governmental Consent.......................................... 39
8P Certain Laws.................................................. 40
8Q. Disclosure.................................................... 40
8R. No Unrestricted Subsidiaries.................................. 41
9. REPRESENTATIONS OF THE PURCHASER..................................... 41
10. DEFINITIONS.......................................................... 41
10A. Yield-Maintenance Terms....................................... 41
10B. Other Terms................................................... 43
11. MISCELLANEOUS........................................................ 61
11A. Note Payments................................................. 61
11B. Expenses...................................................... 61
11C. Consent to Amendments......................................... 61
11D. Form, Registration, Transfer and Exchange of
Notes; Lost Notes............................................. 62
11E. Persons Deemed Owners; Participations......................... 63
11F. Survival of Representations and Warranties; Entire
Agreement..................................................... 63
11G. Successors and Assigns........................................ 63
11H. Disclosure to Other Persons................................... 63
</TABLE>
Exhibit A-iii
<PAGE>
Table of Contents (Cont.)
(Not Part of Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
11I. Notices....................................................... 64
11J. Descriptive Headings.......................................... 65
11K. Governing Law................................................. 65
11L. Counterparts.................................................. 65
</TABLE>
<TABLE>
<C> <S>
Annex 1 -- Purchaser Schedule
Annex 2 -- Information as to Company
Annex 3 -- Payment Instructions at Closing
Annex 4 -- Subordination Provisions
Exhibit A1 -- Form of Series A Senior Note Due March 30, 1996
Exhibit A2 -- Form of Series B Senior Note Due March 30, 1998
Exhibit B1 -- Form of Special Counsel Opinion
Exhibit B2 -- Form of Company Opinion
Exhibit C -- Form of Officers' Certificate
Exhibit D -- Form of Secretary's Certificate
</TABLE>
Exhibit A-iv
<PAGE>
CONNER PERIPHERALS, INC.
Note Agreement
$80,000,000 Senior Notes Due March 30, 1996
$25,000,000 Senior Notes Due March 30, 1998
Dated as of March 29, 1991
as amended through December 22, 1993
[Separately addressed to each of the
Purchasers listed on Annex 1 attached hereto]
Ladies and Gentlemen:
The undersigned, CONNER PERIPHERALS, INC., a California corporation
(together with its successors and assigns, including, as of August 31, 1992,
Conner Peripherals, Inc. a Delaware corporation as successor by merger to Conner
Peripherals, Inc. a California corporation, the "Company"), hereby agrees with
you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES.
(i) Authorization of Notes. The Company will authorize the issue of:
(a) Eighty Million Dollars ($80,000,000) in aggregate principal
amount of its and Series A Senior Notes due March 30, 1996 (the "Series A
Notes"); and
(b) Twenty-Five Million Dollars ($25,000,000) in aggregate principal
amount of its Series B Senior Notes due March 30, 1998 (the "Series B
Notes") (the Series A Notes and the Series B Notes are referred to in this
Agreement collectively as the "Notes").
(ii) Provisions.
(a) Each Series A Note shall bear interest as provided therein,
mature on March 30, 1996; and be in the form of the Note set out in Exhibit
A1 to this Agreement.
Exhibit A-1
<PAGE>
(b) Each Series B Note shall bear interest as provided therein,
mature on March 30, 1998 and be in the form of the Note set out in Exhibit
A2 to this Agreement.
The term "Notes" as used in this Agreement shall include each Note delivered
pursuant to any provision of this Agreement or the Other Note Agreements
referred to in paragraph 2 of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you
and, subject to the terms and conditions set forth in this Agreement, you agree
to purchase from the Company the aggregate principal amount of Notes set forth
opposite your name in the Purchaser Schedule attached to this Agreement as Annex
1, at 100% of such aggregate principal amount. The Company will deliver to you,
at the offices of Hebb & Gitlin, a professional corporation, One State Street,
Hartford, Connecticut 06103, one or more Notes registered in your name,
evidencing the aggregate principal amount of Notes to be purchased by you and in
the denomination or denominations specified with respect to you in Annex 1 to
this Agreement, against payment of the purchase price thereof by transfer of
immediately available funds as directed by the Company on Annex 3 to this
Agreement on the date of closing, which shall be April 1, 1991 (the "Closing
Date"). Concurrently with the execution and delivery of this Agreement, the
Company is entering into other Note Agreements (the "Other Note Agreements")
identical with this Agreement (except as to the identity of the purchaser and
the principal amount of Notes to be purchased) with the other purchasers (the
"Other Purchasers") named in Annex 1 to this Agreement. The sale to you and the
sales to the Other Purchasers are to be separate and several sales.
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay for the
Notes to be purchased by you hereunder is subject to the satisfaction, on or
before the Closing Date, of the following conditions:
3A. Opinion of Purchaser's Special Counsel. You shall have received from
Hebb & Gitlin, a professional corporation, which is acting as special counsel
for you in connection with this transaction, a favorable opinion satisfactory to
you and substantially in the form of Exhibit B1 to this Agreement.
3B. Opinion of Company's Counsel. You shall have received from Wilson,
Sonsini, Goodrich & Rosati, special counsel for the Company, a favorable opinion
satisfactory to you and substantially in the form of Exhibit B2 to this
Agreement.
3C. Representations and Warranties; No Default. The representations and
warranties contained in paragraph 8 of this Agreement shall be true on and as
of the Closing Date, except to the extent of changes caused by the transactions
contemplated in this Agreement; there shall exist on the Closing Date no Event
of Default or Default; and you shall have received a certificate dated the
Closing Date and signed by the President, a Vice-President or the Treasurer of
the Company, substantially in the form of Exhibit C to this Agreement,
certifying to both such effects, and a certificate dated the Closing Date and
signed by the Secretary or an Assistant Secretary of the Company, substantially
in the form of Exhibit D to this Agreement, with respect to the matters therein
set forth.
Exhibit A-2
<PAGE>
3D. Sale of Notes to Other Purchasers. The Company shall have sold to the
Other Purchasers the Notes to be purchased by them on the Closing Date and shall
have received payment in full therefor.
3E. Purchase Permitted by Applicable Laws. The offer, purchase and sale
of, and payment for, the Notes to be purchased by you on the Closing Date on the
terms and conditions provided in this Agreement (including the use of the
proceeds of such Notes by the Company) shall not violate any applicable law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act or Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and shall not subject you to any tax, penalty, liability or
other onerous condition under or pursuant to any applicable law or governmental
regulation, and you shall have received such certificates or other evidence as
you may request to establish compliance with this condition.
3F. Private Placement Number. The Company shall have obtained a private
placement number for each series of the Notes from the CUSIP Division of
Standard & Poor's Corporation.
3G. Closing Expenses. The Company shall have paid the statement for fees
and disbursements of the special counsel to you and the Other Purchasers
presented on the Closing Date.
3H. Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident to this Agreement shall be satisfactory in substance and form to you,
and you shall have received all such counterpart originals or certified or other
copies of such documents as you may reasonably request.
4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to
the required prepayments specified in paragraph 4A of this Agreement and also
under the circumstances set forth in paragraph 4B and paragraph 4E of this
Agreement.
4A. Required Prepayments.
(i) Series A Notes. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Series A Notes, without
premium, the sum of $26,667,000 on March 30 in each of 1994 and 1995, and
such principal amounts of the Notes, together with interest thereon to the
prepayment dates, shall become due on such prepayment dates. The remaining
$26,666,000 principal amount of the Series A Notes, together with interest
accrued thereon, shall become due on the maturity date of the Series A
Notes.
(ii) Series B Notes. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Series B Notes, without
premium, the sum of $5,000,000 on March 30 in each of the years 1994
through 1997, inclusive, and such principal amounts of the Notes, together
with interest thereon to the prepayment dates, shall become due on such
prepayment dates. The remaining $5,000,000
Exhibit A-3
<PAGE>
principal amount of the Series B Notes, together with interest accrued
thereon, shall become due on the maturity date of the Series B Notes.
(iii) Application of Other Prepayments. Each prepayment of any Note
pursuant to paragraph 4E of this Agreement shall reduce pro rata the
prepayments becoming due after such prepayment and payments at maturity
required by paragraph 4A(i) and paragraph 4A(ii) of this Agreement in
respect of all Notes of the same series as such Note, such pro rata
reduction to be determined by multiplying any such prepayment or payment
by the quotient of the principal amount of the Note so prepaid divided by
the principal amount of Notes of the same series outstanding immediately
prior to such prepayment. Any prepayment of Notes pursuant to paragraph
4B of this Agreement shall be applied first, to the amount due on the
maturity date of the Notes and second, to the mandatory prepayments
applicable to the Notes, as set forth in this paragraph 4A, in the
inverse order of the maturity thereof.
4B. Optional Prepayment With Yield-Maintenance Amount. The Notes shall be
subject to prepayment, in whole at any time or from time to time in part (in a
minimum aggregate principal amount of $1,000,000 or integral multiples of
$100,000 in excess thereof, or if the aggregate principal amount of Notes
outstanding is less than $1,000,000, then such lesser aggregate principal
amount), at the option of the Company, at 100% of the principal amount so to be
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each such Note.
4C. Notice of Optional Prepayment. The Company shall give the holder of
each Note irrevocable written notice of any prepayment to be made pursuant to
paragraph 4 of this Agreement not less than 10 Business Days prior to the
prepayment date, specifying such prepayment date and the principal amount of the
Notes, and of the Notes held by such holder, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4B of this
Agreement. Notice of prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with interest thereon to
the prepayment date and together with the premium, if any, provided in this
Agreement, shall become due and payable on such prepayment date.
4D. Partial Payments Pro Rata. Upon any partial prepayment of Notes, the
principal amount so prepaid shall be allocated to all Notes at the time
outstanding in proportion to the respective aggregate principal amounts of Notes
then outstanding.
4E. Required Prepayments Upon Change in Control.
(i) Notice. In the event that the Company obtains actual knowledge
of a Change in Control, the Company shall, within 5 Business Days of
obtaining such knowledge, give written notice of such Change in Control to
each holder of Notes and, simultaneously with the sending of such notice,
use reasonable efforts to give telephonic advice of such Change in Control
to the investment officer of each such holder specified in Annex 1 to this
Agreement (as supplemented by written notice from each such holder). Each
such notice shall contain a description, in reasonable detail, of such
Change in Control.
Exhibit A-4
<PAGE>
(ii) Consolidated Debt. If on any day during the period of twelve
complete consecutive calendar months commencing immediately after a
Change in Control, Consolidated Debt, determined as of such day, shall
exceed 125% of Consolidated Tangible Net Worth, determined as of such
day, the Company shall, within 5 Business Days after such day, give
written notice of such fact to each holder of Notes and, simultaneously
with the sending of such notice, use reasonable efforts to give
telephonic advice of such fact to the investment officer of each such
holder specified in Annex 1 to this Agreement (as supplemented by written
notice from each such holder). Such written notice (the "Offer Notice")
shall contain and constitute an irrevocable offer to prepay all, but not
less than all, the Notes held by such holder.
(iii) Offer to Purchase. To accept such offered prepayment, a holder
of Notes shall cause a written notice of such acceptance with respect to
all, but not less than all, the Notes held by such holder (which acceptance
will be irrevocable) to be delivered to the Company not later than the 90th
day following its receipt of the Offer Notice whereupon such offered
prepayment shall be due and payable on the 10th Business Day following
delivery of such acceptance to the Company (the date of such prepayment
being referred to as the "Control Prepayment Date"). Such offered
prepayment shall be made at 100% of the principal amount of Notes so to be
prepaid, plus interest thereon to the Control Prepayment Date and the
Yield-Maintenance Amount, if any, with respect to such Notes.
4F. Retirement of Notes. The Company shall not, and shall not permit any
of the Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their respective stated final maturities (other than by prepayment
pursuant to paragraph 4A, paragraph 4B or paragraph 4E of this Agreement or the
Other Note Agreements or upon acceleration of such final maturity pursuant to
paragraph 7A of this Agreement or the Other Note Agreements), or purchase, or
otherwise acquire, directly or indirectly, Notes held by any Person. Any Notes
so prepaid or otherwise retired by the Company shall not be deemed to be
outstanding for any purpose under this Agreement (including, without limitation,
any determination of the "Required Holders").
5. AFFIRMATIVE COVENANTS.
5A. Financial Statements. The Company covenants that it will deliver to
each holder of Notes (except with respect to the information referred to in
clause (viii) below which shall only be delivered to Significant Holders of
Notes) in duplicate:
(i) as soon as available and in any event within 90 days after the
end of each fiscal year (except in the case of subclause (c), as to which
the period shall be 120 days after the end of such fiscal year),
(a) consolidated statements of income and cash flows of the
Company and the Subsidiaries for such year, and a consolidated balance
sheet of the Company and the Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding
consolidated figures from the preceding fiscal year, all in reasonable
detail and accompanied by the unqualified opinion
Exhibit A-5
<PAGE>
of independent certified public accountants of recognized national standing
selected by the Company,
(b) consolidating statements of income and cash flows of the
Company and the Subsidiaries for such year, and consolidating
balance sheets of the Company and the Subsidiaries as at the end of
such year, all in reasonable detail; provided that such financial
statements shall not be required to be delivered if financial
statements for the same dates and periods are delivered pursuant to
subclause (c) of this clause (i), and
(c) consolidated statements of income and cash flows of the
Company and the Restricted Subsidiaries for such year, and a
consolidated balance sheet of the Company and the Restricted
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
fiscal year, all in reasonable detail and reviewed in accordance with
generally accepted auditing standards by independent public
accountants of recognized national standing selected by the Company
whose report on such review shall state that such accountants are not
aware of any material modifications that should be made to such
financial statements in order for them to be in conformity with
generally accepted accounting principles; provided that such financial
statements shall not be required to be delivered if no Material
Unrestricted Subsidiaries exist as of the end of the period covered by
such financial statements;
(ii) as soon as available and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year,
(a) consolidated statements of income and cash flows of the
Company and the Subsidiaries for such quarterly period and for the
period from the beginning of the current fiscal year to the end of
such quarterly period, and a consolidated balance sheet of the Company
and the Subsidiaries as at the end of such quarterly period, setting
forth in each case in comparative form figures for the corresponding
periods in the preceding fiscal year, all in reasonable detail,
subject to changes resulting from year-end adjustments,
(b) consolidating statements of income and cash flows of the
Company and the Subsidiaries for such quarterly period and for the
period from the beginning of the current fiscal year to the end of
such quarterly period, and consolidating balance sheets of the Company
and the Subsidiaries as at the end of such quarterly period, subject
to changes resulting from year-end adjustments, all in reasonable
detail; provided that such financial statements shall not be required
to be delivered if financial statements for the same dates and periods
are delivered pursuant to subclause (c) of this clause (ii), and
(c) consolidated statements of income and cash flows of the
Company and the Restricted Subsidiaries for such quarterly period and
for the period from the beginning of the current fiscal year to the
end of such quarterly period, and a consolidated balance sheet of the
Company and the Restricted Subsidiaries
Exhibit A-6
<PAGE>
as at the end of such quarterly period, setting forth in each case
in comparative form figures for the corresponding periods in the
preceding fiscal year, all in reasonable detail, subject to changes
resulting from year-end adjustments; provided that such financial
statements shall not be required to be delivered if no Material
Unrestricted Subsidiaries exist as of the end of the period covered
by such financial statements;
(iii) together with each set of financial statements delivered
pursuant to clause (i) and clause (ii) of this paragraph 5A, a certificate
of a Responsible Officer,
(a) stating that (I) the accompanying financial statements
described in clause (a) of clause (i) or clause (ii), as the case may
be, of this paragraph 5A, present fairly the financial position and
results of operations of the companies being reported on, in
accordance with generally accepted accounting principles subject, in
the case of interim financial statements, to the absence of footnotes
and changes resulting from year-end adjustments, and (II) with
respect to the accompanying financial statements described in clause
(c) of clause (i) or clause (ii), as the case may be, of this
paragraph 5A (if such financial statements are required to be
delivered), such officer is not aware of any material modifications
that should be made to such financial statements in order for them to
be in conformity with generally accepted accounting principles
subject, in the case of interim financial statements, to the absence
of footnotes and changes resulting from year-end adjustments,
(b) stating that no Default or Event of Default then exists, or
if a Default or Event of Default exists, disclosing the nature and
period of existence of each such Default or Event of Default, and
describing all actions the Company has taken and intends to take in
respect to each such Default and Event of Default,
(c) certifying compliance, as of the last day of the period to
which such financial statements relate, with paragraph 6A, paragraph
6B, paragraph 6C, paragraph 6D(xv), paragraph 6E, paragraph 6F,
paragraph 6G(ii), and paragraph 6H(xx) of this Agreement, and setting
forth in reasonable detail the calculations necessary to demonstrate
such compliance, in a form reasonably acceptable to the Required
Holders,
(d) either
(I) stating that, during the period of eight consecutive
fiscal quarters of the Company most recently ended as of the date
of such certificate (the "Two Year Period"), the Company and the
Restricted Subsidiaries have not consummated any Transfer subject
to paragraph 6G(ii)(d) which requires any deduction pursuant to
subclause (cc) of paragraph 6G(ii)(d)(I) or paragraph
6G(ii)(d)(II) in order for such Transfer to be in compliance with
paragraph 6G(ii) or
(II) (aa) containing a brief description of all Transfers
consummated during the Two Year Period as to which such
Exhibit A-7
<PAGE>
deduction was necessary in order for such compliance to be
achieved,
(bb) setting forth the respective dates on which such
Transfers were consummated,
(cc) setting forth the respective amounts required to
be so deducted in respect of such Transfers, and
(dd) setting forth a brief description of the
application of any of the amounts referred to in the
foregoing subclause (cc) to the purposes identified in
subclause (cc) of paragraph 6G(ii)(d)(I) and paragraph
6G(ii)(d)(II); and
(e) the notice, if any, required by paragraph 6B(iii);
(iv) within five days of a Responsible Officer obtaining knowledge of
an Event of Default or Default, a certificate of a Responsible Officer
specifying the nature and period of existence thereof and what action the
Company has taken and proposes to take with respect to such Default or
Event of Default;
(v) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it sends to its public
stockholders generally, copies of all final registration statements on Form
S-1 or Form S-3 (without exhibits) or their successor forms relating to
offerings of debt or equity Securities on behalf of the Company, and copies
of all Form 10-Ks, Form 10-Qs, and Form 8-Ks or their successor forms, and
all amendments to such forms, that the Company files with the Securities
and Exchange Commission (or any governmental body or agency succeeding to
the functions of the Securities and Exchange Commission);
(vi) promptly upon receipt thereof by the Company, a copy of the
final management letter, if any, submitted by the Company's independent
accountants in connection with any annual audit made by them of the books
of the Company and the Subsidiaries;
(vii) promptly upon the request of any holder of Notes, any
information required to be delivered (to the extent not already delivered
to such holder pursuant to the other requirements of this paragraph 5A) to
any transferee of Notes by Rule 144A (17 C.F.R. (S) 230.144A) under the
Securities Act (or any successor provision) as a condition to the transfer
of any Note pursuant to such Rule;
(viii) subject to the second and third provisos to paragraph 5B of
this Agreement, with reasonable promptness, such other financial data as
any Significant Holder of Notes may reasonably request (including, without
limitation, a copy of each report, in addition to those referred to in
clauses (i) and (vi) of this paragraph 5B, submitted to the Company or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any
Subsidiary);
Exhibit A-8
<PAGE>
(ix) immediately upon becoming aware of the occurrence of any
(a) material "reportable event" (as such term is defined in
Section 4043 of ERISA), or
(b) "prohibited transactions" (as such term is defined in Section
406 or Section 4975 of the IRC)
in connection with any Pension Plan or any trust created thereunder, a
certificate of the a Responsible Officer specifying the nature thereof,
what action the Company is taking or proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto;
(x) prompt written notice and a description of
(a) any failure to make a contribution to a Pension Plan if such
failure has given rise to a Lien pursuant to Section 302(f)(1) of
ERISA, or
(b) any request pursuant to Section 303 of ERISA or Section 412
of the IRC for, or notice of the granting pursuant to said Section 303
or Section 412 of, a waiver in respect of all or part of the minimum
funding standard set forth in ERISA or the IRC, as the case may be, of
any Pension Plan, and, in connection with the granting of any such
waiver, the amount of any waived funding deficiency (as such term is
defined in said Section 303 or said Section 412) and the terms of such
waiver; and
(xi) prompt written notice of and, where applicable, a description of
(a) any notice from the PBGC in respect of the commencement of
any proceedings pursuant to Section 4042 of ERISA to terminate any
Pension Plan or for the appointment of a trustee to administer any
Pension Plan,
(b) any distress termination notice delivered to the PBGC under
Section 4041 of ERISA in respect of any Pension Plan, and any
determination of the PBGC in respect thereof,
(c) the placement of any Multiemployer Plan in reorganization
status under Title IV of ERISA,
(d) any Multiemployer Plan becoming "insolvent" (as such term is
defined in Section 4245 of ERISA under Title IV of ERISA),
(e) the whole or partial withdrawal of the Company or any ERISA
Affiliate from any Multiemployer Plan and the withdrawal liability
incurred in connection therewith, and
Exhibit A-9
<PAGE>
(f) the withdrawal of the Company or any ERISA Affiliate from any
Pension Plan with respect to which it is a "substantial employer"
under, and as defined in, ERISA and the withdrawal liability under
ERISA incurred in connection therewith.
Together with each delivery of financial statements required by clause (i)
(a) above, the Company will deliver to each holder of Notes a statement
by such accountants certifying that, in making the examination upon which
such opinion was based, no information came to their attention which, to
their knowledge, indicated that an Event of Default existed as the result
of the failure of the Company to comply with the covenants specified
below or a statement specifying such failure (it being understood that
such accountants' audit will not be directed toward obtaining knowledge
of any such failure):
(1) paragraph 6A, as of the Company's fiscal year end,
(2) paragraph 6B, as of the Company's fiscal year end, based solely
on amounts included in the consolidated financial statements or disclosed
in the notes thereto,
(3) paragraph 6C, for the Company's fiscal year, based solely on
amounts included in the consolidated financial statements or disclosed in
the notes thereto,
(4) paragraph 6D(xv), as of the Company's fiscal year end, based
solely on amounts included in the consolidated financial statements or
disclosed in the notes thereto,
(5) paragraph 6E, but only as to individual transactions in excess of
$5,000,000, and
(6) paragraph 6F, as of the Company's fiscal year end, based solely
on the amounts included in the consolidating balance sheets of the
Restricted Subsidiaries.
Such accountants, however, shall not be liable to anyone by reason of their
failure to obtain knowledge of any Event of Default or Default that would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards.
5B. Inspection of Property. The Company covenants that it will permit any
employee of, or any financial, legal, environmental or other professional
consultant or advisor to, any Significant Holder that is designated by such
Significant Holder in writing, at such Significant Holder's expense or, so long
as an Event of Default shall exist, at the expense of the Company, upon
reasonable notice to the Company, to visit and inspect any of the properties of
the Company and the Subsidiaries, to examine the corporate books and financial
records of the Company and the Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent
public accountants (the "Inspection Rights") and by this paragraph the Company
authorizes such officers and accountants to discuss such affairs, finances and
accounts, all at such reasonable times and as often as such
Exhibit A-10
<PAGE>
holder may reasonably request, provided that, in the event that the Company
reasonably objects to any Significant Holder within two Business Days of such
notice that any Person so designated by such Significant Holder is a
Competitor or an employee thereof, the Company shall not be required to afford
such Person any of the foregoing Inspection Rights, provided, further, that
the Company and the Restricted Subsidiaries will not be required to disclose,
permit the inspection, examination, copying or making extracts of, or discuss,
any portion of, any document, or any information,
(i) that constitutes non-financial trade secrets, non-financial
proprietary information or product-by-product information relating to
production, pricing, profitability or failure rates, or
(ii) in respect of which disclosure to such Significant Holder is
then prohibited by
(a) law, or
(b) an agreement binding on the Company or any Subsidiary that
was not entered into by the Company or such Subsidiary for the primary
purpose of concealing information from such Significant Holder,
and in respect of which a Responsible Officer has provided a certificate to
such holder setting forth a brief description of the law or agreement
(including, in the case of an agreement, without limitation, the nature and
purpose of the agreement, the parties to the agreement, and the provision
of the agreement that prohibits such disclosure), provided, however, that
if disclosure of the existence of any agreement is prohibited by the
provisions thereof, such certificate may state generally, with respect to
such agreement, that there are agreements pertaining to the matter as to
which information was requested which are binding on the Company or a
Subsidiary and which prohibit disclosure of the existence thereof.
5C. Covenant to Secure Note Equally. The Company will, if it or any
Restricted Subsidiary creates or assumes any Lien upon any of its Property,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6D of this Agreement (unless prior written consent to
the creation or assumption thereof shall have been obtained pursuant to
paragraph 11C of this Agreement), make or cause to be made, pursuant to such
agreements and instruments as shall be approved by the Required Holders,
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Debt thereby secured so long as any such other
Debt shall be so secured.
5D. ERISA Compliance. The Company covenants that it will, and will cause
each ERISA Affiliate to, at all times
(i) with respect to each Pension Plan, make timely payments of
contributions required to meet the minimum funding standard set forth in
ERISA or the IRC with respect thereto and, with respect to each
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA and
Exhibit A-11
<PAGE>
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as would
not have a material adverse effect on the business, prospects, Properties or
financial condition of the Company and the Subsidiaries taken as a whole.
5E. Payment of Taxes and Claims. The Company will, and will cause each
Subsidiary to, pay before they become delinquent, all material taxes,
assessments and governmental charges or levies imposed upon it or its
Property, provided that items of the foregoing description need not be paid
while being contested in good faith and by appropriate proceedings as long as
adequate reserves, to the extent required by generally accepted accounting
principles, have been established and maintained and exist with respect
thereto and, provided, further, that the contesting Person's right to use any
material Property is not materially adversely affected thereby.
5F. Maintenance of Properties and Corporate Existence. The Company will,
and will cause each Restricted Subsidiary to,
(i) Property -- maintain in good working order and condition all of
its Property which is material to the continued conduct of the business of
the Company and the Restricted Subsidiaries taken as a whole;
(ii) Insurance -- maintain, with financially sound and reputable
insurers, insurance with respect to its Property and business against such
casualties and contingencies, of such types (including, without limitation,
loss or damage, public liability, business interruption, larceny,
embezzlement or other criminal misappropriation) and in such amounts as is
customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated;
(iii) Financial Records -- maintain sound accounting policies and an
adequate and effective system of accounts and internal accounting control
that will safeguard assets, properly record income, expenses and
liabilities, and assure the production of proper financial statements in
accordance with generally accepted accounting principles;
(iv) Corporate Existence and Rights -- do or cause to be done all
things necessary to preserve and keep in full force and effect its
existence, rights and franchises, except as otherwise permitted by
paragraph 6G or paragraph 6K of this Agreement and except, in each case,
where the failure to take any such action would not have a material adverse
effect on the business, prospects, Properties or condition (financial or
otherwise) of the Company and the Restricted Subsidiaries taken as a whole
or the ability of the Company to perform its obligations set forth in this
Agreement and in the Notes; provided that the corporate existence of any
Restricted Subsidiary may be terminated, and any rights and franchises may
be terminated or permitted to lapse, if, in the good faith judgment of the
Company, such determination or lapse is in the best interests of the
Company and is not disadvantageous to the holders of the Notes; and
Exhibit A-12
<PAGE>
(v) Compliance with Law -- (a) comply with all applicable laws,
rules, regulations, orders, judgments and decrees of any governmental
authority, except where any failure to comply would not have a material
adverse effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Restricted Subsidiaries
taken as a whole or the ability of the Company to perform its obligations
set forth in this Agreement and in the Notes and (b) obtain all licenses,
permits, franchises and other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business, except where
any failure to so obtain would not have a material adverse effect on the
business, Properties or condition (financial or otherwise) of the Company
and the Restricted Subsidiaries taken as a whole or the ability of the
Company to perform its obligations set forth in this Agreement and in the
Notes.
5G. Payment of Notes and Maintenance of Office. The Company will
punctually pay, or cause to be paid, the principal and interest (and premium, if
any) to become due in respect of the Notes according to the terms thereof and
will maintain an office in compliance with paragraph 11I of this Agreement (or
such other address which the Company shall have specified in writing in
accordance with paragraph 11I) where notices, presentations and demands in
respect of this Agreement or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company will notify the
holders of the Notes of any change of location of such office, which will in any
event be located in the United States of America.
6. NEGATIVE COVENANTS.
6A. Consolidated Tangible Net Worth. The Company will not permit
Consolidated Tangible Net Worth, determined as of any Determination Date, to be,
(i) if such Determination Date is prior to December 22, 1993, then
less than the sum of
(a) $525,000,000, plus
(b) 45% of Consolidated Net Income for each fiscal year ended
during the period beginning on January 1, 1991 and ending on or prior
to such Determination Date (unless Consolidated Net Income shall be a
loss in any fiscal year, in which event the amount determined pursuant
to this clause (b) for such fiscal year shall be zero), plus
(c) the net proceeds to the Company from the sale of any capital
stock of the Company made during the period beginning on January 1,
1991 and ending on such Determination Date, plus
(d) without duplication with clauses (i)(b) or (i)(c) above, an
amount equal to the aggregate principal amount of any Debt Security of
the Company (other than Debt Securities held by Restricted
Subsidiaries), minus the costs and fees incurred upon the original
issuance of such Debt Security, any unamortized original issue
discount with respect to any such Debt Security and
Exhibit A-13
<PAGE>
any costs and expenses of conversion, which has been converted into
or exchanged for capital stock during the period beginning on
January 1, 1991 and ending on such Determination Date, but only to
the extent such conversion or exchange increases Consolidated
Tangible Net Worth, and
(ii) if such Determination Date is on or after December 22, 1993,
then less than the sum of
(a) $125,000,000, plus
(b) 50% of Consolidated Net Income for each fiscal quarter
ended during the period beginning on October 3, 1993 and ending on
or prior to such Determination Date (unless Consolidated Net Income
shall be a loss in any fiscal quarter, in which event the amount
determined pursuant to this clause (b) for such fiscal quarter shall
be zero), plus
(c) the net proceeds to the Company from the sale of any capital
stock of the Company made during the period beginning on October 3,
1993 and ending on such Determination Date, plus
(d) without duplication with clauses (ii)(b) or (ii)(c) above,
an amount equal to the aggregate principal amount of any Debt Security
of the Company (other than Debt Securities held by Restricted
Subsidiaries), minus the costs and fees incurred upon the original
issuance of such Debt Security, any unamortized original issue
discount with respect to any such Debt Security and any costs and
expenses of conversion, which has been converted into or exchanged for
capital stock during the period beginning on October 3, 1993 and
ending on such Determination Date, but only to the extent such
conversion or exchange increases Consolidated Tangible Net Worth.
6B. Consolidated Debt.
(i) Consolidated Senior Debt. The Company will not permit, on any
Determination Date, Consolidated Senior Debt, to exceed the percentage of
Consolidated Tangible Net Worth set forth in the following table opposite
such Determination Date, in each case determined as of such Determination
Date:
<TABLE>
<CAPTION>
================================================================================
Determination Date Percentage
- --------------------------------------------------------------------------------
<S> <C>
All Determination Dates occurring between March 29, 1991 to and 75%
including the Determination Date occurring nearest to September
30, 1993
- --------------------------------------------------------------------------------
Determination Date occurring nearest to December 31, 1993 115%
- --------------------------------------------------------------------------------
Determination Date occurring nearest to March 31, 1994 90%
- --------------------------------------------------------------------------------
</TABLE>
Exhibit A-14
<PAGE>
<TABLE>
<CAPTION>
Determination Date
<S> <C>
All Determination Dates occurring after the Determination Date 75%
occurring nearest to March 31, 1994
</TABLE>
(ii) Consolidated Debt. The Company will not permit, on any
Determination Date, Consolidated Debt to exceed the percentage of
Consolidated Tangible Net Worth set forth in the following table opposite
such Determination Date, in each case determined as of such Determination
Date:
<TABLE>
<CAPTION>
Determination Date Percentage
<S> <C>
All Determination Dates 125%
occurring between March
29, 1991 to and including
the Determination Date
occurring nearest to
September 30, 1993
Determination Date 515%
occurring nearest to
December 31, 1993
Determination Date 455%
occurring nearest to
March 31, 1994
Determination Date 405%
occurring nearest to June
30, 1994
Determination Date 365%
occurring nearest to
September 30, 1994
Determination Date 335%
occurring nearest to
December 31, 1994
Determination Date 295%
occurring nearest to
March 31, 1995
Determination Date 275%
occurring nearest to June
30, 1995
Determination Date 255%
occurring nearest to
September 30, 1995
Determination Date 240%
occurring nearest to
December 31, 1995
Determination Date 220%
occurring nearest to
March 31, 1996
All Determination Dates 200%
occurring after the
Determination Date
occurring nearest to
March 31, 1996
</TABLE>
(iii) Adjustments to Consolidated Debt Percentages. The percentages set
forth in the table in paragraph 6B(ii) hereof shall be adjusted as of each
Determination Date to be equal to the Adjusted Consolidated Debt Percentage
calculated in respect thereof if
(a) during the fiscal quarter ended on such Determination Date
the Company issues capital stock, other than issuances of capital stock
pursuant to (or pursuant to options, warrants or other securities issued
pursuant to) employee stock option plans, director stock options plans,
employee stock purchase plans or any similar arrangements intended to
provide incentives for employee and directors, and
Exhibit A-15
<PAGE>
(b) the percentage set forth in such table in respect of such
Determination Date, as then previously adjusted as provided in this
subparagraph (iii), is greater than 125%.
The Company shall provide a notice with respect to each Determination Date
as to which an adjustment in such percentage is required by this
subparagraph (iii), together with the certificate required by paragraph
5A(iii) delivered in respect of such fiscal quarter, to all holders of
Notes, providing in detail the calculation of the Adjusted Consolidated
Debt Percentages determined in respect of such fiscal quarter and all
subsequent fiscal quarters. The Adjusted Consolidated Debt Percentages
specified in such notice shall apply to such fiscal quarter and to all
subsequent fiscal quarters and such table shall be deemed to be amended in
accordance with such notice. Such notice shall be satisfactory in all
respects to the Required Holders.
6C. Consolidated Fixed Charges; Consolidated Net Income.
(i) Consolidated Fixed Charges. The Company will not permit the
ratio of (i) the sum of Consolidated Net Income plus Consolidated Fixed
Charges plus taxes deducted from revenues in the computation of such
Consolidated Net Income, to (ii) Consolidated Fixed Charges to be less for
any period of two consecutive fiscal quarters of the Company than the ratio
set forth opposite the relevant period in the table below:
<TABLE>
<CAPTION>
Two Fiscal Quarter Period Ending Ratio
<S> <C>
On the Determination Date occurring nearest to March 31, 1994 1.0 : 1.0
On the Determination Date occurring nearest to June 30, 1994 1.85 : 1.0
On the Determination Date occurring nearest to September 30, 1994 2.0 : 1.0
On the Determination Date occurring nearest to December 31, 1994 2.0 : 1.0
</TABLE>
The Company will not permit, at any time on or after the Determination Date
occurring nearest to March 31, 1995, the ratio of (i) the sum of
Consolidated Net Income plus Consolidated Fixed Charges plus taxes deducted
from revenues in the computation of such Consolidated Net Income, to (ii)
Consolidated Fixed Charges to be less for any period of four consecutive
fiscal quarters of the Company than 2.0 to 1.0.
(ii) Consolidated Net Income. The Company will not permit
Consolidated Net Income for the three-month period ending on the
Determination Date occurring nearest to December 31, 1993 to be less than a
deficit of $12,000,000.
6D. Liens. The Company will not, and will not permit any Restricted
Subsidiary to, create, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired (whether or not provision is
made for the equal and ratable securing of the Notes in accordance with the
provisions of paragraph 5C of this Agreement), except
Exhibit A-16
<PAGE>
(i) Liens in existence on the Closing Date and described on Annex 2
to this Agreement;
(ii) Liens for taxes that are not yet due or that are being actively
contested in good faith by appropriate proceedings, and in respect of which
adequate reserves are being maintained to the extent required by generally
accepted accounting principles;
(iii) Liens incurred or deposits made in the ordinary course of
business,
(a) in respect of leases, statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons that are not yet due or that are being actively
contested in good faith by appropriate proceedings, and in respect of
which adequate reserves are carried on the books of the Person liable
therefor to the extent required by generally accepted accounting
principles,
(b) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(c) to secure the performance of letters of credit, bids,
leases, tenders, sales contracts, statutory obligations, government
contracts, surety and performance bonds 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,
(d) incidental to the conduct of its business or ownership of
its Property, provided that,
(I) such obligations shall not have arisen in connection
with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of Property, and
(II) such Liens shall not in the aggregate materially
detract from the value of the Property encumbered thereby or
materially interfere with the use of such Property in the
ordinary conduct of the owning Person's business,
(e) which constitute purchase money security interests with
respect to advances or the payment of deferred purchase price in
connection with the purchase of goods and services in the ordinary
course of business, provided that, at the time any such security
interest is created, the Company or such Restricted Subsidiary intends
to pay the amount secured thereby within 180 days after such creation,
provided further that any such security interest runs in favor of the
provider of such goods or services and is not part of a floor plan
financing arrangement or any other arrangement with any Person that is
primarily in the business of making loans or extending other financial
accommodations, or
Exhibit A-17
<PAGE>
(f) which constitute Liens with respect to conditional sale or
other title retention agreements and any lease in the nature thereof,
provided that any such Lien with respect to conditional sales or other
title retention agreements encumbers only Property and accretions
thereto (and proceeds arising from the disposition thereof) which are
subject to such conditional sale or other title retention agreement or
lease in the nature thereof and, provided, further, that the aggregate
amount secured by all such conditional sale or other title retention
agreements and leases in the nature thereof shall not be more than
$5,000,000 (it being understood that additional amounts may be so
secured if permissible under any other provision of this paragraph 6D
including, without limitation, clause (xv) of this paragraph 6D);
(iv) reservations, exceptions, encroachments, easements, rights-of-
way, covenants, conditions, restrictions and other similar title exceptions
or encumbrances affecting real Property, provided such Liens do not
interfere with the use of such Property in the ordinary conduct of the
business of the Company and the Restricted Subsidiaries, taken as a whole;
(v) Liens on Property of a Restricted Subsidiary to secure
obligations of such Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(vi) Liens with respect to Capitalized Lease Obligations (together
with any related interest), provided, that such Liens encumber only
Property and accretions thereto (and proceeds arising from the disposition
thereof) acquired with the proceeds of the indebtedness secured thereby;
(vii) leases and subleases of, and licenses and sub-licenses with
respect to, Property where the Company or a Restricted Subsidiary is the
lessor or licensor (or sublessor or sublicensor), provided that such
leases, subleases, licenses and sublicenses do not in the aggregate
materially interfere with the business of the Company and the Restricted
Subsidiaries taken as a whole;
(viii) (a) Liens to secure appeal bonds, supersedeas bonds and other
similar Liens 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 the aggregate
amount so secured, together with the aggregate amount secured pursuant
to paragraph 6D(viii)(b), shall not at any time exceed $5,000,000 (it
being understood that additional amounts may be so secured if
permissible under any other provision of this paragraph 6D including,
without limitation, clause (xv) of this paragraph 6D),
(b) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution or
other enforcement of such Liens is effectively stayed and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings and provided further, that the aggregate
amount so secured, together with the aggregate amount secured pursuant
to paragraph 6D(viii)(a) of this Agreement, shall not exceed
$5,000,000 (it being understood that additional amounts may be so
Exhibit A-18
<PAGE>
secured if permissible under any other provision of this paragraph 6D
including, without limitation, clause (xv) of this paragraph 6D),
(ix) Liens on the Property of any corporation at the time such
corporation becomes a Restricted Subsidiary, or such corporation is
acquired by, consolidated with or merged into the Company or a Restricted
Subsidiary, and Liens on any Property at the time acquired by the Company
or a Restricted Subsidiary, provided, in each case, that such Lien was not
incurred in contemplation of such transaction;
(x) any Lien permitted by this paragraph 6D securing Debt that is
being renewed, extended or refunded, provided that the principal amount of
such Debt outstanding at the time of such renewal, extension or refunding
is not increased and such Lien is not extended to any other Property (other
than pursuant to its original terms);
(xi) Purchase Money Mortgages, provided that each such Purchase Money
Mortgage secures an amount not exceeding 100% of the lesser of the cost
(including liabilities assumed) or the Fair Market Value at the time of
acquisition or construction of the Property to which it relates (as
determined in good faith by the Board of Directors);
(xii) Liens consisting of an agreement to file or give a financing
statement set forth in operating leases (it being understood that, upon the
filing of any such financing statement, the Lien created thereby must be
permissible under any other provision of this paragraph 6D including,
without limitation, clause (iii)(f) and clause (xv) of this paragraph 6D);
(xiii) Liens which constitute rights of set-off of a customary nature
or bankers' Liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with working capital
facilities, lines of credit, term loans, or other credit facilities and
similar arrangements entered into with banks in the ordinary course of
business;
(xiv) Liens in the nature of rights of first refusal and restrictions
on transfer on the capital stock of Arcada Holdings, Inc. arising in
connection with the purchase of Quest Development Corporation and described
in that certain Letter of Intent dated as of December 13, 1993, related
thereto; and
(xv) Liens not otherwise permitted by this paragraph 6 on Property
of the Company or any Restricted Subsidiary, provided that, as of each
Determination Date, the amount of
(a) all Debt secured by Liens permitted only by this paragraph
6D(xv), plus
(b) all Debt of Restricted Subsidiaries (other than Debt owed by
a Restricted Subsidiary to the Company or another Restricted
Subsidiary) and all Preferred Stock of Restricted Subsidiaries (other
than Preferred Stock of a
Exhibit A-19
<PAGE>
Restricted Subsidiary owned by the Company or another Restricted
Subsidiary), plus
(c) the Sale/Leaseback Transaction Amount,
(without duplication) does not exceed 20% of Consolidated Tangible Net
Worth, in each case determined as of such Determination Date.
6E. Sale/Leaseback Transactions.
The Company will not, nor will it permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction at any time, unless after giving
effect thereto, the sum of
(i) the Sale/Leaseback Transaction Amount, plus
(ii) the amount of all Debt secured only by Liens permitted by
paragraph 6(xv) of this Agreement, plus
(iii) all Debt of Restricted Subsidiaries (other than Debt owed by a
Restricted Subsidiary to the Company or another Restricted Subsidiary) and
all Preferred Stock of Restricted Subsidiaries (other than Preferred Stock
of a Restricted Subsidiary owned by the Company or another Restricted
Subsidiary),
(without duplication) does not exceed 20% of Consolidated Tangible Net Worth, in
each case determined as of such time.
6F. Restricted Subsidiary Debt and Preferred Stock. The Company will not,
at any time, permit any Restricted Subsidiary to create, incur or assume any
Debt, or to issue any Preferred Stock, unless, immediately after the creation,
incurrence or assumption of such Debt, or the issuance of such Preferred Stock,
and after giving effect thereto, the sum of
(i) the Sale/Leaseback Transaction Amount, plus
(ii) the amount of all Debt secured by Liens permitted only by
paragraph 6(xv) of this Agreement, plus
(iii) all Debt of Restricted Subsidiaries (other than Debt owed by a
Restricted Subsidiary to the Company or another Restricted Subsidiary) and
all Preferred Stock of Restricted Subsidiaries (other than Preferred Stock
of a Restricted Subsidiary owned by the Company or another Restricted
Subsidiary),
(without duplication) does not exceed 20% of Consolidated Tangible Net Worth, in
each case determined as of such time. Notwithstanding the foregoing, the
prepayment of the 8 7/8% Convertible Subordinated Debentures issued by Archive
pursuant to the Convertible Subordinated Debenture Agreement dated as of May 11,
1990, as heretofore amended, and outstanding on the Merger Date, not to exceed
in aggregate amount $10,000,000 shall be permitted.
Exhibit A-20
<PAGE>
6G. Merger and Consolidation; Sale of Assets.
(i) Merger and Consolidation.
(a) The Company will not permit any other Person to consolidate
with or merge into it (except that a Restricted Subsidiary may
consolidate with or merge into the Company); provided that the
foregoing restriction does not apply to the merger or consolidation of
the Company with another corporation, if:
(I) either (aa) the Company shall be the continuing or
surviving corporation or (bb) the successor corporation that
results from such merger or consolidation (the "Surviving
Corporation") is organized under the laws of any State of the
United States (or the District of Columbia), and the due and
punctual payment of the principal of and premium, 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 in writing by the Surviving
Corporation; and
(II) 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 under any
provision of this Agreement.
(b) The Company will not permit any Restricted Subsidiary to
consolidate with or merge into any other Person or permit any other
Person to consolidate with or merge into it (except that a Restricted
Subsidiary may consolidate with or merge into the Company as
contemplated by paragraph 6G(i)(a) and a Restricted Subsidiary may
consolidate with or merge into another Restricted Subsidiary);
provided that a Restricted Subsidiary may merge or consolidate with
another Person if
(I) such transaction would be permitted under the
provisions of paragraph 6G(ii) (deeming such transaction to be a
Transfer of all of the assets and liabilities of such Restricted
Subsidiary, in the case of any such merger or consolidation which
results in a surviving entity which is not a Restricted
Subsidiary); or
(II) the surviving corporation is the Company or a
Restricted Subsidiary.
(ii) Sale of Assets. The Company will not, nor will it permit any
Restricted Subsidiary to, sell, lease as lessor, transfer or otherwise
dispose of Property (collectively, "Transfers"), except
(a) Transfers in the ordinary course of business,
Exhibit A-21
<PAGE>
(b) Transfers to the Company or a Restricted Subsidiary other
than an Arcada Restricted Subsidiary;
(c) Transfers which (I) constitute dispositions of cash or cash
equivalents not prohibited by this Agreement, (II) constitute
Investments which are Permitted Investments or (III) constitute the
liquidation of any Permitted Investment; and
(d) any other Transfer if all of the following conditions shall
have been satisfied:
(I) the sum (without duplication) of
(aa) the net book value of such Property on the date
of the Transfer (the "Asset Disposition Date"), expressed as
a percentage of Consolidated Total Assets on the
Determination Date most recently preceding the Asset
Disposition Date, plus
(bb) the net book value of each other item of Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 6G(ii)(d) (including,
without limitation, a Transfer by merger or consolidation,
as contemplated by paragraph 6G(i)) during the period ending
on the Asset Disposition Date and commencing on the first
day of the period of 12 consecutive calendar months most
recently ended as of the Asset Disposition Date (the
"Annual Disposition Measurement Period") (Subsidiary Stock
being deemed to have a net book value equal to the net
book value of all assets of the issuer of such Subsidiary
Stock at such time, or the appropriate portion thereof if
less than all Subsidiary Stock of such issuer is the
subject of such Transfer), expressed in each case as a
percentage of Consolidated Total Assets on the
Determination Date most recently preceding the date of
each such Transfer, minus
(cc) the aggregate net book value of all Property
Transferred pursuant to this paragraph 6G(ii)(d) during the
Annual Disposition Measurement Period to the extent that the
net proceeds arising therefrom have been either reinvested
in the business of the Company and the Restricted
Subsidiaries or applied to, or irrevocably committed to
make, Senior Debt Prepayments within the period of 12
consecutive months after the respective Transfers of such
Property pursuant to this paragraph 6G(ii)(d), such
aggregate net book value (or the portion thereof
corresponding to the portion of such net proceeds so applied
or to be so applied) being expressed as a percentage of
Consolidated Total Assets determined on the Determination
Date most recently preceding the date of each such Transfer;
Exhibit A-22
<PAGE>
provided, that any such net proceeds spent for operating
expenses or principal, premium or interest in respect of
Debt or held in deposit accounts or otherwise as short term
investments shall not be deemed to have been reinvested in
the business of the Company and the Restricted Subsidiaries,
provided, further, that such percentage shall not, in any
event, exceed 10%;
will not exceed 15%;
(II) the sum (without duplication) of
(aa) the Cash Flow Contribution of such Property
during the period of four consecutive fiscal quarters of the
Company most recently ended prior to the Asset Disposition
Date (the "Four Quarter Period"), plus
(bb) the Cash Flow Contribution of each other item of
Property of the Company and the Restricted Subsidiaries that
was Transferred pursuant to this paragraph 6G(ii)(d)
(including, without limitation, a Transfer by merger or
consolidation, as contemplated by paragraph 6G(i)) during
the Annual Disposition Measurement Period, such Cash Flow
Contribution for any particular Property being measured for
the period of four consecutive fiscal quarters of the
Company most recently ended prior to the Transfer of such
Property, minus
(cc) the Cash Flow Contribution of all Property
Transferred by the Company and the Restricted Subsidiaries
during the Annual Disposition Measurement Period to the
extent that the net proceeds arising therefrom have been
either reinvested in the business of the Company and the
Restricted Subsidiaries or applied to, or irrevocably
committed to make, Senior Debt Prepayments within the period
of 12 consecutive months after the respective Transfers of
such Property pursuant to this paragraph 6G(ii)(d), such
Cash Flow Contribution (or the portion thereof corresponding
to the portion of such net proceeds so applied or to be so
applied) for any particular Property being measured for the
period of four consecutive fiscal quarters of the Company
most recently ended prior to the disposition of such
Property, provided, that any such net proceeds spent for
operating expenses or principal, premium or interest in
respect of Debt or held in deposit accounts or otherwise as
short term investments shall not be deemed to have been
reinvested in the business of the Company and the Restricted
Subsidiaries, provided, further, that the Cash Flow
Contribution of all such Property shall not, in any event,
exceed 10% of Consolidated Operating Cash Flow during the
Four Quarter Period,
Exhibit A-23
<PAGE>
will not exceed 15%;
(III) the sum (without duplication) of
(aa) the net book value of such Property on the Asset
Disposition Date, expressed as a percentage of Consolidated
Total Assets on the Determination Date most recently
preceding the Asset Disposition Date, plus
(bb) the net book value of each other item of Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 6(ii)(d) (including,
without limitation, a Transfer by merger or consolidation,
as contemplated by paragraph 6(i)) during the period ending
on the Asset Disposition Date and commencing on the first
day of the period of 36 consecutive calendar months most
recently ended as of the Asset Disposition Date (the "Three
Year Disposition Measurement Period") (Subsidiary Stock
being deemed to have a net book value equal to the net book
value of all assets of the issuer of such Subsidiary Stock,
or the appropriate portion thereof if less than all
Subsidiary Stock of such issuer is the subject of such
Transfer), expressed in each case as a percentage of
Consolidated Total Assets on the Determination Date most
recently preceding the date of each such Transfer,
will not exceed 40%;
(IV) the sum (without duplication) of
(aa) the Cash Flow Contribution of such Property
during the Four Quarter Period, plus
(bb) the Cash Flow Contribution of all other Property
of the Company and the Restricted Subsidiaries that was
Transferred pursuant to this paragraph 6(ii)(d) (including,
without limitation, a Transfer by merger or consolidation,
as contemplated by paragraph 6(i)) during such Three Year
Disposition Measurement Period, such Cash Flow Contribution
for any particular Property being measured for the period of
four consecutive fiscal quarters of the Company most
recently ended prior to the disposition of such Property,
will not exceed 40%;
(V) with respect to any Transfer, or series of related
Transfers, of Property pursuant to this paragraph 6(ii)(d) for
consideration in an amount which is at least equal to the sum of
$25,000,000 plus 5% of the amount, if any, by which Consolidated
Total Assets, determined as
Exhibit A-24
<PAGE>
of the most recent Determination Date at the time of such
Transfer, exceeds Consolidated Total Assets, determined as of
December 31, 1990, in the opinion of the Board of Directors,
the sale is for Fair Market Value and is in the best interests
of the Company and the Restricted Subsidiaries; and
(VI) 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 under any
provision of this Agreement.
If the Company shall make any Transfer which would be prohibited by this
paragraph 6G but for the deduction provided for in subclause (cc) of either
or both of paragraph 6G(ii)(d)(I) or paragraph 6G(ii)(d)(II), the Company
shall be deemed to have covenanted that the net proceeds from such Transfer
shall be reinvested in the business of the Company and the Restricted
Subsidiaries (subject to the limitations of the first proviso to such
subclause) or applied to, or irrevocably committed to make, Senior Debt
Prepayments within the period of 12 consecutive months after such Transfer.
6H. Permitted Investments. The Company will not and will not permit any
Restricted Subsidiary to purchase or make investments in, purchase stock or
Securities of, or make loans or advances to, or make other investments in, or
guarantee the obligations of, any other Person (including investments in or
loans or advances to any corporation proposed to be acquired or created as a
Subsidiary) (all of the foregoing referred to as "Investments," and all of the
below-listed Investments referred to as "Permitted Investments") except:
(i) obligations of, or obligations guaranteed by, the United States
government, its agencies, or any public instrumentality thereof with
maturities not to exceed (or an unconditional right to compel purchase
within) seven years from the date of acquisition;
(ii) Investments in or to the Company or Restricted Subsidiaries and
Investments in or to companies which simultaneously with such Investments
become Restricted Subsidiaries, and guarantees by the Company of the
obligations of the Restricted Subsidiaries and guarantees by Restricted
Subsidiaries of obligations of the Company or other Restricted
Subsidiaries;
(iii) commercial paper or loan participations maturing within seven
years of the date of acquisition issued by a Person organized under the
laws of the United States, Canada, a country that is a member of the
European Community, Singapore, Taiwan, Malaysia or Japan, rated at the time
of acquisition (or issued by Persons organized under the laws of such
jurisdiction with other outstanding unsecured and unsupported debt
securities ranking pari passu with such commercial paper or loan
participations and rated at the time of acquisition) in the top rating
classification by Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff & Phelps Inc. or any other rating agency nationally
recognized in the United States, Japan or any country which is a member of
the European Community at the time of acquisition thereof;
Exhibit A-25
<PAGE>
(iv) Investments arising from transactions by the Company or the
Restricted Subsidiaries with customers or suppliers (including Investments
received in settlement of trade receivables which trade receivables are
fully reserved against on the books of the Company or such Restricted
Subsidiary or are less than one year overdue) in the ordinary course of
business;
(v) Investments consisting of
(a) travel advances, employee relocation loans, and other
employee loans and advances in the ordinary course of business,
(b) loans to employees, officers or directors relating to the
purchase of equity securities of the Company or the Restricted
Subsidiaries, or
(c) other loans to officers and employees approved by the Board
of Directors in an aggregate amount not in excess of $10,000,000
outstanding at any time;
(vi) operating deposit accounts maintained in the ordinary course of
business for operating fund purposes including Investments therein
denominated in French francs, Deutsche marks, Chinese renminbi and
otherwise with Permitted Banks, consistent with past practice;
(vii) Securities issued by any state of the United States or any
political subdivision of any such state or any public instrumentality
thereof with maturities not to exceed (or an unconditional right to compel
purchase within) seven years of the date of acquisition, that are rated in
one of the highest two rating classifications by Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff & Phelps Inc. or any other rating
agency nationally recognized in the United States;
(viii) demand and time deposits with, Eurodollar deposits with,
certificates of deposit issued by, or obligations or securities fully
backed by letters of credit issued by
(a) any bank organized under the laws of the United States, any
state thereof, the District of Columbia or Canada having combined
capital and surplus aggregating at least $100,000,000, and outstanding
unsecured and unsupported Debt rated "A" or better at the time of
acquisition thereof by Standard and Poor's Corporation, Moody's
Investor Service, Inc., Duff & Phelps Inc. or any other rating agency
nationally recognized in the United States, Japan or any country which
is a member of the European Community,
(b) the banks listed on Annex 2 to this Agreement, and
(c) any other bank organized under the laws of a country that is
a member of the European Community (or any political subdivision of
any such country), Japan, Singapore, Taiwan, Malaysia, the Cayman
Islands, the British West Indies or the Bahamas, having combined
capital and surplus of not less
Exhibit A-26
<PAGE>
than $500,000,000 or the equivalent thereof in a currency other than
United States dollars,
(the banks described in the foregoing subclauses (a) to (c), inclusive,
being referred to in this Agreement as "Permitted Banks");
(ix) bankers' acceptances accepted by a Permitted Bank and eligible
for rediscount under the requirements of the Board of Governors of the
Federal Reserve System;
(x) repurchase agreements with any of
(a) the Permitted Banks,
(b) Alex. Brown & Sons Incorporated, Bear, Stearns & Co., Dean
Witter Reynolds Inc., The First Boston Corporation, Goldman Sachs &
Co., J.P. Morgan Securities, Inc., Kidder, Peabody & Co.,
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, Paine Webber Incorporated, Salomon
Brothers, Inc., Shearson Lehman Hutton, Inc., Smith Barney, Harris
Upham & Co., Incorporated, or
(c) any other bank or securities dealer of a similar quality
approved by a Responsible Officer, or
(d) any affiliate of the foregoing,
such repurchase agreements to be (at the time entered into) fully
collateralized by securities of a type described in clause (i), clause
(iii), clause (vii) or clause (viii) above, in each case made in accordance
with the Company's internal investment policy in effect at such time;
(xi) Investments in money market programs that would be classified on
the balance sheet of the investing Person as a current asset in accordance
with generally accepted accounting principles, which money market programs
have total invested assets in excess of $1,000,000,000;
(xii) Investments in money market preferred stocks or other
equivalent Dutch-auction preferred stock of any corporation maturing within
seven years of the date of acquisition thereof and with a credit rating at
the time of acquisition thereof of "AA+" or "aa1" or better (or a
comparable rating) by Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff & Phelps Inc. or any other rating agency nationally
recognized in the United States, Japan or any country which is a member of
the European Community;
(xiii) notes receivable of, or prepaid royalties and other credit
extensions to, customers and suppliers in the ordinary course of business
so long as such notes, prepaid royalties or other credit extensions are due
within one year of the date of
Exhibit A-27
<PAGE>
acquisition thereof or cover no more than a reasonable estimate of one
year's obligations to such customers or suppliers, as the case may be;
(xiv) foreign currency swaps and hedging arrangements entered into in
the ordinary course of business to protect against currency losses, and
interest rate swaps and caps entered into in the ordinary course of
business to protect against interest rate exposure on Debt of the Company
and the Restricted Subsidiaries bearing interest at a variable or adjusting
rate so long as, at the time any such transaction shall be entered into,
the counterparty in such transaction has outstanding Debt Securities rated
(a) "A1" or better, or "A+" or better (or a comparable rating),
or
(b) "A2" or "A-" (or a comparable rating) provided that the term
of each such swap or arrangement is less than 2 years,
by Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff &
Phelps Inc. or any other rating agency nationally recognized in the United
States, Japan or any country which is a member of the European Community;
(xv) (a) guarantees by the Company and Restricted Subsidiaries of
the obligations of Unrestricted Subsidiaries and of vendors and
suppliers of Unrestricted Subsidiaries, in each case in respect of
transactions of such Unrestricted Subsidiaries entered into in the
ordinary course of business of such Unrestricted Subsidiaries and such
vendors and suppliers and directly related to the business conducted
by such vendors and suppliers with such Unrestricted Subsidiaries,
provided that such guarantees shall not at any time exceed 5% of
Consolidated Tangible Net Worth, and
(b) guarantees by the Company and Restricted Subsidiaries of the
obligations of Restricted Subsidiaries and of vendors and suppliers of
Restricted Subsidiaries, in each case in respect of transactions of
such Restricted Subsidiaries entered into in the ordinary course of
business of such Restricted Subsidiaries and such vendors and
suppliers and directly related to the business conducted by such
vendors and suppliers with such Restricted Subsidiaries;
(xvi) Investments existing on the Closing Date not in excess, in the
aggregate, of $20,000,000;
(xvii) regardless of the occurrence or non-occurrence of the Merger
Date, and in any event, prior to the occurrence of the Merger Date,
investments in (a) the stock of Archive and its subsidiaries as
contemplated by the Archive Tender Offer, and (b) Investments to enable
Archive to repay its outstanding obligations for borrowed money not to
exceed in the aggregate $150,000,000;
(xviii) Investments made by any corporation at the time it becomes a
Restricted Subsidiary, or such corporation is acquired by, consolidated
with or merged into the Company or a Restricted Subsidiary, provided that
such Investments were not made in contemplation of such transaction;
Exhibit A-28
<PAGE>
(xix) Investments consisting of repurchases of Subordinated Debt
permitted by paragraph 6M; and
(xx) Investments not otherwise permitted by the other provisions of
this paragraph 6H, if, on the date of the making of any such Investment,
and after giving effect to such Investment,
(a) the aggregate cost of all Investments outstanding on such
date made pursuant to this paragraph 6H(xx), minus
(b) the net return of capital received by the Company and the
Restricted Subsidiaries on or prior to such date from all Investments
made pursuant to this paragraph 6H(xx) during the period commencing on
January 1, 1991 and ending on such date,
does not exceed 15% of Consolidated Tangible Net Worth on such date.
No Investments can be made pursuant to the provisions of paragraph 6H(xx) of
this Agreement during any period when a Default or Event of Default has occurred
and is then continuing. Notwithstanding any provision herein to the contrary,
none of the following shall constitute Investments for purposes of this
Agreement: (a) any dividends or other distributions paid or made in respect of
the stock of the Company or any Restricted Subsidiary (whether in cash,
Property, or stock of the Company or any Restricted Subsidiary), or (b) any
payments (whether in cash, Property or stock of the Company or any Restricted
Subsidiary) to redeem, purchase or otherwise acquire, directly or indirectly,
any stock of the Company or any Restricted Subsidiary. For purposes of the
preceding sentence, the term "stock" shall include warrants, options and rights
to purchase stock. For purposes of calculations required by this paragraph 6H,
Investments denominated in currencies other than U.S. dollars shall be
translated into U.S dollars in accordance with generally accepted accounting
principles applicable to such types of Investments.
6I. Transactions with Affiliates. The Company will not, nor will it
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the rendering
of any service, with any Affiliate unless
(i) such transaction, when taken in the light of a series of
transactions of which such transaction is a part (if any), is upon fair and
reasonable terms no less favorable to the Company or such Restricted
Subsidiary than could be obtained in a comparable arm's-length transaction
with a Person not an Affiliate, or
(ii) if, at the time of such transaction, such Affiliate is an
officer, director or employee of the Company or such Restricted Subsidiary
and such transaction relates to such Person's compensation, (a) such
transaction is in the best interests of the Company and the Restricted
Subsidiaries, taken as a whole, and has been approved by the Board of
Directors or the board of directors of such Restricted Subsidiary, as the
case may be, and (b) at the time of such transaction, the Company is
required to file reports pursuant to Section 13 of the Exchange Act.
Exhibit A-29
<PAGE>
It is acknowledged that the Archive Tender Offer, the merger of Archive into
Conner Acquisition Corp., and the repayment by the Company of the debt of
Archive and its subsidiaries outstanding on the Acquisition Date in an amount
not to exceed in the aggregate $150,000,000 shall be deemed permitted
transactions hereunder. The purchase by the Company or any Restricted
Subsidiaries of shares of outstanding capital stock of the Company's Subsidiary
formed under the laws of China shall be deemed to comply with this paragraph 6I
so long as the Company or such Restricted Subsidiary pays fair value for such
shares, as determined by the Board of Directors of the Company. The
transactions described in the Arcada Letter of Intent shall be deemed to comply
with this paragraph 6I.
6J. Line of Business. The Company will not, nor will it permit any
Restricted Subsidiary to, engage in any business other than the businesses
currently engaged in by the Company and the Subsidiaries and any business
substantially similar or substantially related thereto.
6K. Designation of Subsidiaries. The Board of Directors may at any time
designate any Restricted Subsidiary as an Unrestricted Subsidiary provided that
no Default or Event of Default shall exist immediately after, and after giving
effect to, any such designation (whether or not caused by such designation), but
it may not thereafter redesignate such Subsidiary as a Restricted Subsidiary.
6L. Private Offering. The Company will not, nor will it permit anyone
acting on its behalf to, offer the Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act.
6M. Subordinated Debt. The Company will not, and will not permit any
Restricted Subsidiary to, make any payment or redemption of Subordinated Debt,
other than mandatory prepayments or mandatory redemptions scheduled at the time
of issuance of such Subordinated Debt, or otherwise purchase or acquire any
Subordinated Debt, directly or indirectly, or give any notice that irrevocably
binds it to take any such action, unless:
(i) no Default or Event of Default shall exist immediately prior to, or
immediately after, the consummation of any such action or the giving of
such notice, whichever shall first occur, and the Company has delivered a
certificate to such effect to each holder of Notes prior to, but not more
than 30 days prior to, taking such action or giving such notice, whichever
shall first occur, together with a brief description of such action or the
action contemplated by such notice; and
(ii) at the time it shall become irrevocably bound to take such
action, or the time it shall take such action, whichever shall first occur,
one of the following conditions shall be satisfied:
(a) the Company or such Restricted Subsidiary, as the case may
be, could incur Senior Debt in an amount equal to the amount of
Subordinated Debt to be so prepaid, redeemed or otherwise purchased or
acquired;
Exhibit A-30
<PAGE>
(b) the Subordinated Debt to be so prepaid, redeemed or
otherwise purchased or acquired is convertible into a number of shares
of capital stock of the Company having a Fair Market Value at the time
that the Company or such Restricted Subsidiary becomes obligated to
take such action which is at least 25% in excess of the principal
amount of such Subordinated Debt; or
(c) the Subordinated Debt to be so prepaid, redeemed or
otherwise purchased or acquired is convertible into a number of shares
of capital stock of the Company having a Fair Market Value at the time
that the Company or such Restricted Subsidiary becomes obligated to
take such action which is a least 15% in excess of the principal
amount of such Subordinated Debt, and the Company has entered into a
firm commitment underwriting agreement with one or more underwriters,
which agreement contains terms and conditions no less favorable to the
Company than those generally included in comparable agreements for
similarly situated issuers at such time (as determined by the Company
in its reasonable judgment), and pursuant to which such underwriters
have agreed to purchase capital stock of the Company for an amount
sufficient to prepay, redeem or otherwise purchase or acquire all or
any part of such Subordinated Debt that is not so converted into such
capital stock prior to such prepayment, redemption, purchase or
acquisition;
provided that no such action shall be taken and no such notice given during the
period beginning on October 3, 1993 and ending on the Determination Date
occurring nearest to March 31, 1995, inclusive.
Nothing set forth in this paragraph 6M shall prevent the Company or any
Restricted Subsidiary from purchasing or acquiring any Subordinated Debt in
privately negotiated transactions or in open-market transactions if
(1) the price paid is less than par plus accrued interest;
(2) no Default or Event of Default shall exist immediately prior to,
or immediately after, such purchase or acquisition; and
(3) the aggregate amount paid by the Company for all such purchases or
acquisitions in any period of twelve consecutive months, which purchases or
acquisitions are not otherwise permitted pursuant to this paragraph 6M,
shall not exceed $25 million;
provided that the Company will not enter into, or agree to enter into, any such
transactions during the period beginning on October 3, 1993 and ending on the
Determination Date occurring nearest to March 31, 1995, inclusive.
6N. Liquidity Coverage. The Company will not permit, on any Determination
Date, the Liquidity Coverage to be less than the percentage set forth in the
following table opposite such Determination Date, in each case determined as of
such Determination Date:
Exhibit A-31
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Determination Date Percentage
- --------------------------------------------------------------------------------------------------
<S> <C>
All Determination Dates occurring during the period beginning with 200%
the Determination Date occurring nearest to June 30, 1993 to and including
the Determination Date occurring nearest to September 30, 1993
All Determination Dates occurring during the period beginning with the 125%
Determination Date occurring nearest to December 31, 1993 to and including the
Determination Date occurring nearest to March 31, 1995
==================================================================================================
</TABLE>
6O. Restricted Payments. The Company shall not make any
Restricted Payments during the period beginning of October 3, 1993 and
ending on the Determination Date occurring nearest to March 31, 1995,
inclusive.
6P. Accounting Period. The Company shall not change the
method in which it determines its fiscal year or its fiscal
quarters.
7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or otherwise):
(i) the Company defaults in the payment of any
principal of or premium on any Note when the same shall become
due, either by the terms thereof or otherwise as provided in
this Agreement; or
(ii) the Company defaults in the payment of any
interest on any Note for more than 5 Business Days after the
date due; or
(iii) the Company fails to perform or observe any
agreement contained in paragraph 6 or paragraph 5C of this
Agreement; or
(iv) the Company fails to perform or observe any other
agreement contained in this Agreement and such failure shall not
be remedied within thirty (30) days after any Responsible
Officer obtains actual knowledge thereof; or
(v) any representation or warranty made by the Company
in this Agreement or in any writing furnished in connection with
or pursuant to this Agreement shall be false in any material
respect on the date as of which made; or
(vi) the Company or any Restricted Subsidiary,
(a) defaults in any payment of principal of or
interest on any other obligation for money borrowed (or
any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment
for Property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts
accepted representing extensions of credit, but not any
Exhibit A-32
<PAGE>
obligation in respect of trade credit incurred in the
ordinary course of business) beyond any period of grace
in effect prior to the occurrence of such default, or
(b) fails to perform or observe any other
agreement, term or condition contained in any agreement
under which any such obligation is created (or if any
other event thereunder or under any such agreement shall
occur and be continuing)
and the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due prior to any originally
stated maturity, or to require that such obligation be repurchased by the
Company or any Subsidiary, provided that the aggregate amount of all
obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration or repurchase shall occur and be continuing exceeds
$10,000,000 and provided further that this paragraph 7A(vi) shall not apply
to the Specified Debt, so long as the Specified Debt is paid in full within
30 days after it becomes due; or
(vii) the Company or any Restricted Subsidiary makes an
assignment for the benefit of creditors or is generally not paying
its debts as such debts become due; or
(viii) any decree or order for relief in respect of the
Company or any Restricted Subsidiary is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "Bankruptcy
Law"), of any jurisdiction; or
(ix) the Company or any Restricted Subsidiary
(a) petitions or applies to any tribunal for, or
consents to, the appointment of, or the taking of possession
by, a trustee, receiver, custodian, liquidator or similar
official of the Company or any Restricted Subsidiary, or of
any substantial part of the Property of the Company or any
Restricted Subsidiary, or
(b) commences a voluntary case under the Bankruptcy Law
of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of
a Restricted Subsidiary) relating to the Company or any
Restricted Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any petition or application referred to in paragraph
7A(ix) is filed, or any such proceedings are commenced, against the
Company or any Restricted Subsidiary, and the Company or such
Restricted Subsidiary by any act indicates its approval thereof,
consent thereto, or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any
such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
Exhibit A-33
<PAGE>
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the
Company and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Restricted Subsidiary
decreeing a split-up of the Company or such Restricted Subsidiary
that requires the divestiture of assets representing a Substantial
Part, or the divestiture of the stock of a Restricted Subsidiary
whose assets represent a Substantial Part, of the consolidated
assets of the Company and the Restricted Subsidiaries (determined
in accordance with generally accepted accounting principles) or
that requires the divestiture of assets, or stock of a Restricted
Subsidiary, that shall have contributed a Substantial Part of the
Consolidated Net Income for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains unstayed
and in effect for more than 60 days; or
(xiii) a final judgment for the payment of money or the
transfer of Property in an amount in excess of $5,000,000
(excluding that portion of any such judgment covered by insurance
in respect of which coverage is undisputed) is rendered against the
Company or any Restricted Subsidiary and, within 60 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of
any such stay, such judgment is not discharged or execution thereof
stayed pending further appeal;
then
(a) if such event is an Event of Default specified in
clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, all of the Notes at the time outstanding shall
automatically become immediately due and payable at par together
with interest accrued thereon, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the
Company,
(b) if such event is any other Event of Default, the
Required Holders may at their option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment,
demand, protest or other notice of any kind, all of which are
hereby waived by the Company, provided that the Yield-Maintenance
Amount, if any, with respect to each Note shall be due and payable
upon such declaration only if
(I) such event is an Event of Default specified in
any of clause (i) to clause (vi), inclusive, or clause
(xiii) of this paragraph 7A,
(II) the Required Holders shall have given to the
Company, at least 10 Business Days before such declaration,
written notice stating its or their intention so to declare
the Notes to be immediately due and payable and identifying
one or more such Events of Default whose occurrence on or
before the date of such notice permits such declaration and
Exhibit A-34
<PAGE>
(III) one or more of the Events of Default so
identified shall be continuing at the time of such
declaration, and
(c) if such event is an Event of Default specified in
clause (i) or clause (ii) of this paragraph 7A and irrespective
of whether the Required Holders shall have declared the Notes to
be due and payable pursuant to the foregoing clause (b), any
holder of Notes may at its option, by notice in writing to the
Company, declare all of the Notes held by such holder to be, and
all of such Notes shall thereupon be and become, immediately due
and payable together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each
such Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
7B. Other Remedies. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement
contained in this Agreement or in aid of the exercise of any power granted
in this Agreement. No remedy conferred in this Agreement upon the holder
of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every
other remedy conferred in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise.
7C. Annulment of Acceleration of Notes. If a declaration is
made pursuant to paragraph 7A(b) of this Agreement by the Required Holders
or paragraph 7A(c) of this Agreement by any holder of Notes, then and in
every such case, the Required Holders may, by written instrument filed
with the Company, rescind and annul such declaration within 90 days
thereafter, and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(i) no judgment or decree shall have been entered for the
payment of any moneys due on or pursuant to the Notes or this
Agreement;
(ii) all arrears of interest upon all the Notes and all
other sums payable under the Notes and under this Agreement
(except any principal of, or interest or premium on, the Notes
which shall have become due and payable by reason of such
declaration under paragraph 7A(b) or paragraph 7A(c) of this
Agreement) shall have been duly paid; and
(iii) each and every other Default and Event of Default
shall have been waived pursuant to paragraph 11C of this Agreement
or otherwise made good or cured,
and provided further that no such rescission and annulment shall extend to
or affect any subsequent Default or Event of Default or impair any right
consequent thereon.
8. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants:
Exhibit A-35
<PAGE>
8A. Corporate Organization and Authority; Compliance with Law.
Each of the Company and the Restricted Subsidiaries
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
incorporation,
(ii) has all legal and corporate power and authority to own
and operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted,
(iii) has all necessary licenses, certificates and permits
to own and operate its Properties and to carry on its business as
now conducted and as presently proposed to be conducted, except
where the failure to have such licenses, certificates and
permits, in the aggregate, would not have a material adverse
effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Restricted
Subsidiaries taken as a whole, or the ability of the Company to
perform its obligations set forth in this Agreement and in the
Notes,
(iv) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation in each jurisdiction where such qualification or
authorization is required, except where the failure to be so
qualified or licensed and authorized and in good standing, in the
aggregate, would not have a material adverse effect on the
business, prospects, Properties or condition (financial or
otherwise) of the Company and the Restricted Subsidiaries taken
as a whole, or the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes, and
(v) is in compliance with all of its contractual obligations
and all laws, ordinances, and governmental rules and regulations
to which it is subject, except where the failure so to be in
compliance would not have a material adverse effect on the
business, prospects, Properties or condition (financial or
otherwise) of the Company and the Restricted Subsidiaries taken
as a whole, or the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes.
8B. Conflicting Agreements and Other Matters.
(i) Conflict with Notes. Neither the execution nor delivery
of this Agreement or the Notes, nor the offering, issuance and
sale of the Notes, nor fulfillment of nor compliance with the
terms and provisions of this Agreement and of the Notes will
conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of
the Properties of the Company or any of the Restricted
Subsidiaries pursuant to, the charter or by-laws of the Company
or any of the Restricted Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any of the
Restricted Subsidiaries is subject.
Exhibit A-36
<PAGE>
(ii) Restrictions on Debt. Neither the Company nor any of
the Restricted Subsidiaries is a party to, or otherwise subject
to any provision contained in, any instrument evidencing
indebtedness of the Company or such Restricted Subsidiary, any
agreement relating to this Agreement or any other contract or
agreement (including its charter), in each case relating to Debt
in an outstanding aggregate principal amount in excess of
$1,000,000, that limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Company of the
type to be evidenced by the Notes except as set forth in the
agreements listed in Annex 2 to this Agreement.
8C. Sale is Legal and Authorized; Notes are Enforceable.
(i) Sale Is Authorized. Each of the sale of the Notes by
the Company and compliance by the Company with all of the
provisions of this Agreement and of the Notes is within the
corporate powers of the Company.
(ii) Notes are Enforceable. The obligations of the Company
under this Agreement and the Notes are valid, binding and
enforceable in accordance with the terms of this Agreement and
the Notes, except that the enforceability of this Agreement and
the Notes may be:
(a) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or similar laws affecting
the enforcement of creditors' rights generally; and
(b) subject to the availability of equitable remedies.
8D. Financial Statements. The Company has furnished you with
the following financial statements, identified by a principal financial
officer of the Company: a consolidated balance sheet of the Company and
the Subsidiaries as at December 31 in each of the years 1987 to 1990,
inclusive, all certified by Price, Waterhouse & Co.; and consolidated
statements of income and cash flows of the Company and the Subsidiaries
for each such year, all certified by Price, Waterhouse & Co. Such
financial statements (including any related schedules and notes) are
true and correct in all material respects (subject, as to interim
statements, to changes resulting from audits and year-end adjustments),
have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of the Company and the
Subsidiaries required to be shown in accordance with such principles.
The balance sheets fairly present the condition of the Company and the
Subsidiaries as at the dates thereof, and the statements of income and
statements of cash flows fairly present the results of the operations of
the Company and the Subsidiaries for the periods indicated.
8E. Material Adverse Change. Except as set forth in the
Supplemental Disclosure Letter, since December 31, 1990, there has been
no material adverse change in the business, prospects, Properties or
condition (financial or otherwise) of the Company and the Subsidiaries
taken as a whole, or in the ability of the Company to perform its
obligations set forth in this Agreement and in the Notes.
Exhibit A-37
<PAGE>
8F. Actions Pending. Except as set forth in the Supplemental
Disclosure Letter or the SEC Documents, there is no action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of the Restricted Subsidiaries, or
any Properties or rights of the Company or any of the Restricted
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body that, in the aggregate, if adversely determined, would
result in a materially adverse effect on the business, prospects,
Properties or condition (financial or otherwise) of the Company and the
Restricted Subsidiaries taken as a whole, or the ability of the Company
to perform its obligations set forth in this Agreement and in the Notes.
8G. Outstanding Debt. Neither the Company nor any of the
Subsidiaries has outstanding any Debt except as permitted by paragraph
6 of this Agreement. All Debt with an outstanding principal amount in
excess of $1 million is described on Annex 2 to this Agreement. The
aggregate principal amount of all other Debt does not exceed $5,000,000.
8H. Taxes. Each of the Company and the Subsidiaries has filed
all Federal, State and other income tax returns and other material tax
returns that, to the best knowledge of the officers of the Company, are
required to be filed, and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such
taxes have become due, except such taxes as are being contested in good
faith by appropriate proceedings for which adequate reserves (to the
extent required) have been established in accordance with generally
accepted accounting principles.
8I. Title to Properties; Patents and Copyrights.
(i) Title to Properties. Each of the Company and the
Restricted Subsidiaries has good and indefeasible title to its
respective real Properties (other than Properties that it leases)
and good title to all of its other respective Properties (other
than Intellectual Property Rights), including the Properties
reflected in the balance sheet as at December 31, 1990 referred to
in paragraph 8D of this Agreement (other than Properties disposed
of in the ordinary course of business), subject to no Lien of any
kind except Liens permitted by paragraph 6D of this Agreement. All
leases necessary in any material respect for the conduct of the
respective businesses of the Company and the Subsidiaries are
valid and subsisting and are in full force and effect.
Notwithstanding the foregoing, no representation or warranty is
made by the Company in this paragraph 8I(i) with respect to
Intellectual Property Rights.
(ii) Patents and Copyrights. Except as disclosed in the SEC
Documents or the Supplemental Disclosure Letter, each of the
Company and the Restricted Subsidiaries owns or possesses, or
could obtain ownership or possession on terms not materially
adverse to the financial condition of the Person so obtaining
ownership or possession of, all of the patents, trademarks,
service marks, trade names, copyrights, licenses, and rights with
respect thereto ("Intellectual Property Rights") necessary for the
present and presently planned future conduct of its business,
without any known conflict with the rights of others, except where
such conflicts, in the aggregate, would not have a material
adverse effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Restricted
Subsidiaries taken as a whole,
Exhibit A-38
<PAGE>
or the ability of the Company to perform its obligations set forth
in this Agreement and the Notes.
8J. Environmental Compliance.
(i) Compliance. Each of the Company and the Subsidiaries has
been, since its incorporation, complying with, and, on the Closing
Date will be in compliance with, all Environmental Protection Laws
in effect in each jurisdiction where it is presently doing
business and in which the failure so to comply would have a
material adverse effect on the business, prospects, Properties or
condition (financial or otherwise) of the Company and the
Subsidiaries taken as a whole, or the ability of the Company to
perform its obligations under this Agreement and the Notes; and
(ii) Liability.Neither the Company nor any of the
Subsidiaries is subject to any liability under any Environmental
Protection Laws that, in the aggregate, would have a material
adverse effect on the business, prospects, Properties or condition
(financial or otherwise) of the Company and the Subsidiaries taken
as a whole, or the ability of the Company to perform its
obligations under this Agreement and the Notes.
8K. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the IRC), whether or not waived,
exists with respect to any Pension Plan (other than a Multiemployer Plan).
No liability to the PBGC has been or is expected by the Company or any
other ERISA Affiliate to be incurred with respect to any Pension Plan
(other than a Multiemployer Plan) by the Company or any other ERISA
Affiliate that is or would be materially adverse to the business,
prospects, Properties or condition (financial or otherwise) of the Company
and the Subsidiaries taken as a whole, or the ability of the Company to
perform its obligations under this Agreement and the Notes. Neither the
Company nor any ERISA Affiliates have incurred or presently expect to
incur any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan that is or would have a materially adverse effect on
the business, prospects, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries taken as a whole, or the ability of
the Company to perform its obligations under the this Agreement and the
Notes. The execution and delivery of this Agreement and the issuance and
sale of the Notes 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 of the IRC. The representation
by the Company in the next preceding sentence is made in reliance upon and
subject to the accuracy of your representation in paragraph 9 of this
Agreement as to the source of the funds to be used to pay the purchase
price of the Notes to be purchased by you.
8L. No Defaults. No event has occurred and no condition exists
that, upon the issue of the Notes, would constitute a Default or an Event
of Default. Neither the Company nor any Subsidiary is in violation in any
respect of any term of any charter instrument or bylaw and neither the
Company nor any Subsidiary is in violation in any material respect of any
term in any agreement or other instrument to which it is a party or by
which it or any of its Property may be bound, except for violations that,
in the aggregate, could not have a materially adverse effect on the
business, prospects, Properties or condition (financial or otherwise) of
the Company and the Subsidiaries taken as a whole, or the ability of the
Company to perform its obligations set forth in this Agreement and in the
Notes.
Exhibit A-39
<PAGE>
8M. Regulation G, etc. Neither the Company nor any Subsidiary
owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System ("Margin Stock"), other than incidental amounts
thereof which would, in no event, exceed a value of (based on the higher
of purchase price or current fair market value) of $5,000,000 and would
not cause the Notes to be "indirectly secured" by margin stock, as such
term is used in Regulation G. The proceeds of sale of the Notes will be
used to fund capital expenditures and for general corporate purposes. None
of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any
Margin Stock or for the purpose of maintaining, reducing or retiring any
indebtedness that was originally incurred to purchase or carry any stock
that is currently a Margin Stock or for any other purpose that might
constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has
taken or will take any action that might cause this Agreement or the Notes
to violate Regulation G, Regulation T or any other regulation of the Board
of Governors of the Federal Reserve System or to violate the Exchange Act,
in each case as in effect now or as the same may hereafter be in effect.
8N. Offering of Notes. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Notes or any
similar Security of the Company for sale to, or solicited any offers to
buy the Notes or any similar Security of the Company from, or otherwise
approached or negotiated with respect to this Agreement with, any Person
other than you, the Other Purchasers, and 59 other institutional
investors, and neither the Company nor any agent acting on its behalf has
taken or will take any action that would subject the issuance or sale of
the Notes to the provisions of section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8O. Governmental Consent. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or Properties,
nor any relationship between the Company or any Subsidiary and any other
Person, nor any circumstance in connection with the offering, issuance,
sale or delivery of the Notes is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing
with any court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and Exchange
Commission and state Blue Sky authorities) in connection with the
execution and delivery of this Agreement, the offering, issuance, sale or
delivery of the Notes or fulfillment of or compliance with the terms and
provisions of this Agreement or of the Notes (other than any of the
foregoing required after the date hereof to comply with the covenants set
forth herein but otherwise unrelated to this Agreement or the transactions
contemplated hereby).
8P Certain Laws.
(i) Investment Company Act. The Company is not, and is not
directly or indirectly controlled by, or acting on behalf of any
Person which is, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(ii) Absence of Foreign or Enemy Status. The Company is not
Exhibit A-40
<PAGE>
(a) an "enemy" or an "ally of the enemy" within the meaning
of Section 2 of the Trading with the Enemy Act, as amended, or any
executive orders or regulations issued or promulgated pursuant
thereto, or
(b) a "national" of any "designated enemy country" as
such terms are defined in Executive Order No. 9095, as amended, of
the President of the United States of America.
Neither the issue and sale of the Notes by the Company nor its use of the
proceeds thereof as contemplated by this Agreement will violate the
Foreign Assets Control Regulations, the Transaction Control Regulations,
the Cuban Assets Control Regulations, the Foreign Fund Control
Regulations, the Iranian Assets Control Regulations, the Nicaraguan Trade
Control Regulations, the South African Transactions Regulations, the
Libyan Sanctions Regulations, the Soviet Gold Coin Regulations or the
Panamanian Transactions Regulations, of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) or Executive
Orders 12722 and 12724 (transactions with Iraq and Executive Orders 12723
and 12725 (transactions with Kuwait).
(iii) Holding Company Status. The Company 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 Utilities Holding Company Act of 1935, as
amended.
(iv) South African Investments Prohibited. None of the
transactions contemplated in this Agreement (including without
limitation, the use of the proceeds from the sale of the Notes) will
violate the Comprehensive Anti-Apartheid Act of 1986, or any rules or
regulations promulgated thereunder.
8Q. Disclosure. The Private Placement Memorandum with respect to the
Company, dated January 1991, prepared by J.P. Morgan Securities, Inc., for
use in connection with the Company's private placement of the Notes, taken
together with the SEC Documents and the Supplemental Disclosure Letter,
does not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to the Company or any
of the Subsidiaries that materially adversely affects the business,
Properties or condition (financial or otherwise) of the Company and the
Subsidiaries taken as a whole, and that has not been set forth in this
Agreement or in the other documents, certificates and written statements
furnished to you by or on behalf of the Company prior to the date of this
Agreement in connection with the transactions contemplated hereby.
8R. No Unrestricted Subsidiaries. The Company has no Subsidiaries
other than Restricted Subsidiaries.
9. REPRESENTATIONS OF THE PURCHASER. You represent, and in making
this sale to you it is specifically understood and agreed, that you are not
acquiring the Notes to be purchased by you hereunder with a view to or for
sale in connection with any distribution thereof within the meaning of the
Securities Act, provided that the disposition of your Property shall at all
times be and remain within your control. You also represent that no part
Exhibit A-41
<PAGE>
of the funds being used by you to pay the purchase price of the Notes being
purchased by you under this Agreement constitutes assets allocated to any
separate account maintained by you in which any employee benefit plan,
other than employee benefit plans identified on a list that has been
furnished by you to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 9, the terms "separate account" and
"employee benefit plan" have the respective meanings specified in Section 3
of ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the following
terms shall have the meanings specified with respect to this Agreement
below:
10A. Yield-Maintenance Terms.
"Adjusted Reinvestment Yield" means, with respect to any Settlement
Date, the Reinvestment Yield for such Settlement Date, plus
(a) zero (0) if such Settlement Date is prior to March 30, 1994,
and
(b) twenty five one-hundredths percent (0.25%) per annum if such
Settlement Date is on or after March 30, 1994.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in New York City are required or
authorized to be closed.
"Called Principal" shall mean, with respect to any Note, the
principal of such Note that
(i) is to be prepaid pursuant to paragraph 4B of this
Agreement (any prepayment of less than all the Notes being
applied to required payments of principal as provided in
paragraph 4A(iii) of this Agreement),
(ii) is to be prepaid pursuant to paragraph 4E of this
Agreement (any prepayment of less than all the Notes being
applied to required payments of principal as provided in
paragraph 4A(iii) of this Agreement), or
(iii) is declared to be immediately due and payable
pursuant to paragraph 7A of this Agreement, as the context
requires.
"Discounted Value" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on a semiannual
basis) equal to the Adjusted Reinvestment Yield with respect to such
Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by either,
Exhibit A-42
<PAGE>
(i) the yields reported, as of 10:00 A.M. (New York City
time) on the Business Day next preceding the Settlement Date with
respect to such Called Principal, on the display designated as
"Page 678" on the Telerate Service (or such other display as may
replace Page 678 on the Telerate Service) for actively traded
U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date,
or if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, then
(ii) the Treasury Constant Maturity Series yields reported,
for the latest day for which such yields shall have been so
reported as of the Business Day next preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having
a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield
shall be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-
equivalent yields in accordance with accepted financial
practice, and
(b) interpolating linearly between reported yields.
"Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by multiplying
(a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest
one-twelfth (1/12) year) that will elapse between the
Settlement Date with respect to such Called Principal and
the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, assuming, for purposes of
calculation, that the rate of interest on the Series A Senior Notes was
8.84% per annum at all times, and that the rate of interest on the
Series B Senior Notes was 9.08% per annum at all times
"Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to paragraph 4B or
Exhibit A-43
<PAGE>
paragraph 4E of this Agreement or is declared to be immediately due and
payable pursuant to paragraph 7A of this Agreement, as the context
requires.
"Yield-Maintenance Amount" shall mean, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of
(a) such Called Principal plus
(b) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called
Principal.
The Yield-Maintenance Amount shall in no event be less than zero.
10B. Other Terms.
"Acquisition Date" means the date on which the Archive Tender
Offer is consummated.
"Adjusted Consolidated Debt Percentage" means, with respect to
any sale of capital stock to which paragraph 6B(iii) applies, the
greater of
(a) the lesser of
(I) the percentage in effect in accordance with
paragraph 6B(ii) in respect of the Determination Date
immediately preceding such sale of capital stock, or
(II) the percentage determined by dividing the
Adjusted Consolidated Debt Amount by the Adjusted
Consolidated Tangible Net Worth Amount, in each case
determined after giving effect to such sale, or
(b) 125%.
The Adjusted Consolidated Debt Percentage determined by the foregoing
calculation shall apply to the first period, as set forth in the table
in paragraph 6B(ii) hereof, immediately following the date of the sale
of such capital stock. If the Adjusted Consolidated Debt Percentage for
such first period is greater than 125%, then the Adjusted Consolidated
Debt Percentage in each period succeeding such first period shall be
determined by deducting 20 percentage points from the Adjusted
Consolidated Debt Percentage determined as herein provided for the
immediately preceding period until a period is reached where the
Adjusted Consolidated Debt Percentage is reduced to, but not below 125%
(the last deduction to arrive at 125% being 20 percentage points or
such lesser number of percentage points as is necessary to arrive at
125%). Thereafter, the Adjusted Consolidated Debt Percentage shall be
125%. As used in this definition,
Exhibit A-44
<PAGE>
"Adjusted Consolidated Debt Amount" means, with respect to
any sale of capital stock to which paragraph 6B(iii) hereof
applies, the Existing Consolidated Debt Amount with respect
thereto plus 50% of the Net Cash Proceeds of such sale of capital
stock.
"Adjusted Consolidated Tangible Net Worth Amount" means,
with respect to any sale of capital stock to which paragraph
6B(iii) hereof applies, the Existing Consolidated Tangible Net
Worth Amount with respect thereto plus 100% of the Net Cash
Proceeds of such sale of capital stock.
"Existing Consolidated Debt Amount" means, with respect to
any sale of capital stock to which paragraph 6B(iii) hereof
applies, the amount of Consolidated Debt outstanding on the
Determination Date immediately preceding such sale.
"Existing Consolidated Tangible Net Worth Amount" means,
with respect to any sale of capital stock to which paragraph
6B(iii) hereof applies, the amount of Consolidated Tangible Net
Worth determined on the Determination Date immediately preceding
such sale.
"Net Cash Proceeds" means, with respect to any sale of
capital stock to which paragraph 6B(iii) hereof applies, the net
cash proceeds of the sale of such stock of the Company, net of all
costs related to the sale thereof, and net of the Fair Market
Value of any contingent obligations the Company has assumed with
respect to any Person in connection with such sale.
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the
Company, except a Restricted Subsidiary. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Annual Disposition Measurement Period" has the meaning assigned
to such term in paragraph 6G(ii)(d)(l) of this Agreement.
"Arcada Holdings, Inc." means that certain corporation formed, or
to be formed, pursuant the Arcada Letter of Intent to act as the
holding company for the Company's software disk backup, data
management, hierarchical storage management an related applications
business.
"Arcada Letter of Intent" means that certain Letter of Intent,
entered into as of December 13, 1993, between Archive, the Company and
Quest Development Corporation.
"Arcada Restricted Subsidiary" means, at any time,
(i) Arcada Holdings, Inc., provided that
Exhibit A-45
<PAGE>
(a) at least
(I) 65% of the Voting Stock of which, except
directors qualifying shares and any shares issued to
comply with local ownership legal requirements
(provided that such directors qualifying shares and
other shares shall not represent in excess of 3% of
the outstanding shares of the stock of any class of
such Restricted Subsidiary and, after taking such
shares into account, the Company shall, directly or
indirectly, own a majority of the Voting Stock of
such Subsidiary), and
(II) 65% of all non-voting stock of every other
class of which,
is, at such time, owned by the Company either directly or
through Restricted Subsidiaries other than Restricted
Subsidiaries that qualify as such solely by virtue of this
definition of "Arcada Restricted Subsidiary,"
(b) Arcada Holdings, Inc. has at such time never
been designated an Unrestricted Subsidiary by the Board of
Directors pursuant to paragraph 6K of this Agreement, and
(c) Arcada Holdings, Inc. qualifies at such time as
a Subsidiary, and
(ii) any other Subsidiary of the Company provided that
(a) (I) 100% of the Voting Stock of which, except
directors qualifying shares and any shares issued to comply
with local ownership legal requirements (provided that such
directors qualifying shares and other shares shall not
represent in excess of 3% of the outstanding shares of the
stock of any class of such Restricted Subsidiary and, after
taking such shares into account, the Company shall, directly
or indirectly, own a majority of the Voting Stock of such
Subsidiary), and
(II) 100% of all non-voting stock of every other
class of which,
is, at such time, owned by Arcada Holdings, Inc. either directly
or through other Restricted Subsidiaries,
(b) such Subsidiary has at such time never been
designated an Unrestricted Subsidiary by the Board of
Directors pursuant to paragraph 6K of this Agreement, and
(c) Arcada Holdings, Inc. qualifies at such time as
a Restricted Subsidiary.
Exhibit A-46
<PAGE>
Any Subsidiary that qualifies as a Restricted Subsidiary under the
definition of "Restricted Subsidiary" in this paragraph 10B without
reference to this definition of "Arcada Restricted Subsidiary" shall
be deemed to be a Restricted Subsidiary but not an Arcada Restricted
Subsidiary.
"Archive" means Archive Corporation, a Delaware corporation.
"Archive Tender Offer" means the offer by the Company for all
of the shares of the outstanding capital stock of Archive pursuant to
an Offer to Purchase dated November 24, 1992.
"Asset Disposition Date" has the meaning assigned to such term
in paragraph 6G(ii)(d)(l) of this Agreement.
"Bankruptcy Law" has the meaning assigned to it in paragraph
7A(viii) of this Agreement.
"Board of Directors" means, at any time, the board of directors
of the Company or any committee thereof which, in the instance, shall
have the lawful power to exercise the power and authority of such
board of directors.
"Capital Lease" means a lease with respect to which the rental
obligation thereunder is a Capitalized Lease Obligation.
"Capitalized Lease Obligation" means, with respect to any
Person, any rental obligation that, under generally accepted
accounting principles, is required to be capitalized on the books of
such Person, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such
principles.
"Cash Equivalents" means
(a) cash,
(b) all Investments permitted by subparagraph 6H (i),
(iii), (vi), (vii), (viii), (ix), (x), (xi) and (xii), and
(c) any other Investments which would properly be
classified as "cash equivalents" in accordance with generally
accepted accounting principles.
"Cash Flow Contribution" means, for any period, in respect of
any Property of the Company or a Restricted Subsidiary, the amount of
Consolidated Operating Cash Flow fairly attributable to such Property
during such period, expressed as a percentage of such Consolidated
Operating Cash Flow.
"Change in Control" means the direct or indirect acquisition by
any person (as such term is used in Section 13(d) and Section
14(d)(2) of the Exchange Act), or related persons constituting a
group (as such term is used in Rule 13d-5 under the Exchange Act), of
Exhibit A-47
<PAGE>
(i) beneficial ownership of issued and outstanding shares of
Voting Stock of the Company, the result of which acquisition is
that such person or such group possesses in excess of 50% of the
combined voting power of all then issued and outstanding Voting
Stock of the Company, or
(ii) the power to elect, appoint, or cause the election or
appointment of at least a majority of the members of the Board of
Directors.
"Closing Date" has the meaning assigned to such term in
paragraph 2 of this Agreement.
"Company" has the meaning assigned to such term in the
introductory sentence of this Agreement.
"Competitor" means any Person who, at the time of
determination, is commonly known to have a portion of its business in
the same line of business as the Company or the Subsidiaries, or is
commonly known to be an affiliate of such Person provided, that
neither you, any of your affiliates, any Purchaser, any affiliate of
any Purchaser, nor any Financial Institution (other than a finance
company or a pension plan) shall be deemed to be Competitors.
"Consolidated Debt" means, at any time, without duplication,
the amount of Debt of the Company and the Restricted Subsidiaries
outstanding at such time, determined on a consolidated basis.
"Consolidated Fixed Charges" means, with respect to any period,
the greater of zero and the amount of all expenses of the Company and
the Restricted Subsidiaries during such period of the following
types:
(i) interest due on, or with respect to, Consolidated
Debt (including, without limitation, interest due on the
Notes), amortization of debt discount and expense with respect
to Consolidated Debt, and imputed interest on Capitalized Lease
Obligations, plus
(ii) Rentals with respect to all leases,
determined on a consolidated basis in accordance with generally
accepted accounting principles; provided that, if the net earnings
(or loss) of any Person shall not be taken into account pursuant to
clauses (f) or (h) of the definition of "Consolidated Net Income" in
determining Consolidated Net Income for any period in respect of
which Consolidated Fixed Charges is being determined, all of the
foregoing items attributable to such Person for such period shall
only be taken into account to the extent that, in the aggregate,
they exceed the net earnings of such Person, provided further that,
if the net earnings (or loss) of any Person shall not be taken into
account pursuant to clauses (c), (d) or (g) of the definition of
"Consolidated Net Income" in determining Consolidated Net Income for
any period in respect of which Consolidated Fixed Charges is being
determined, all of the foregoing items attributable to such Person
for such period shall be excluded from Consolidated Fixed Charges
for such period.
Exhibit A-48
<PAGE>
As used in this definition,
"Rentals" means, with respect to any period, all fixed
payments which the lessee is required to make during such period by
the terms of any lease of one year or more, but shall not include
amounts required to be paid in respect of Capital Leases.
"Consolidated Net Income" -- for any fiscal period means
net earnings (or loss) after income taxes of the Company and the
Restricted Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles, but
excluding:
(a) any gain or loss arising from the sale of
capital assets (other than any gain or loss of less than
$100,000 from any such sale);
(b) any gain or loss arising from any write-up of
assets subsequent to December 31, 1990 (other than as a
consequence of a physical review of inventory or other
assets), any gain arising from the acquisition of any
Securities of the Company or any Restricted Subsidiary, or
any other extraordinary item;
(c) earnings of any Restricted Subsidiary accrued
prior to the date it became a Restricted Subsidiary;
(d) earnings of any Person, substantially all the
assets of which have been acquired in any manner, realized
by such other Person prior to the date of such
acquisition;
(e) 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 or cancellation of Debt;
(f) any portion of the net earnings of any
Restricted Subsidiary that for any reason is unavailable,
by law or pursuant to any contractual restriction, for
payment of dividends to the Company or any other Restricted
Subsidiary;
(g) the earnings of any Person to which assets of
the Company shall have been sold, transferred or disposed
of, or into which the Company shall have merged, prior to
the date of such transaction; and
(h) any portion of the net earnings of the Company
that cannot be converted into United States dollars;
all determined in accordance with generally accepted accounting
principles.
"Consolidated Operating Cash Flow" means, for any period,
Exhibit A-49
<PAGE>
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of depreciation and
amortization accrued for such period by the Company and the
Restricted Subsidiaries (to the extent, but only to the
extent, each component of such aggregate amount was
reflected in the computation of Consolidated Net Income for
such period), determined on a consolidated basis.
"Consolidated Senior Debt" means, at any time, without
duplication, the amount of Senior Debt outstanding at such time,
determined on a consolidated basis.
"Consolidated Tangible Net Worth" means at any time:
(a) the net book value (after deducting related
depreciation, obsolescence, amortization, valuation and
other proper reserves relating to such assets) at which
the Tangible Assets of the Company and all Restricted
Subsidiaries would be shown on a consolidated balance
sheet at such time prepared in accordance with generally
accepted accounting principles (subject to any
modification required by the definition of "Tangible
Assets" below), but excluding any amount on account of
write-ups of assets after December 31, 1990 (other than as
a consequence of a physical review of inventory or other
assets), at such time, minus
(b) the amount at which the liabilities of the
Company and the Restricted Subsidiaries would be shown on
such balance sheet, and including as liabilities all
reserves for contingencies and other potential liabilities
(specifically including therein, without limitation,
actuarially determined unfunded vested pension liabilities
and liabilities in respect of other post-retirement
benefits) and all minority interests in Restricted
Subsidiaries at such time, all determined in accordance
with generally accepted accounting principles (subject to
any modification required by the preceding parenthetical
expression in this clause (b)), plus
(c) if such time is on or after the Determination
Date occurring nearest to December 31, 1993, $0, and if
such time is prior to such Determination Date,
(i) the aggregate amount paid by the Company to
Compaq Computer Corporation during the Company's
fiscal quarter ended October 3, 1992 for the purchase
of outstanding shares of the Company 's common stock
owned by Compaq Computer Corporation subject to an
aggregate limit of $150 million, plus
(ii) following the Acquisition Date, an amount
representing intangibles, including goodwill, in an
aggregate amount equal, on the relevant date of
reference thereto, to the amount specified in the
table below opposite the period during which such
date occurs:
Exhibit A-50
<PAGE>
<TABLE>
<CAPTION>
Period Amount
===============================================================================
<S> <C>
Acquisition Date to the Determination Date occurring nearest to $245,000,000
June 30, 1993, inclusive
===============================================================================
From the date immediately following the Determination Date $215,000,000
occurring nearest to June 30, 1993 to the day immediately
preceding the Determination Date occurring nearest to December
31, 1993, inclusive
===============================================================================
</TABLE>
As used in this definition,
"Tangible Assets" means all assets (including, without
duplication, the capitalized value of any leasehold interest under any
Capitalized Lease Obligation) except:
(i) the aggregate amount of deferred assets, other than
prepaid insurance and prepaid taxes, in excess of $10,000,000;
(ii) patents, copyrights, trademarks, trade names,
franchises, goodwill and other similar intangible assets;
(iii) all Investments made pursuant to paragraph 6H(xx) and
any other Investments not permitted by any other provision of
paragraph 6H of this Agreement (except that "Tangible Assets"
shall include outstanding Investments made pursuant to paragraph
6H(xx) at any time when "Consolidated Tangible Net Worth" is
being determined for purposes of determining the amount of
Investments which may be made pursuant to such paragraph); and
(iv) unamortized debt discount and expense (other than not
more than $6,500,000 of unamortized debt expense attributable to
the issuance of Debt prior to the date hereof (which expense
shall be included in "Tangible Assets").
"Consolidated Total Assets" means, at any time of determination,
the net book value of all assets of the Company and the Restricted
Subsidiaries that would be shown on a consolidated balance sheet of the
Company and the Restricted Subsidiaries prepared at such time of
determination in accordance with generally accepted accounting
principles, excluding changes in the net book value of assets resulting
from write-ups of assets subsequent to December 31, 1990 (other than as
a consequence of a physical review of inventory or other assets).
"Control Prepayment Date" has the meaning assigned to such term in
paragraph 4E(iii) of this Agreement.
Exhibit A-51
<PAGE>
"Debentures" means the 6-3/4% Convertible Subordinated Debentures
Due 2001 of the Company issued pursuant to that certain Indenture,
dated as of March 1, 1991, between the Company and The First National
Bank of Boston, as trustee, and the 6-1/2% Convertible Subordinated
Debentures Due 2002 of the Company issued pursuant to that certain
Indenture, dated as of March 1, 1992, between the Company and The First
National Bank of Boston, as trustee.
"Debt" of any Person, at any time, means
(i) indebtedness for money borrowed of such Person;
(ii) indebtedness that is secured by any Lien on Property
owned by such Person, whether or not the indebtedness secured
thereby shall have been assumed by such Person;
(iii) Capitalized Lease Obligations of such Person;
(iv) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of
business) and other contingent liabilities (whether direct or
indirect) of such Person in connection with the obligations,
stock or dividends of any other Person, provided that guarantees
by such Person of contingent obligations of other Persons shall
be excluded from this clause (iv);
(v) obligations of such Person under any contract
providing for the making of loans, advances or capital
contributions to any other Person, or for the purchase of any
Property from any other Person, in each case primarily in order
to enable such other Person to maintain working capital, net
worth or any other balance sheet condition or to pay debts,
dividends or expenses, to the extent that such other Person is
obligated to maintain such condition or make such payments and
has failed to do so;
(vi) obligations of such Person under any contract for the
purchase of materials, supplies or other Property or services if
such contract (or any related document) requires that payment for
such materials, supplies or other Property or services shall be
made regardless of whether or not delivery of such materials,
supplies or other Property or services is ever made or tendered;
and
(vii) obligations under any other contract which, in legal
effect, is substantially equivalent to a guarantee, provided that
guarantees by such Person of contingent obligations of other
Persons shall be excluded from this clause (vii),
all as determined in accordance with generally accepted accounting
principles, provided that such items shall only constitute Debt to the
extent that, in accordance with generally accepted accounting
principles, such items would be (and only to the extent such items
would be) included in determining total liabilities as shown on the
liability side of the balance sheet of such Person (assuming that such
Person were the primary
Exhibit A-52
<PAGE>
obligor in respect of the underlying obligation with respect to any
guarantee or other contingent obligation, as contemplated by the next
succeeding sentence), provided further that, notwithstanding the
foregoing, "Debt" shall not include
(a) accrued compensation,
(b) taxes payable and deferred taxes,
(c) trade payables, including intercompany payables in the
nature of trade payables,
(d) any obligations payable, at the option of the obligor, in
equity Securities of the obligor,
(e) any guarantee or contingent liability or obligation with
respect to any of the items set forth in the foregoing clauses (a) to
(d), inclusive or
(f) obligations of Archive and its Subsidiaries which would
otherwise constituting "Debt" hereunder, to the extent that such
obligations are repaid in full within 60 days following the
Acquisition Date.
For purposes of computing the amount of any obligation specified in either
of the foregoing clauses (iv) and (vii), it shall be assumed that the
indebtedness or other obligations which are the subject of such guarantee,
endorsement or other contingent liability are direct obligations of the
obligor on such guarantee, endorsement or contingent liability (but not in
an amount in excess of the maximum liability of such obligor) and,
therefore, are of the nature and type of, and bear interest at the rate
applicable to, such indebtedness or other obligations.
"Default" means any of the events specified in paragraph 7 of this
Agreement, whether or not there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time,
or the happening of any further condition, event or act.
"Determination Date" means the last day of each fiscal quarter of the
Company.
"Environmental Protection Law" means any federal, state, county,
regional or local law, statute, or regulation (including, without
limitation, CERCLA, RCRA and SARA) enacted in connection with or relating
to the protection or regulation of the environment, including, without
limitation, those laws, statutes, and regulations regulating the
disposal, removal, production, storing, refining, handling, transferring,
processing, or transporting of Hazardous Substances, and any regulations,
issued or promulgated in connection with such statutes by any
Governmental Authority and any orders, decrees or judgments issued by any
court of competent jurisdiction in connection with any of the foregoing.
As used in this definition,
Exhibit A-53
<PAGE>
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith;
"Governmental Authority" means the government of the United
States of America, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any such government.
"Hazardous Substances" has the meaning assigned to such term in
42 U.S.C. Section 9601(14), as amended from time to time.
"RCRA" means the Resource Conservation and Recovery Act of 1976,
as amended, and any rules and regulations issued in connection
therewith; and
"SARA" means the Superfund Amendments and Reauthorization Act of
1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or trade or business that
(a) is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the IRC) as the Company or
(b) is under common control (within the meaning of Section
414(c) of the IRC) with the Company.
"Event of Default" means any of the events specified in paragraph 7
of this Agreement, provided that there has been satisfied any requirement
in connection with such event for the giving of notice, or the lapse of
time, or the happening of any further condition, event or act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time, 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, under no compulsion to buy or sell, respectively.
"Financial Institution" means (i) any bank, savings bank, savings and
loan association or insurance company, (ii) any pension plan or portfolio
or investment fund managed or administered by any bank, savings bank,
savings and loan association or insurance company, (iii) any investment
company owned by any bank, savings bank, savings and loan association or
insurance company, or the majority of the shares of
Exhibit A-54
<PAGE>
the capital stock of which are traded on a national securities exchange
or in the National Association of Securities Dealers automated quotation
system, (iv) any investment banking company, or (v) any finance company.
"Four Quarter Period" has the meaning assigned to such term in
paragraph 6G(ii)(d)(II).
"Inspection Rights" has the meaning assigned to such term in paragraph
5B of this Agreement.
"Intellectual Property Rights" has the meaning assigned to such term
in paragraph 8I(ii) of this Agreement.
"Investment" has the meaning assigned to such term in paragraph 6H of
this Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations promulgated thereunder.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Liquidity Coverage" means the ratio (expressed as a percentage) of
(i) Cash Equivalents, to (ii) Senior Debt of the Company and the Restricted
Subsidiaries, in each case determined on a consolidated basis.
"Margin Stock" has the meaning assigned to such term in paragraph 8M
of this Agreement.
"Material Unrestricted Subsidiaries" shall be deemed to exist with
respect to any consolidated financial statement of the Company and the
Subsidiaries if the amounts of either revenue or total assets (as the case
may be), reflected on such consolidated financial statement vary by more
than 10% from the amount of the same item reflected on the same type of
consolidated financial statement of the Company and the Restricted
Subsidiaries, prepared as of the same date, or covering the same period, as
the case may be.
"Merger Date" means the date on which Archive is merged into Conner
Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of
the Company.
"Multiemployer Plan" means any "multiemployer plan" (as such term is
defined in ERISA) in respect of which the Company or any ERISA Affiliate is
an "employer" (as such term is defined in ERISA).
Exhibit A-55
<PAGE>
"Multiple Employer Pension Plan" means any "employee pension benefit
plan" (as such term is defined in ERISA) other than a Multiemployer Plan to
which the Company or any ERISA Affiliate and an "employer" (as such term is
defined in ERISA) other than an ERISA Affiliate or the Company contribute.
"Notes" has the meaning assigned to such term in paragraph 1 of this
Agreement.
"Offer Notice" has the meaning assigned to such term in paragraph
4E(ii) of this Agreement.
"Other Note Agreements" has the meaning assigned to such term in
paragraph 2 of this Agreement.
"Other Purchasers" has the meaning assigned to such term in paragraph
2 of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, and its
successors and assigns.
"Pension Plans" means any "employee pension benefit plan" (as such
term is defined in ERISA) maintained by the Company or any ERISA Affiliate
for employees of the Company or such ERISA Affiliate, excluding any
Multiemployer Plan, but including, without limitation, any Multiple
Employer Pension Plan.
"Permitted Banks" has the meaning assigned to such term in paragraph
6H(viii)(c) of this Agreement.
"Permitted Investment" has the meaning assigned to such term in
paragraph 6H of this Agreement.
"Permitted Transferee" means (i) any Financial Institution which is
not a Competitor and (ii) any other proposed Transferee consented to in
writing by the Company, which consent shall not be unreasonably withheld.
"Person" means any of an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
"Preferred Stock" means, at any time, with respect to any Person,
capital stock of such Person that is preferred as to the payment of
dividends, or as to the distribution of Property on any voluntary or
involuntary liquidation or dissolution of such Person, over any other
class of capital stock of such Person (in each case, taken at the greater
of its voluntary or involuntary liquidation preference at the time of
calculation thereof, but exclusive of accrued dividends) provided that
the term "Preferred Stock" shall not include preferred stock issued by
Arcada Holdings, Inc. so long as Arcada Holdings, Inc. is a Restricted
Subsidiary.
Exhibit A-56
<PAGE>
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Purchase Money Mortgages" means a Lien held by any Person (whether
or not the seller of such assets) on tangible Property (other than assets
acquired to replace, repair, upgrade or alter tangible Property owned by
the Company or any Restricted Subsidiary on the date of this Agreement),
provided that such Lien
(a) secures all or a portion of the related purchase price or
construction costs of such assets,
(b) encumbers only tangible Property, accretions and accessions
thereto and any theretofore unimproved real property on which such
Property is located (and the proceeds of the disposition thereof)
acquired or constructed with the proceeds of the indebtedness secured
thereby, and
(c) is created concurrently with or within one year of the
acquisition or substantial completion of construction of such tangible
Property.
"Purchaser" means you and the Other Purchasers.
"Required Holders" means the holder or holders of more than 50% of the
aggregate principal amount of the Notes from time to time outstanding.
"Responsible Officer" means each of the Chairman of the Board of
Directors, the President, any Vice President and the Treasurer of the
Company.
"Restricted Payments" means, in respect of any corporation,
(a) dividends or other distributions on capital stock of the
corporation (except distributions in such capital stock); and
(b) the redemption or acquisition made by or on behalf of such
corporation of such capital stock or of warrants, rights, other
options to purchase such stock or securities convertible into or
exchangeable for such capital stock (except when solely in exchange
for such capital stock) unless made, contemporaneously, from the net
proceeds of a sale of such capital stock.
"Restricted Subsidiary" means, at any time, any of a Subsidiary that
is an Arcada Restricted Subsidiary and a Subsidiary
(i) at least
(a) 80% (a majority in the case of Conner Peripherals
Europe or any Subsidiary organized under the laws of Japan,
Taiwan or Singapore) of the Voting Stock of which, except
directors qualifying shares and any shares issued to comply
with local ownership legal
Exhibit A-57
<PAGE>
requirements (provided that such directors qualifying shares
and other shares shall not represent in excess of 3% of the
outstanding shares of the stock of any class of such Restricted
Subsidiary and, after taking such shares into account, the
Company shall, directly or indirectly, own a majority of the
Voting Stock of such Subsidiary), and
(b) 80% of all non-voting stock of every other class,
except Preferred Stock, of which,
is, at such time, owned by the Company either directly or through
other Subsidiaries meeting the requirements of clause (i) and clause
(ii) of this definition, and
(ii) that has never been designated an Unrestricted Subsidiary
by the Board of Directors pursuant to paragraph 6K of this Agreement.
"Sale/Leaseback Transaction" means any transaction or series of
related transactions in which the Company or a Restricted Subsidiary sells
or transfers any of its assets to any Person (other than to the Company or
to a Restricted Subsidiary) and within one year thereafter rents or leases
such transferred Property or substantially similar Property from any
Person.
"Sale/Leaseback Transaction Amount" means, on any date, after giving
effect to all Sale/Leaseback Transactions occurring on such date, the
greater of
(a) the present value, discounted at 9% per annum, of all unpaid
payment obligations of the Company and the Restricted Subsidiaries in
respect of all Sale/Leaseback Transactions in effect on such date, or
(b) the depreciated purchase price of all Property subject to
Sale/Leaseback Transactions at such time, on such date,
"SEC Documents" means (i) the Company's Annual Report to Shareholders
for the fiscal year ended December 31, 1990, (ii) the Company's Annual
Report on Form 10-K for such fiscal year, as filed with the Securities and
Exchange Commission, and (iii) the Company's Registration Statement on Form
S-1 filed with the Securities and Exchange Commission in connection with
the issuance and sale of the Debentures.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security" has the meaning specified in Section 2(1) of the
Securities Act.
"Senior Debt" means, at any time, Debt of the Company outstanding at
such time that is not Subordinated Debt, except for Subordinated Debt
that the Company has become obligated to prepay, redeem or otherwise
purchase or acquire (other than obligations to make mandatory prepayments
or mandatory redemptions scheduled at the time of issuance of such
Subordinated Debt), and all Debt and Preferred Stock of Restricted
Subsidiaries.
Exhibit A-58
<PAGE>
"Senior Debt Prepayments" means, at any time, an optional principal
prepayment of Senior Prepayment Debt made in accordance with the following
procedure:
(a) such offer shall be made in writing by the Company, pro
rata, to all holders of Senior Prepayment Debt with an outstanding
principal amount at such time of at least $1 million, such pro rata
portion to be determined on the basis of the principal amount of such
Senior Prepayment Debt;
(b) such offer shall be deemed to be rejected by a holder if not
accepted within 30 days of the receipt of such offer by such holder;
and
(c) in the case of the holders of Notes who accept such offer,
the prepayment shall be made in conformity with the terms of paragraph
4B of this Agreement, provided that those holders of Senior Prepayment
Debt who have accepted such offer shall also be offered promptly in
writing a pro rata portion of the amounts in respect of which such
offer of prepayment was not accepted, such pro rata portion to be
determined on the basis of the principal amount of the Senior
Prepayment Debt held by all such accepting holders and provided
further that such offer shall be deemed to be rejected by a holder if
not accepted within 30 days of the receipt of such offer by such
holder.
Required prepayments of Senior Debt shall not be "Senior Debt Prepayments."
As used in this definition
"Senior Prepayment Debt" means, at any time, all Debt for money
borrowed owed directly by the Company that is not at such time
Subordinated Debt and which, at such time, can be prepaid in whole or
in substantial part by the Company.
"Series A Notes" has the meaning assigned to such term in paragraph
1 of this Agreement.
"Series B Notes" has the meaning assigned to such term in paragraph
1 of this Agreement.
"Significant Holder" means
(i) you or any of your affiliates, so long as you or such
affiliate shall hold (or shall be committed under this Agreement to
purchase) any Note,
(ii) during the period on or prior to March 30, 1996 (or such
later date as of which all of the Series A Notes shall have been
paid in full), any other holder of at least 2% of the aggregate
principal amount of the Notes from time to time outstanding which is
an immediate transferee of a Purchaser, and any other holder of at
least 5% of the aggregate principal amount of the Notes from time to
time outstanding and
Exhibit A-59
<PAGE>
(iii) at any time after March 30, 1996 (or such later date as of
which the Series A Notes shall have been paid in full), any other
holder of at least 5% of the aggregate principal amount of the Notes
from time to time outstanding which is an immediate transferee of a
Purchaser, and any other holder of at least 10% of the aggregate
principal amount of the Notes from time to time outstanding.
"Specified Debt" means that certain Indebtedness incurred by Conner
Peripherals Europe S.p.A., in an aggregate principal amount (expressed in
Italian Lire) equivalent to approximately $16,800,000 as of December 22,
1993, and not to exceed such principal amount except as a result of
currency fluctuations, plus accrued interest in respect thereof, arising
under the following agreements:
(i) the agreement dated as of December 10, 1991, entered into
with Finaosta S.p.A. in the original principal amount of Lire
9,000,000,000,
(ii) the agreement dated as of December 29, 1992, entered into
with Finaosta S.p.A., in the original principal amount of Lire
4,500,000,000,
(iii) agreement dated as of June 25, 1991, entered into with
Finaosta S.p.A., in the original principal amount of Lire
10,000,000,000,
(iv) agreement dated as of October 31, 1989, entered into with
I.M.I. Instituto Mobiliare Italiano and Olivetti System & Network
S.r.l., in the original principal amount of Lire 10,350,000,000, and
(v) agreement dated as of April 30, 1991, entered into with
I.M.I. Instituto Mobiliare Italiano and Olivetti System & Network
S.r.l., in the original principal amount of Lire 6,400,000,000.
"Subordinated Debt" means the Debentures and any Debt of the Company
that
(a) is subject to subordination provisions no less favorable to
the holders of the Notes than those set forth in the form attached to
this Agreement as Annex 4 or other subordination provisions consented
to by the Required Holders,
(b) has a maturity date of later than March 30, 1998, and
(c) has a Weighted Average Life to Maturity at any time greater
than the Weighted Average Life to Maturity of both of the Series A
Notes and the Series B Notes at such time.
As used in this definition,
"Weighted Average Life to Maturity" at any time with respect to
any indebtedness for borrowed money means the number of years obtained
by
Exhibit A-60
<PAGE>
dividing the then Remaining Dollar-Years of such indebtedness by the
then outstanding principal amount of such indebtedness.
"Remaining Dollar-Years" at any time with respect to any
indebtedness for borrowed money means the result obtained by
(a) multiplying
(i) the amount of each then remaining required principal
payment (including repayment of principal at final maturity) of
such borrowing unpaid immediately prior to such time, by
(ii) the number of years (calculated to the nearest one-
twelfth) that will elapse between such time and the date each
such required principal payment is due, and
(b) calculating the sum of the products obtained in the
preceding subsection (a).
"Subsidiary" means, at any time, any corporation that would be
included in the consolidated financial statements of the Company prepared
at such time in accordance with generally accepted accounting principles.
"Subsidiary Stock" means common stock, preferred stock, warrants,
stock rights and other securities convertible into common stock and
preferred stock, in each case issued by a Subsidiary.
"Substantial Part" means, when used with respect to assets at any
time, more than 10% of consolidated assets of the Company and the
Restricted Subsidiaries at such time, and, when used with respect to
Consolidated Net Income in respect of any period, more than 10% of
Consolidated Net Income for such period.
"Supplemental Disclosure Letter" means that certain letter addressed
to each of the Purchasers, dated as of the Closing Date, executed by the
Company and delivered on the Closing Date to each of the Purchasers.
"Surviving Corporation" has the meaning assigned to such term in
paragraph 6G(i)(a)(l) of this Agreement.
"Three Year Disposition Measurement Period" has the meaning assigned
to such term in paragraph 6G(ii)(d)(lll) of this Agreement.
"Transfer" has the meaning assigned to such term in paragraph 6G(ii)
of this Agreement.
"Transferee" means any direct or indirect transferee of all or any
part of any Note purchased by you under this Agreement.
Exhibit A-61
<PAGE>
"Two Year Period" has the meaning assigned to such term in paragraph
5A(iii)(d) of this Agreement.
"Unrestricted Subsidiary" at any time means a Subsidiary other than a
Restricted Subsidiary.
"Voting Stock" means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes
has or might have such voting power by reason of the happening of any
contingency).
11. MISCELLANEOUS.
11A. Note Payments. The Company agrees that, so long as you shall
hold any Note, it will make payments of principal thereof and Yield-Maintenance
Amount, if any, and interest thereon, that comply with the terms of this
Agreement, by wire transfer of immediately available funds for credit to your
account or accounts as specified in Annex 1 to this Agreement, or such other
account or accounts in the United States as you may designate in writing,
notwithstanding any contrary provision in this Agreement or in any Note with
respect to the place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule attached to this Agreement)
of all principal payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to afford the benefits of
this paragraph 11A to any Permitted Transferee that shall have made the same
agreement as you have made in this paragraph 11A.
11B. Expenses. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you and any Permitted
Transferee harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and
expenses of any special counsel engaged by you or any Permitted Transferee
in connection with this Agreement, the transactions contemplated hereby and
any subsequent proposed modification of, or proposed consent under, this
Agreement, whether or not such proposed modification shall be effected or
proposed consent granted, and
(ii) the costs and expenses, including attorneys' fees, incurred by
you or any Permitted Transferee in enforcing any rights under this
Agreement or the Notes or in responding to any subpoena or other legal
process issued in connection with this Agreement or the transactions
contemplated hereby or by reason of your or any Permitted Transferee's
having acquired any Note, including without limitation costs and expenses
incurred in any bankruptcy case,
but excluding any of the foregoing (including transfer taxes) incurred in
connection with the transfer of a Note to a Transferee, except as otherwise
provided in paragraph 11D. The
Exhibit A-62
<PAGE>
obligations of the Company under this paragraph 11B shall survive the transfer
of any Note or portion thereof or interest therein by you or any Transferee and
the payment of any Note.
11C. Consent to Amendments. This Agreement may only be amended, and the
Company may only take any action prohibited in this Agreement, or omit to
perform any act required in this Agreement to be performed by it, if the Company
shall obtain the written consent of the Required Holders to such amendment,
action or omission to act except that, without the written consent of the holder
or holders of all Notes at the time outstanding, no amendment to this Agreement
shall change the maturity of any Note, or change the principal of, or the rate
or time of payment of interest or any Yield-Maintenance Amount payable with
respect to any Note, or affect the time, amount or allocation of any required
prepayments, reduce the proportion of the principal amount of the Notes required
with respect to any consent, or otherwise modify paragraph 4 of this Agreement.
Each holder of any Note at the time or thereafter outstanding shall be bound by
any consent authorized by this paragraph 11C, whether or not such Note shall
have been marked to indicate such consent, but any Notes issued thereafter may
bear a notation referring to any such consent. 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 in this Agreement and in the Notes, the term "this
Agreement" and references to this Agreement shall mean this Agreement as it may
from time to time be amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes.
(i) Form, Registration, Transfer and Exchange of Notes. The Notes
are issuable as registered notes without coupons in denominations of at
least Five Hundred Thousand Dollars ($500,000), except as may be necessary
to reflect any principal amount not evenly divisible by Five Hundred
Thousand Dollars ($500,000). The Company shall keep at its principal
office a register in which the Company shall provide for the registration
of Notes and of transfers of Notes. Upon surrender for registration of
transfer of any Note at the principal office of the Company, the Company
shall, at its expense, execute and deliver one or more new Notes of like
tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note,
such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the
Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes that the holder making
the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the
holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof
shall carry the rights to unpaid interest and interest to accrue that were
carried by the Note so exchanged or transferred, so that neither gain nor
loss of interest shall result from any such transfer or exchange.
(ii) Lost Notes. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in
the case of any such
Exhibit A-63
<PAGE>
loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement (provided that the Company may require security in
the case of a holder which is not a Financial Institution), or in the
case of any such mutilation upon surrender and cancellation of such Note,
the Company will make and deliver a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note at the expense of such
holder.
(iii) Limitation on Transfer. No holder of Notes shall assign, sell,
transfer, negotiate, or otherwise dispose of all or any of its Notes, or
any part thereof, unless
(a) the principal amount of Notes so assigned, sold,
transferred, negotiated or disposed of is not less than the lesser of
One Million Dollars or an amount equal to such holder's entire holding
of Notes, and
(b) the Transferee is a Permitted Transferee.
11E. Persons Deemed Owners; Participations. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and Yield-Maintenance Amount, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note shall be overdue, and the Company shall not be affected by notice to the
contrary. Subject to the preceding sentence, the holder of any Note may from
time to time grant participations in all or any part of such Note to any Person
on such terms and conditions as may be determined by such holder in its sole and
absolute discretion, provided, that the Company shall have no obligations to any
such participant by virtue of its having acquired a participation in all or part
of any Note.
11F. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Company in connection herewith shall survive the execution
and delivery of this Agreement and the Notes, the 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 Permitted Transferee, regardless of any investigation made at
any time by or on behalf of you or any Permitted Transferee. Subject to the
preceding sentence, this Agreement (together with the Annexes and Exhibits
hereto and the Supplemental Disclosure Letter) 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 of this Agreement.
11G. Successors and Assigns. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties to this Agreement
shall bind and inure to the benefit of the respective successors and permitted
assigns of the parties to this Agreement (including, without limitation, any
Permitted Transferee) whether so expressed or not.
11H. Disclosure to Other Persons. The Company acknowledges that the holder
of any Note may deliver copies of any financial statements and other documents
delivered to such holder, and disclose any other information disclosed to such
holder, by or on behalf of the Company or any Subsidiary in connection with or
pursuant to this Agreement to
Exhibit A-64
<PAGE>
(i) such holder's directors, officers, employees, agents and
professional consultants,
(ii) any other holder of any Note,
(iii) any Permitted Transferee to which such holder offers to sell
such Note or any part thereof,
(iv) any Permitted Transferee to which such holder sells or offers to
sell a participation in all or any part of such Note,
(v) any federal or state regulatory authority having jurisdiction
over such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization, or
(vii) any other Person to which such delivery or disclosure may be
necessary
(a) to comply with any law, rule, regulation or order applicable
to such holder,
(b) to respond to any subpoena or other legal process,
(c) in connection with any litigation to which such holder is a
party, or
(d) in order to protect such holder's investment in such Note.
You agree, and each Permitted Transferee by purchasing a Note agrees, that any
information concerning the Company or the Subsidiaries that has been supplied to
you or to such Permitted Transferee, as the case may be, by the Company or the
Subsidiaries and identified in writing by the Company as confidential which is
not, at the time supplied to you or to such Permitted Transferee, as the case
may be, information available to the public, shall be treated as confidential by
you or such Permitted Transferee, as the case may be, in accordance with the
procedures and standards that you or such Permitted Transferee, as the case may
be, generally apply to information of a confidential nature.
11I. Notices. All written communications provided for under this Agreement
shall be sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and
(i) if to you, addressed to you at the address specified for such
communications in the Purchaser Schedule to this Agreement, or at such
other address as you shall have specified to the Company in writing,
(ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified
an address to the Company, then addressed to such other holder in care of
the last holder of such Note that shall have so specified an address to the
Company, and
Exhibit A-65
<PAGE>
(iii) if to the Company, addressed to it at 3081 Zanker Road, San
Jose, California 95134, Attention: Treasurer, or at such other address as
the Company shall have specified to the holder of each Note in writing so
long as such office is located in the United States of America; provided
that any such communication to the Company may also, at the option of the
holder of any Note, be delivered by hand to the Senior Vice President,
Financial or Treasurer (or an equivalent officer) of the Company. Any
notice described in this paragraph 11I shall be deemed given only upon
receipt.
11J. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11K. 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 New York.
11L. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
[Remainder of page intentionally blank. Next page is signature page.]
Exhibit A-66
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between you and
the Company.
Very truly yours,
CONNER PERIPHERALS, INC.
By
----------------------------
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above written.
[NAME OF PURCHASER]
By
--------------------------
Name:
Title:
[Signature page of the NOTE AGREEMENT dated as of March 29, 1991 of CONNER
PERIPHERALS, INC. in respect of $80,000,000 in aggregate principal amount of
its Series A Senior Notes Due March 30, 1996, and $25,000,000 in aggregate
principal amount of its Series B Senior Notes Due March 30, 1998].
<PAGE>
EXHIBIT A1
TO AMENDMENT NO. 5
AMENDED AND RESTATED SERIES A SENIOR NOTE
CONNER PERIPHERALS, INC.
Series A Senior Note Due March 30, 1996
No. RA- [Closing Date]
$________ PPN: 208108 A@ 9
FOR VALUE RECEIVED, the undersigned, CONNER PERIPHERALS, INC. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to ______ or registered assigns,
the principal sum of ______ DOLLARS ($______) on March 30, 1996 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 eight and eighty-four one-hundredths
percent (8.84%) per annum from April 1, 1991 until September 30, 1993,
inclusive, nine and thirty-four one-hundredths percent (9.34%) per annum from
October 1, 1993 until March 31, 1995, inclusive, and eight and eighty-four one-
hundredths percent (8.84%) per annum on and after April 1, 1995 and to pay, as
additional interest, over and above the foregoing rates of interest, interest at
a rate of forty one-hundredths percent (0.40%) per annum at any time on and
after October 1, 1993 when this Note does not have at such time an Acceptable
Rating, in each case payable semi-annually on the thirtieth (30th) day of March
and September in each year commencing with the later of September 30, 1991 or
the interest payment date next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of Yield-
Maintenance Amount (as defined in the Note Agreement referred to below) and, to
the extent permitted by applicable law, any overdue payment of interest, 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 greater of (i) the
per annum rate of interest that is payable at such time on this Note as provided
above (including any additional interest payable as provided above) plus two
percent (2%) per annum, or (ii) the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York from time to time in New York City as
its Prime Rate.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made as provided in the Purchaser Schedule attached as Annex 1 to the
Note Agreement referred to below or at such other place as the holder hereof
shall designate to the Company, in writing, in lawful money of the United States
of America.
This Note is one of a series of Series A Senior Notes (herein called
the "Notes") issued pursuant to separate identical Note Agreements, each dated
as of March 29, 1991 (collectively, as amended from time to time, the "Note
Agreement"), between the Company
EXHIBIT A1-1
<PAGE>
and the respective original purchasers of the Notes named in the Purchaser
Schedule attached thereto as Annex 1, and the holder hereof is entitled to the
benefits and subject to the provisions thereof. As provided in the Note
Agreement, this Note is subject to prepayment in whole or from time to time in
part, in certain cases without a Yield-Maintenance Amount and in other cases
with a Yield-Maintenance Amount, as specified in the Note Agreement.
This Note is a registered Note and, as provided in the Note Agreement,
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 shall not be affected by any notice to the contrary.
The Company agrees to make prepayments of principal on the dates and
in the amounts specified in the Note Agreement.
In case an Event of Default, as defined in the Note Agreement, shall
occur and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the Note
Agreement.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAW OF SUCH
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CONNER PERIPHERALS, INC.
By:
--------------------
Name:
Title:
Exhibit A1-2
<PAGE>
EXHIBIT A2
TO AMENDMENT NO. 5
AMENDED AND RESTATED SERIES B SENIOR NOTE
CONNER PERIPHERALS, INC.
Series B Senior Note Due March 30, 1998
No. RB- [Closing Date]
$________ PPN: 208108 A# 7
FOR VALUE RECEIVED, the undersigned, CONNER PERIPHERALS, INC. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to ______ or registered assigns,
the principal sum of ______ DOLLARS ($______) on March 30, 1998, 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 nine and eight one-hundredths percent
(9.08%) per annum from April 1, 1991 until September 30, 1993, inclusive, nine
and fifty-eight one-hundredths percent (9.58%) per annum from October 1, 1993
until March 31, 1995, inclusive, and nine and eight one-hundredths percent
(9.08%) per annum on and after April 1, 1995 and to pay, as additional interest,
over and above the foregoing rates of interest, interest at a rate of forty one-
hundredths percent (0.40%) per annum at any time on and after October 1, 1993
when this Note does not have at such time an Acceptable Rating, in each case
payable semi-annually on the thirtieth (30th) day of March and September in each
year commencing with the later of September 30, 1991 or the interest payment
date next succeeding the date hereof, until the principal hereof shall have
become due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of Yield-Maintenance Amount (as
defined in the Note Agreement referred to below) and, to the extent permitted by
applicable law, any overdue payment of interest, 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 greater of (i) the per annum rate
of interest that is payable at such time on this Note as provided above
(including any additional interest payable as provided above) plus two percent
(2%) per annum, or (ii) the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New York City as its
Prime Rate.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made as provided in the Purchaser Schedule attached as Annex 1 to the
Note Agreement referred to below or at such other place as the holder hereof
shall designate to the Company, in writing, in lawful money of the United States
of America.
This Note is one of a series of Series B Senior Notes (herein called
the "Notes") issued pursuant to separate identical Note Agreements, each dated
as of March 29, 1991 (collectively, as amended from time to time, the "Note
Agreement"), between the Company
Exhibit A2-3
<PAGE>
and the respective original purchasers of the Notes named in the Purchaser
Schedule attached thereto as Annex 1, and the holder hereof is entitled to the
benefits and subject to the provisions thereof. As provided in the Note
Agreement, this Note is subject to prepayment in whole or from time to time in
part, in certain cases without a Yield-Maintenance Amount and in other cases
with a Yield-Maintenance Amount, as specified in the Note Agreement.
This Note is a registered Note and, as provided in the Note Agreement,
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 shall not be affected by any notice to the contrary.
The Company agrees to make prepayments of principal on the dates and
in the amounts specified in the Note Agreement.
In case an Event of Default, as defined in the Note Agreement, shall
occur and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the Note
Agreement.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAW OF SUCH
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CONNER PERIPHERALS, INC.
By:____________________
Name:
Title:
Exhibit A2-4
<PAGE>
EXHIBIT B
TO AMENDMENT NO. 5
CERTIFICATE OF CLOSING
December 22, 1993
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134
Attn: Mr. P. Jackson Bell
Reference is made to that certain Fifth Amendment, dated as of
December 22, 1993, in respect of those certain separate Note Agreements dated as
of March 29, 1991, as amended through December 21, 1993, between Conner
Peripherals, Inc. and the person identified therein as Purchaser, in respect of
Conner Peripherals, Inc.'s Series A Senior Notes due March 30, 1996 and its
Series B Senior Notes due March 30, 1998. In accordance with Section 4 of the
Fifth Amendment, the undersigned hereby notify you that the conditions precedent
set forth in such Section 4 have been satisfied.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:______________________
Name:
Title:
<PAGE>
Certificate of Closing
December 22, 1993
Page 2
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By:________________________
Name:
Title:
By:________________________
Name:
Title:
CIG & CO.
c/o CIGNA Investments, Inc.
By:_______________________
Name:
Title:
GENERAL AMERICAN LIFE INSURANCE COMPANY
By:_________________________
Name:
Title:
<PAGE>
SUBLEASE AGREEMENT
195 SOUTH MILPITAS BOULEVARD
MILPITAS, CALIFORNIA
This Sublease (hereinafter the "Sublease") is made and entered into by
and between GENERAL SIGNAL CORPORATION, a New York corporation (hereinafter
"Sublessor"), and CONNER PERIPHERALS, INC. a Delaware corporation (hereinafter
"Sublessee") for the Premises hereinafter described. Sublessor is the Tenant,
as successor in interest to Telecommunications Technology, Inc. ("TTI"), under
that certain Net Lease Agreement for the Premises between the Bryan Family
Partnership II, Ltd. (the ultimate successor in interest to CAMSI II, a
California general partnership), as Landlord, and TTI, as Tenant, dated December
20, 1985, as supplemented and amended by that certain Addendum to the Net Lease
Agreement, that certain First amendment to Lease dated October 24, 1986, and
that certain Second Amendment to Lease dated September 30, 1988, a copy of which
is attached hereto as Exhibit "X" to the Sublease (hereinafter the "Master
Lease"). The Bryan Family Partnership II, Ltd., Landlord under the Master
Lease, is hereinafter referred to as the "Master Lessor". Sublessor hereby
leases to Sublessee and Sublessee hereby hires from Sublessor the Premises for
the term and on and subject to the terms, conditions, covenants and agreements
hereinafter set forth.
1. Premises. The Premises shall consist of that certain approximately
Seventy-Seven Thousand Two Hundred (77,200) square foot building located in the
City of Milpitas, County of Santa Clara, State of California, shown
cross-hatched on Exhibit "Y" attached hereto and incorporated herein by this
reference, and commonly referred to as 195 South Milpitas Boulevard. Sublessee
also shall have the following appurtenant rights with respect to the real
property on which the Premises are located, which is described in Exhibit "Z"
attached hereto and incorporated herein by this reference (hereinafter the
"Common Area"): (i) the exclusive right to use the parking spaces located in
the Common Area (the location of which may be redesignated from time to time by
the Master Lessor without affecting Sublessee's obligations under this
Sublease); and (ii) such other rights as are necessary and convenient to
Sublessee's use and possession of the Premises or performance of Sublessee's
obligations under this Sublease. (Notwithstanding the number of parking spaces
existing as of the commencement of the Term of this Sublease, in the event by
reason of any rule, regulation, order, law, statute or ordinance of any
governmental or quasi-governmental authority relating to or affecting parking on
the Common Area, or any other cause beyond the Master Lessor's reasonable
control, the Master Lessor is required to reduce the number of parking spaces on
the Common Area, the Master Lessor shall have the right to proportionately
reduce the number of parking spaces available for Sublessee's exclusive use
without affecting Sublessee's obligations under this Sublease.) In addition,
Sublessee shall have a non-exclusive easement for vehicular ingress and egress
in and over the paved roadways in the Common Area and pedestrian ingress and
egress in and over the Common Area. Except for the right of Sublessor and/or
Master Lessor to enter upon and use the Common Area as may be necessary for the
performance of their respective obligations under this Sublease and/or the
Master Lease, and subject to conditions, covenants, restrictions, easements and
encumbrances of record, Sublessee shall have the exclusive right to use the
Common Area; provided, however, that Sublessee's rights to use that portion of
the Common Area marked by the dashed lines on Exhibit "Y" shall be subject to
the terms and conditions of that certain Deed from Beatrice C. Wrigley to the
City and County of San Francisco dated October 31, 1949, and recorded November
14, 1949, Book 1875, Page 312 of the Official Records, Santa Clara County and
that certain San Francisco Water Department Land Use Permit by and between the
City and County of San Francisco and Master Lessor's predecessor in interest,
dated
1
<PAGE>
June 21, 1984 and recorded July 3, 1984 at Book I 692, Pages 502-509 of the
Official Records, Santa Clara County. Sublessor and Sublessee acknowledge and
agree that the building referred to in the Master Lease as 185 South Milpitas
Boulevard and the building commonly referred to as 195 South Milpitas Boulevard
are one and the same and said building constitutes the Premises under this
Sublease. Sublessor and the Sublessee also agree that the information printed on
Exhibit "Y" regarding the Premises is for reference only and does not constitute
a representation or warranty by Sublessor as to the accuracy of such
information.
2. Term. Subject to the condition precedent in Paragraph 12 of this Sublease,
the Term of this Sublease shall commence on the date Sublessor delivers
possession of the Premises to Sublessee (and Sublessor shall deliver possession
of the Premises to Sublessee promptly upon satisfaction of the condition
precedent in Paragraph 12), and, unless sooner terminated as hereinafter
provided, shall end on April 27, 1996.
3. Rent. Sublessee shall pay to Sublessor as basic rent ("Rent") for the
Premises the sum of Fifty Seven Thousand Nine Hundred Dollars ($57,900.00) per
month. The Rent shall be due and payable in advance on or before the first day
of each and every calendar month during the Term of this Sublease, shall be paid
to Sublessor at the address designated in this Sublease for notices to
Sublessor, or at such other address as Sublessor shall designate in writing,
and shall be paid in lawful money of the United States without deduction,
offset, prior notice or demand. The Rent shall be pro-rated for any partial
month during the Term of the Sublease. The foregoing notwithstanding, the Rent
for the first month, or partial month, of the Term of the Sublease shall be
payable on the commencement date of this Sublease.
4. Additional Rent. In addition to the Rent payable by Sublessee during the
Term of this Sublease, from and after the commencement date of the Sublease,
Sublessee shall pay to Sublessor (unless Sublessor otherwise directs Sublessee
in writing) as Additional Rent, at the times specified in and otherwise in
accordance with the terms of the Master Lease, all Taxes (as defined in the
Master Lease), insurance premiums, charges for Services (as defined in the
Master Lease), maintenance costs, Operating Expenses (as defined in the Master
Lease), and other charges, costs and expenses that Sublessor is required to pay
under the Master Lease, it being understood and agreed by Sublessor and
Sublessee that this Sublease is to be a net lease as to Sublessor and that
Sublessee, therefore, shall pay any and all amounts and shall perform all acts
which Sublessor is obligated to pay and/or perform under the Master Lease
(except for the difference between the basic Rent payable by Sublessee under
this Sublease and the basic Rent payable by Sublessor under the Master Lease or
amounts Sublessor may become obligated to pay by reason of a breach of the
Master Lease by an act or omission of Sublessor). Sublessor reserves the right
to direct Sublessee to make payments constituting Additional Rent directly to
the Master Lessor or to other third parties, and concurrently with the payment
thereof, Sublessee shall give Sublessor written notice (and/or such other
reasonable documentation as Sublessor may request) confirming the making of any
such payment and the amount thereof.
5. Use. The Premises shall be used for electronic research and development,
assembly, manufacturing and warehousing, and related office uses, but the
Premises shall not be used for any other purpose or purposes whatsoever.
6. Services. It is understood and agreed by Sublessee that the obligations
imposed on the Landlord under Paragraphs 6.2, 10.1, 11.2, 15.2.1, 15.2.2 and
15.3.1 of the Master Lease are obligations of the Master Lessor, and Sublessee
will look solely to said Master Lessor to perform said obligations.
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Sublessor shall permit Sublessee to make demand on the Master Lessor in
Sublessor's name to perform such obligations, and Sublessor shall reasonably
cooperate with Sublessee to enable Sublessee to make such demand, provided that
Sublessee agrees to pay all expenses incurred in connection with any such demand
and Sublessor's cooperation therewith, and to indemnify, defend and hold
harmless Sublessor against and from any claim, demand, liability, cost and
expense, including without limitation attorneys' fees, arising out of or
resulting from making or prosecuting any such demand and Sublessor providing any
such cooperation. Sublessee acknowledges and agrees that this Sublease shall be
a net lease as to Sublessor and that Sublessor shall have no obligations to
provide or to perform for the benefit of Sublessee any services, utilities,
improvements (other than those already in place at the commencement of the Term
of this Sublease), maintenance or repairs.
7. Condition of Premises. Sublessee agrees that by taking possession of the
Premises it shall be deemed to have accepted the Premises and the Common Area as
being in good and sanitary order, condition and repair and to have accepted the
Premises and the Common Area in their condition existing as of the date
Sublessor delivers possession of the Premises to Sublessee, subject to all
applicable laws, covenants, conditions, restrictions, easements and other
matters of public record and the rules and regulations from time to time
promulgated by the Master Lessor governing the use of the Premises and the
Common Area. Sublessee further agrees (i) that Sublessor has no obligation to
repair, paint, improve or otherwise alter the Premises or the Common Area (and
that Sublessee is accepting the Premises and Common Area in their "AS-IS"
condition as of the commencement of the Term of the Sublease), (ii) that neither
Sublessor nor Sublessor's agents have made any representation or warranty as to
the suitability of the Premises for the conduct of Sublessee's business, the
condition of the Premises (except as otherwise expressly set forth in Paragraph
13 of this Sublease), or the use or occupancy which may be made thereof, and
(iii) that Sublessee has independently investigated the Premises and matters
related to Sublessee's use thereof and is satisfied that the Premises are
suitable for Sublessee's intended use and that the Premises meet all
governmental requirements for such intended use.
8. Subject to Master Lease. This Sublease is subject and subordinate to the
Master Lease, and to all of the provisions thereof; and Sublessee shall not
commit any act or omit to perform any act that will constitute a breach of the
Master Lease. At any time, or from time to time, Sublessor, by prior written
notice to Sublessee, can elect to require Sublessee to perform its obligations
(or any of same) under this Sublease directly to the Master Lessor, in which
case Sublessee agrees to do so and to provide to Sublessor (i) copies of any and
all notices or other communications it shall give to or receive from the Master
Lessor at the time that any such notice or other communication is given or
received, and (ii) written confirmation that any such obligation has been
performed. Sublessor represents that, subject to the condition precedent
specified in Paragraph 12 of this Sublease, it has the right to enter into this
Sublease and this Sublease does not violate any provision of the Master Lease.
Sublessor further represents and warrants that the copy of the Master Lease
attached hereto as Exhibit "X" is a true, correct and complete copy of the
entire Master Lease and all amendments relating thereto, that such Master Lease
is in full force and effect as of the date hereof and will be in full force and
effect as of the commencement date of the Sublease term, and that there
currently is no Default by Tenant (as that phrase is defined in the Master
Lease), default by the Master Lessor, or, to the best of Sublessor's knowledge,
other event which (with the giving of notice or the passage of time or both)
could constitute a Default by Tenant or default by the Master
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Lessor under the Master Lease, nor shall any such Default by Tenant or default
by the Master Lessor, or, to the best of Sublessor's knowledge, such other
event, have occurred prior to the commencement date of the Sublease term. In
addition, so long as Sublessee is not in default of its obligations under this
Sublease, Sublessor shall (a) keep the Master Lease in effect, (b) not amend or
waive any provisions thereof without Sublessee's prior written consent, which
shall not be unreasonably withheld or delayed, (c) pay the Rent due under the
Master Lease and, unless relieved of such obligation as provided herein, comply
with its obligation under Paragraph 8.2(a) of the Master Lease (as it reads in
the Second Amendment to Lease) to maintain the insurance coverage specified
therein, and (d) reasonably cooperate with Sublessee as provided in Paragraph 6
of this Sublease in connection with enforcing the performance of the obligations
of the Master Lessor under the Master Lease. The foregoing notwithstanding, if
the Master Lease is terminated for any reason, whether by the Master Lessor,
Sublessor or otherwise (including, without limitation, termination by Sublessor
as permitted under Paragraphs 15.3.2 and 15.4 of the Master Lease (subject to
Sublessee's right to prevent such termination as provided in this Sublease)),
this Sublease shall terminate (without any liability on the part of Sublessor to
Sublessee by reason of such termination, except as hereinafter expressly
provided), and the parties shall be relieved of any further liabilities and
obligations under this Sublease (other than those that survive termination);
provided, however, if this Sublease is terminated due to a default under the
Master Lease, the party committing the act or omission that constitutes the
default under the Master Lease shall be liable to the non-defaulting party for
any liabilities, damages, costs and expenses, including without limitation
attorneys' fees, incurred or suffered by the non-defaulting party as a result of
or in connection with the termination, and such defaulting party hereby agrees
to indemnify, defend and hold harmless the non-defaulting party against and from
such liabilities, damages, costs and expenses.
9. Incorporation by Reference/Assumption. The terms, covenants and
conditions contained in the Master Lease (a copy of which is attached hereto as
Exhibit "X") are incorporated by this reference into this Sublease and shall
be a party hereof to the extent and in the manner hereinafter specified, and
Sublessee agrees to be bound by and perform such terms, covenants and conditions
of the Master Lease.
(a) The following terms, covenants and conditions of the Master
Lease are not incorporated by reference into this Sublease and shall not be a
part thereof: Paragraphs 1, 2, 3, 4.1, 8.1, 30.2(a), 37, 42, The Addendum to the
Net Lease Agreement (consisting of Paragraphs 43, 44, 45, 46, 47, 48, 49, and 50
of the Master Lease), Exhibits to the Master Lease (including Exhibits A, B and
C), and the First Amendment to Lease.
(b) The following terms, covenants and conditions of the Master
Lease are incorporated by reference into this Sublease and shall be a part
thereof, except that the term "Tenant" as used therein shall mean the
Sublessee and the term "Landlord" as used therein shall mean the Sublessor:
Paragraphs 4.2, 4.3, 7, 8.2(c), 8.3, 8.5, 8.6, 9, 12.2, 14, 15.6, 15.7, 15.8,
15.9, 16, 19, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30.1, 30.2(b), 30.2(c), 30.3,
30.4, 30.5, 30.6, 30.7, 30.8, 30.9, 30.10, 30.11, 33, 34, 36, 38, 39, and 40.
(c) The following terms, covenants and conditions of the Master
Lease are incorporated by reference into the Sublease and shall be a part
thereof, except that the term "Tenant" as used therein shall mean the
sublessee and the term "Landlord" as used therein shall mean both the
Sublessor and the Master Lessor: Paragraphs 6.1, 6.3, 8.2(a) (as it reads in the
Second Amendment
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to Lease, which is incorporated by reference into the Sublease), 8.2(b), 8.2(d),
8.4, 10.2, 12.1, 17, 18, 20, 31, 32, and 35.
(d) The following terms, covenants and conditions of the Master
Lease are incorporated by reference into the Sublease and shall be a part
thereof, except that the term "Tenant" as used therein shall mean the Sublessee
and the term "Landlord" as used therein shall mean only the Master Lessor:
Paragraphs 6.2, 10.1, 11, 13, 15.1, 15.2, 15.3, 15.4, 15.5, and 41.
(e) The foregoing notwithstanding, Sublessor and Sublessee agree
that:
(1) As to Paragraph 6.2 of the Master Lease, Sublessee's
obligation to promptly comply, at Sublessee's sole cost, with all laws,
statutes, ordinances, rules, regulations, orders or requirements shall include,
without limitation, the obligation to comply with the provisions of the
Americans with Disabilities Act ("ADA") (and Sublessor makes no representation
or warranty that the Premises and Common Area are in compliance with the
provisions of the ADA, nor shall the Sublessor be responsible for bringing the
Premises and Common Area into compliance with the provisions of the ADA).
(2) As to Paragraph 7 of the Master Lease, to the extent it
references Taxes laid, levied, assessed or imposed upon Landlord, such reference
shall mean any such Taxes laid, levied, assessed or imposed upon Sublessor
and/or the Master Lessor. In addition, the insert to Paragraph 7.3(a) of the
Master Lease that is referenced by an asterisk shall refer to assessments
existing as of the commencement date of the Sublease term.
(3) As to Paragraph 8.2(a) of the Master Lease (as such
Paragraph is amended and made a part of the Master Lease by the Second Amendment
to Lease), Sublessor shall continue to obtain and maintain the "all risk"
property insurance, including the rental income insurance, required thereunder,
and Sublessee shall pay to Sublessor, as Additional Rent, the amount of the
premium and shall be responsible for any deductible (said payments to be made by
Sublessee upon presentation of an invoice therefor by Sublessor); and in the
event Sublessor maintains such "all risk" insurance as part of a blanket policy,
the amount to be reimbursed by Sublessee hereunder shall be reasonably
determined by Sublessor on the basis of what such coverage would cost if a
separate policy were obtained for the Premises but then allowing a reasonable
discount to account for the fact that the coverage is maintained as part of a
blanket policy. The foregoing notwithstanding, Sublessee shall be entitled to
obtain and maintain the insurance required under Paragraph 8.2(a) of the Master
Lease, provided that Sublessee first obtains the written consent thereto of the
Master Lessor and the Master Lessor's written agreement that maintenance of such
insurance by Sublessee shall be in lieu of Sublessor maintaining the insurance
and Sublessor shall be relieved of its obligation to do so under the Master
Lease.
(4) As to Paragraph 8.2(d) of the Master Lease, the insert
appearing on Page 5-A of the Master Lease that is referenced by the three
asterisks shall not be a part of the Sublease.
(5) As to Paragraph 10.1 of the Master Lease, the insert
denoted by one asterisk in the margin regarding the landlord's obligation to
reseal and restripe the parking lot and wash the exterior of the Premises shall
not be a part of the Sublease.
(6) As to Paragraph 12.1 of the Master Lease, the reference to
the "Landlord" in the sixth to the last line thereof shall refer only to the
Master Lessor.
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(7) As to Paragraph 12.2 of the Master Lease, the time and
method of payment and accounting for all Operating Expenses payable under this
Sublease shall be in the same manner as required by the Master Lessor under the
Master Lease.
(8) As to the last sentence of Paragraph 13.1 of the Master
Lease, Sublessee shall be entitled to make structural changes to the Premises
provided that Sublessee first obtains the written consent of the Master Lessor
authorizing such changes.
(9) As to Paragraphs 15.3.2 and 15.4 of the Master Lease, their
incorporation by reference into the Sublease shall not be construed to modify or
limit Sublessor's right to terminate the Master Lease (without incurring any
liability to Sublessee) under the circumstances specified therein. The foregoing
notwithstanding, Sublessor shall immediately provide to Sublessee, by personal
delivery or via telecopier, copies of the Master Lessor's notice of termination
(in the case of Paragraph 15.3.2 of the Master Lease) or estimate of the time
needed to complete repair or restoration of the Premises (in the case of
Paragraph 15.4 of the Master Lease), and: (i) in the case of Paragraph 15.3.2,
Sublessor shall not exercise its right to terminate the Master Lease and,
instead, will give the Master Lessor the written notice required under Paragraph
15.3.2 to keep the Master Lease in effect, if Sublessee gives written notice to
Sublessor, by personal delivery or via telecopier not less than three (3) days
prior to the expiration of the ten (10) day period specified in Paragraph 15.3.2
of the Master Lease, stating (a) that Sublessee does not want Sublessor to
terminate the Master Lease, (b) that Sublessee will pay all costs and perform
all other obligations required under Paragraph 15.3.2 of the Master Lease to
keep the Master Lease in effect, (c) that Sublessee waives its right to
terminate the Sublease pursuant to Paragraph 15.3.2 on account of the damage or
destruction giving rise to the Master Lessor's notice, and (d) that from and
after the date of Sublessee giving the notice to Sublessor the Rent payable by
Sublessee to Sublessor under this Sublease shall be the same amount as the Rent
payable by Sublessor to the Master Lessor under the Master Lease, as said Rent
may be adjusted under the terms of the Master Lease; and (ii) in the case of
Paragraph 15.4, Sublessor shall not exercise its right to terminate the Master
Lease if Sublessee gives written notice to Sublessor, by personal delivery or
via telecopier not less than three (3) days prior to the expiration of the ten
(10) day period specified in Paragraph 15.4 of the Master Lease, stating (a)
that Sublessee does not want Sublessor to terminate the Master Lease, (b) that
Sublessee waives its right to terminate the Sublease pursuant to Paragraph 15.4
on account of the damage or destruction giving rise to the Master Lessor's
notice, and (c) that from and after the date of Sublessee giving the notice to
Sublessor the Rent payable by Sublessee to Sublessor under this Sublease shall
be the same amount as the Rent payable by Sublessor to the Master Lessor under
the Master Lease, as said Rent may be adjusted under the terms of the Master
Lease. The parties agree that in the event Sublessee gives the notice described
herein to Sublessor, Paragraph 3 of this Sublease shall thereby, without any
further action on the part of Sublessee or Sublessor being required, be amended
to provide that the Rent payable under this Sublease shall be the same as the
Rent payable by Sublessor to Master Lessor under the Master Lease, as said
Master Lease Rent may be adjusted pursuant to the Master Lease; but the other
terms and conditions of the Sublease shall remain the same and in full force and
effect.
(10) As to Paragraph 18 of the Master Lease, Sublessor agrees
that so long as Sublessee is not in default of its obligations under the
Sublease, and provided the entry into the Premises is not for the purpose of
protecting the Premises in the event of an emergency, Sublessor, in exercising
its rights under said Paragraph 18, shall be accompanied by a representative
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of Sublessee while Sublessor is on the Premises, and shall comply with all
reasonable securrity measures from time to time requested in writing by
Sublessee. Sublessor further agrees that even if Sublessee is in default of its
obligations under the Sublease, Sublessor, in exercising its rights under
Paragraph 18 of the Master Lease, will comply with those reasonable security
measures requested in writing by Sublessee that do not unreasonably interfere
with the exercise of Sublessor's rights under said Paragraph 18.
(11) As to Paragraph 22 of the Master Lease, the address for notices to
Sublessor shall be:
General Signal Corporation
P.O. Box 10010
Stamford, CT 06904
Attention: General Counsel
with a copy to: Hoffman, Finney & Klinedinst
351 California Street
Suite 800
San Francisco, CA 94104
Attention: Kenneth H. Finney
and the address for notices to Sublessee shall be:
Conner Peripherals, Inc.
3081 Zanker Road
M/S 4408
San Jose, CA 95134-2128
Attention: Marla Ann Stark, Esq.
with a copy to: Conner Peripherals, Inc.
3081 Zanker Road
M/S 4408
San Jose, CA 95134-2128
Attention: Mr. Carl Neun
with a copy to: Conner Peripherals, Inc.
311 Turquoise Street
Milpitas, CA 95035
Attention: Mr. Ed Roney
provided, however, that this shall not preclude Sublessor from giving notices to
Sublessee at the Premises as permitted by said Paragraph 22. In addition,
anything in Paragraph 22 of the Master Lease to the contrary notwithstanding,
the notices that can be given by Sublessee to Sublessor pursuant to Paragraph
9(e)(9) of this Sublease must be given by personal delivery or via telecopier.
(12) As to Paragraph 24.2 of the Master Lease, Sublessee understands and
agrees that Sublessor, in turn, shall have to follow the procedures specified
therein vis-a-vis the Master Lessor, including without limitation obtaining the
Master Lessor's consent to any proposed assignment or subletting by Sublessee,
and that the refusal by the Master Lessor to consent to any such proposed
assignment or subletting by Sublessee shall, without more, entitle Sublessor to
withhold its consent (and the withholding of Sublessor's consent under these
circumstances shall be presumptively reasonable).
(13) As to Paragraph 24.5 of the Master Lease, the interlineation denoted by
three asterisks in the margin shall not be incorporated into the Sublease.
(14) As to Paragraph 26 of the Master Lease, the interlineation denoted by
four asterisks shall not be part of the Sublease, and the obligations specified
in Paragraph 26 pursuant to which Sublessee must give notice to any beneficiary
of a deed
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of trust affecting the Premises of a default by the "Landlord" shall refer to a
default by the Master Lessor. In addition, the second sentence of such Paragraph
26 shall not be incorporated into this Sublease.
(15) As to Paragraph 39 of the Master Lease, Sublessee understands and agrees
that Sublessor is not responsible for the acts or omissions of the Master Lessor
and/or any third party that succeeds the Master Lessor, and, accordingly,
Sublessor shall not be liable to Sublessee for a breach of said Paragraph 39
that arises out of or results from an act or omission of the Master Lessor or
any such successor to the Master Lessor.
(16) As to any paragraphs in the Master Lease in which the term "Landlord" has
been deemed to mean either the Master Lessor alone or both the Master Lessor and
the Sublessor (such as, by way of example, Paragraphs 10.1 and 10.2), and a
payment is to be made to the "Landlord" by Sublessee, such payment shall be made
to Sublessor, unless Sublessor otherwise instructs Sublessee in writing.
(17) As to Paragraph 8.6 of the Master Lease, for purposes of the release and
waiver given by Sublessee, the property covered, and the circumstances under
which the release and waiver apply, the term "Landlord" as used therein shall
mean both the Sublessor and the Master Lessor.
(18) The term "Lease," as used in the Master Lease shall mean this Sublease
and/or the Master Lease as appropriate to effectuate the parties' intention to
incorporate the terms, covenants and conditions of the Master Lease into this
Sublease.
10. Indemnity. In addition to, and not in lieu of other indemnities given by
Sublessee, including without limitation the indemnities in Paragraph 8.4 of the
Master Lease and in Paragraph 13 of this Sublease, Sublessee hereby agrees to
indemnify, defend and hold harmless Sublessor against and from any claims,
demands, liabilities, damages, costs and expenses, including without limitation
attorneys' fees, arising out or resulting from (i) a breach by Sublessee of any
term, covenant or condition of this Sublease, including without limitation any
act or omission by Sublessee that constitutes a breach of the Master Lease, and
(ii) the making by Sublessee of any "alterations" (as that term is defined in
Paragraph 13.1 of the Master Lease) in, on, about or to the Premises, on any
part thereof, including without limitation any structural changes permitted in
accordance with Paragraph 9(e)(8) of this Sublease. This provision shall survive
termination of this Sublease.
11. Right to Reenter. Sublessor, in addition to any other rights it may have
under this Sublease or at law upon the occurrence of a breach of this Sublease
by Sublessee, shall have the right to reenter and retake possession of the
Premises from Sublessee, and to remove all persons and property from the
Premises and the Common Area, any property that is so removed to be stored in a
public warehouse or elsewhere at the cost of and for the account of Sublessee.
No such reentry or retaking of possession of the Premises by Sublessor pursuant
to this provision shall be construed as an election to terminate this Sublease
unless a written notice of such termination is given to Sublessee.
12. Condition Precedent. Sublessee understands and agrees that it is a
condition precedent to this Sublease that the Master Lessor give its prior
written consent to this Sublease in accordance with the terms of the Master
Lease. In the event the Master Lessor does not give its written consent to this
Sublease in accordance with the terms of the Master Lease, either party,
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at its option, may thereafter terminate this Sublease by giving written notice
of termination to the other party; and neither Sublessor nor Sublessee shall
have any liability to the other in the event of such termination by reason of
the failure of the Master Lessor to give its consent. The consent of the Master
Lessor shall include: (i) the Master Lessor's certification that (a) the Master
Lease attached hereto as Exhibit "X" constitutes the entire Master Lease and all
amendments relating thereto, (b) the Master Lease is in full force and effect,
and (c) there currently is no Default by Tenant (as that phrase is defined in
the Master Lease), default by the Master Lessor, or, to the best of Master
Lessor's knowledge, other event which (with the giving of notice or the passage
of time or both) could constitute a Default by Tenant or default by the Master
Lessor under the Master Lease; (ii) the Master Lessor's agreement (a) to give
Sublessee copies of any written notice given to Sublessor of any default under
the Master Lease or events of which the Master Lessor has knowledge that (with
the giving of further notice or the passage of time or both) would constitute a
default under the Master Lease, at the same times and in the same manner as such
notices are given to Sublessor, and (b) to accept tender of payment or
performance by Sublessee to remedy any such default; (iii) a waiver of
subrogation in favor of Sublessee on and subject to the same terms and
conditions as are contained in Paragraph 8.6 of the Master Lease; (iv) the
Master Lessor's agreement to adhere to the same restrictions on entry into the
Premises imposed on Sublessor under Paragraph 9(e)(10) of this Sublease; and (v)
the Master Lessor's agreement that its consent to a sublet of the Premises or
assignment of this Sublease will not be required in connection with a subletting
or assignment described in Paragraph 16 of this Sublease.
13. Environmental Indemnities.
-------------------------
(a) Neither Sublessee nor its agents, contractors, employees, invitees,
assignees or sublessees shall transport, store, use or dispose of any Hazardous
Materials in, on or about the Premises or Common Area without the prior written
consent of Sublessor, which Sublessor shall not unreasonably withhold so long as
Sublessee demonstrates to Sublessor's reasonable satisfaction that any such
Hazardous Materials are necessary or useful to Sublessee's business at the
Premises and will be brought upon the Premises, stored, used and/or disposed of
in compliance with all federal, state and local laws, rules, regulations,
ordinances, and other requirements applicable to any such Hazardous Materials.
Sublessee, in any event, at its sole cost and expense, shall comply with all
federal, state and local laws, rules, regulations, ordinances, and other
requirements applicable to Sublessee's transport, storage, use and/or disposal
of Hazardous Materials in, on or about the Premises, and Sublessee shall be
solely responsible for and shall indemnify, defend and hold harmless Sublessor
and the Master Lessor from and against any and all claims, costs, liabilities,
losses, damages, obligations and expenses, including without limitation
attorneys' fees, arising out of or resulting from Sublessee or its agents,
contractors, employees, invitees, assignees or sublessees transporting, storing,
using and/or disposing of or otherwise releasing Hazardous Materials in, on or
about the Premises or the Common Area. The foregoing indemnity shall include,
without limitation, all claims, costs, liabilities, losses, damages, obligations
and expenses, including attorneys' fees, arising out of or resulting from any
investigation, testing, monitoring, removal, cleanup, restoration and/or other
remedial work required by any federal, state, or local government agency or
political subdivision, required by reason of any action initiated by a private
party, or otherwise necessitated by reason of any use, storage, disposal or
release of Hazardous Materials in, on or around the Premises or the Common Area
by Sublessee or its agents, contractors, employees, invitees, assignees or
sublessees.
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(b) Sublessor represents and warrants to Sublessee that to the best
of Sublessor's actual knowledge there are no Hazardous Materials present in, on
or about the Premises or the Common Area as of February 1, 1993. Sublessor
shall be solely responsible for and shall indemnify, defend and hold harmless
Sublessee from and against any and all claims, costs, liabilities, losses,
damages, obligations and expenses, including without limitation attorneys' fees,
arising out of or resulting from a breach of the foregoing representation and
warranty by Sublessor and/or any use, storage, disposal or release of Hazardous
Materials by Sublessor or its agents in, on or about the Premises or the Common
Area prior to the commencement of the Term of the Sublease. Said indemnity
shall include, without limitation, all claims, costs, liabilities, losses,
damages, obligations and expenses, including attorneys' fees, arising out of or
resulting from any investigation, testing, monitoring, removal, cleanup,
restoration and/or other remedial work required by any federal, state or local
government agency or political subdivision, required by reason of any action
initiated by a private party, or otherwise necessitated by reason of any use,
storage, disposal or release of Hazardous Materials in, on or around the
Premises or the Common Area by Sublessor or its agents prior to the commencement
of the Term of the Sublease.
(c) The term Hazardous Materials, as used herein, shall mean all
hazardous, toxic, and/or radioactive materials, substances, and wastes, and
shall include, without limitation, all materials, substances, and wastes,
defined as "hazardous substances", "hazardous materials", or "toxic substances"
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq, the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq, or those materials, substances
and wastes defined as "hazardous wastes" in Section 25117 of the California
Health & Safety Code or as "hazardous substances" in Section 25316 of the
California Health & Safety Code, petroleum and petroleum products, and any other
materials, substances or wastes defined as hazardous, toxic or radioactive in
any laws, regulations, statutes, ordinances or rules adopted or promulgated by
and federal, state or local government agency.
(d) Sublessee's and Sublessor's indemnity obligations under this
Paragraph 13 shall survive the termination of this Sublease. If at any time
during or after the term of this Sublease Sublessor or Sublessee becomes aware
of any inquiry, investigation, administrative proceeding, or judicial proceeding
by any governmental agency or any action by a private party regarding the
presence of any Hazardous Materials in, on or about the Premises or the Common
Area, such party shall, within five days after learning of such inquiry,
investigation, proceeding, or action give the other party written notice
advising Sublessor of same.
14. Commissions. Sublessee represents and warrants to Sublessor that
Sublessee has dealt with no broker in connection with this Sublease other than
Cornish & Carey Commercial Real Estate, and Sublessor represents and warrants to
Sublessee that Sublessor has dealt with no broker in connection with this
Sublease other than Grubb & Ellis Company Commercial Real Estate Services.
Sublessor agrees to be liable for and to pay all real estate brokerage
commissions earned by the aforementioned brokers in connection with this
Sublease, and Sublessor understands and agrees that said commissions shall total
one and one half (1-1/2) times the commission payable to Grubb & Ellis pursuant
to Sublessor's separate agreement with Grubb & Ellis, with Cornish & Carey
receiving a commission equal to the full amount due under said separate
agreement and Grubb & Ellis receiving a commission equal to one half of the full
amount due under said separate agreement. Sublessor shall pay all amounts due
to Grubb & Ellis
10
<PAGE>
(and Grubb & Ellis, in turn, shall be responsible for forwarding payment of its
share to Cornish & Carey); provided, however, that anything in said separate
agreement to the contrary notwithstanding such commissions shall be payable as
follows: (i) fifty percent (50%) at such time as the conditions precedent in
Paragraph 12 of this Sublease have been satisfied; and (ii) fifty percent (50%)
upon the commencement of the Term of this Sublease. Sublessor and Sublessee
each (as "Indemnitor") agree to indemnify, defend and hold harmless the other
against and from any claims, demands, liabilities, costs and expenses, including
without limitation attorneys' fees, arising out of or resulting from a claim by
any person or entity (other than Cornish & Carey and Grubb & Ellis) that it is
entitled to a commission, finders fee or other compensation in connection with
this Sublease transaction based on acts or omissions of the Indemnitor.
15. Entire Agreement. There are no other agreements between Sublessor
and Sublessee regarding the Premises, the Common Area or the Sublease, and this
Sublease supersedes and cancels any and all prior negotiations, arrangements,
agreements, representations, and understandings, whether oral or written,
between Sublessor and Sublessee or made by Sublessor or its agents to Sublessee
with respect to the subject matter of this Sublease. This Sublease constitutes
the entire agreement between the parties and may be amended or modified only by
a written instrument signed by the parties.
16. Assignment and Subletting. Notwithstanding anything to the contrary
in this Sublease, Sublessee may, without Sublessor's prior written consent and
without any participation by Sublessor in assignment or subletting proceeds,
sublet the Premises or assign this Sublease to (i) a subsidiary, affiliate,
division or corporation controlled by or under common control with Sublessee ,
(ii) a successor corporation related to Sublessee by merger, consolidation,
non-bankruptcy reorganization or government action, or (iii) a purchaser of
substantially all of the assets of Sublessee's division occupying the Premises;
provided, however, that any such sublease or assignment shall not be construed
to relieve Sublessee of its obligations under this Sublease.
17. Approvals. Notwithstanding anything to the contrary in this Sublease,
whenever this Sublease expressly requires an approval or consent by Sublessor or
Sublessee, such approval or consent shall not be unreasonably withheld or
delayed.
18. Communications with Master Lessor. Sublessee agrees to provide to
Sublessor (i) copies of any communications and/or other documentation given by
Sublessee to the Master Lessor, including without limitation any requests for
the Master Lessor's consent required under Paragraphs 9(e)(3) and (e)(8) of this
Sublease, at the same times and in the same manner that any such communications
and/or other documentation are submitted to the Master Lessor, and (ii) copies
of any communications received by Sublessee from the Master Lessor promptly upon
receipt thereof.
IN WITNESS WHEREOF, the parties have executed this Lease as of the 22 day
of February, 1993
SUBLESSOR: SUBLESSEE:
General Signal Corporation Conner Peripherals, Inc.
/s/ /s/ Carl W. Neun
By:_________________________ By:__________________________
Its: VP & Treasurer Its: CFO
-------------------- ---------------------
11
<PAGE>
INDEX
NET LEASE
<TABLE>
<CAPTION>
Page
<S> <C>
1. Summary of Lease Provisions ........................................... 1
2. Property Leased ....................................................... 2
3. Term .................................................................. 2
4. Rent .................................................................. 3
5. Security Deposit ...................................................... 3
6. Use of Premises ....................................................... 3
7. Taxes ................................................................. 4
8. Insurance; Indemnity; Waiver .......................................... 5
9. Utilities ............................................................. 6
10. Repairs and Maintenance ............................................... 6
11. Common Area ........................................................... 6
12. Operating Expenses .................................................... 7
13. Alterations and Improvements .......................................... 7
14. Default and Remedies .................................................. 7
15. Damage or Destruction ................................................. 8
16. Condemnation .......................................................... 9
17. Liens ................................................................. 9
18. Landlord's Right of Access to Premises ................................ 10
19. Landlord's Right to Perform Tenant's Covenants ........................ 10
20. Lender Requirements ................................................... 10
21. Holding Over .......................................................... 11
22. Notices ............................................................... 11
23. Attorneys' Fees ....................................................... 11
24. Assignment, Subletting and Hypothecation .............................. 11
25. Successors ............................................................ 12
26. Landlord Default; Mortgage Protection ................................. 12
27. Exhibits .............................................................. 13
28. Surrender of Lease Not Merger ......................................... 13
29. Waiver ................................................................ 13
30. General ............................................................... 13
31. Signs ................................................................. 13
32. Landlord as Party Defendant ........................................... 14
33. Landlord Not a Trustee ................................................ 14
34. Interest .............................................................. 14
35. Surrender of Premises ................................................. 14
36. No Partnership or Joint Venture ....................................... 14
37. Entire Agreement ...................................................... 14
38. Submission of Lease ................................................... 14
39. Quiet Enjoyment ....................................................... 14
40. Authority ............................................................. 14
41. Building Plans ........................................................ 14
42. Addendum .............................................................. 14
43. Option to Extend Lease Term ........................................... 15
44. Rent During Extended Term ............................................. 15
45. Moving Costs .......................................................... 17
46. Existing Leases ....................................................... 17
47. Right of First Refusal ................................................ 17
48. Right of First Negotiation - Expansion Building ....................... 18
49. Condition of Title .................................................... 18
50. Environmental Compliance .............................................. 18
</TABLE>
Exhibit "X" to Sublease
12
<PAGE>
NET LEASE AGREEMENT
1. SUMMARY OF LEASE PROVISIONS For and in consideration of the rentals,
covenants, and conditions hereinafter set forth, Landlord hereby leases to
Tenant, and Tenant hereby rents from Landlord, the herein described Premises for
the term, at the rental and subject to and upon all of the terms, covenants and
agreements set forth in this Net Lease Agreement, including Landlord's right to
recover the Premises pursuant to Paragraph 24 below ("Lease"):
1.1 Tenant: TELECOMMUNICATIONS TECHNOLOGY, INC., a Delaware
----------------------------------------------------------------
corporation
___________________________________________________________("Tenant").
1.2 Landlord: CAMSI II, a California general partnership
--------------------------------------------------------------
___________________________________________________________("Landlord").
1.3 Date of Lease, for reference purposes only: December 20, 19 85
_________________ _______.
1.4 Premises: That certain building located in the city of Milpitas
________________,
County of Santa Clara State of California, shown cross-hatched on the
___________,
site plan attached hereto as Exhibit "A", and commonly referred to as
185 So. Milpitas Boulevard
__________________________, _________________ together with certain
rights appurtenant thereto. (Paragraph 2.1)
1.5 Term: Ten (10) years (Paragraph 3)
-----------------------------------------------------
1.6 Commencement Date: May 1, 1986 subject to the provisions
--------------------------,
of Paragraph 3 below. (Paragraph 3)
1.7 Ending Date: April 30, 1996 unless sooner terminated
_________________________________,
pursuant to the terms of this Lease, subject to extension pursuant to
Paragraph 43.
1.8 Rent: (Paragraph 4) Period Monthly Amount
------ --------------
5/1/86 - 4/30/97 -0-
5/1/87 - 4/30/92 $60,988
5/1/92 - 4/30/93 $64,076
5/1/93 - 4/30/94 $67,936
5/1/94 - 4/30/96 $76,428
Subject to adjustment pursuant to Paragraph 2(e) of the Improvement
Agreement attached as Exhibit "C" hereto.
Receipt of the first month's Rent is hereby acknowledged by Landlord.
1.9 Use of Premises: electronic research and development, assembly,
-------------------------------------------------------
manufacturing, and warehousing and related office use (Paragraph 6)
-----------------------------------------------------------
1.10 Security Deposit: none
------------------------------------------------------
-----------------------------------------------------------(Paragraph 5)
1.11 Addresses for Notices:
To Landlord. CAMSI II
-----------------------------------------------------------
P. O. Box 4360
-----------------------------------------------------------
Santa Clara, CA 95054
-----------------------------------------------------------
To Tenant. To the Premises, with a courtesy copy to:
General Signal Corporation (Guarantor)
-----------------------------------------------------------
High Ridge Park
-----------------------------------------------------------
Stamford, Connecticut 06904 Attention: General Counsel
-----------------------------------------------------------
1.12 Exclusive Right to Use No More than Two hundred Ninety-Three ( 293 )
-------------------------- -------
parking spaces within the Common Area. (Paragraph 2.1)
1.13 SUMMARY PROVISIONS IN GENERAL. Parenthetical references in this Paragraph
1 to other paragraphs in this Lease are for convenience of reference, and
designate some of the other Lease paragraphs where applicable provisions are
set forth. All of the terms and conditions of each such referenced paragraph
shall be construed to be incorporated within and made a part of each of the
above referring Summary of Lease Provisions. In the event of any conflict
between any Summary of Lease Provision as set forth above and the balance of
the Lease, the latter shall control.
13
<PAGE>
2. PROPERTY LEASED
2.1 PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, upon the terms and conditions herein set forth, that certain building
("Premises") referred to in Paragraph 1.4 above, shown cross-hatched on the site
plan attached hereto as Exhibit "A". In addition, Tenant shall have the
following rights with respect to the real property more particularly described
in the legal description attached as Exhibit "B" hereto (if applicable) and
outlined in red on Exhibit "A" ("Common Area"): (i) the exclusive right to use
no more than the number of parking spaces set forth in Paragraph 1.12 above, as
shown on Exhibit "A", the location of which may be redesignated from time to
time by Landlord; and (ii) such other rights as are necessary and convenient to
Tenant's possession of the Premises or performance of Tenant's obligations under
this Lease. (Notwithstanding the number of parking spaces designated for
Tenant's exclusive use, in the event by reason of any rule, regulation, order,
law, statute or ordinance of any governmental or quasi-governmental authority
relating to or affecting parking on the Common Area, or any other cause beyond
Landlord's reasonable control, Landlord is required to reduce the number of
parking spaces on the Common Area. Landlord shall have the right to
proportionately reduce the number of parking spaces designated herein for
Tenant's exclusive use.) In addition, Landlord grants to Tenant a non-exclusive
easement for vehicular ingress and egress in and over the paved roadways in the
Common Area and pedestrian ingress and egress in and over the Common Area.
(*See attached Page 2-A.)
2.2 IMPROVEMENTS. The improvements to be constructed by Landlord for Tenant's
use in the Premises are set forth in detail on the attached Exhibit "C". In the
event of changes to any of the work set forth in Exhibit "C" (whether such
changes are required by any public agency, or by reason of any error or omission
in plans because of information provided to Landlord by Tenant, or because
requested in writing by Tenant and accepted in writing by Landlord), Tenant
shall pay to Landlord, Landlord's costs related to such changes before work in
regard to such changes is commenced; provided, however, in no event shall
Landlord's failure to demand such payment before commencement of work in regard
to such changes, or Tenant's failure to pay for the same before commencement of
work in regard to such changes be deemed to be a waiver of Landlord's right to
require or enforce collection of such payment for changes at any time
thereafter. Landlord's costs related to the changes shall include, without
limitation, all architectural, contractor, and engineering expenses, and the
cost of all building and other permits and inspection fees. Tenant acknowledges
that Landlord or a person or entity related to Landlord and/or controlled by
Landlord may serve as Landlord's architect, engineer and/or contractor in regard
to the above-described work and in the event of any changes, Landlord's costs
shall be deemed to include architect, engineering and/or contractor expenses at
the rates charged to third parties by Landlord and/or such related person or
entity for such services, when performed independently of any lease agreement.
Since any construction work on the Premises by Tenant prior to substantial
completion of the work required of Landlord pursuant to this Paragraph 2.2 may
interfere with the work required of Landlord or with Landlord's ability to
obtain a Certificate of Occupancy therefor, any such work by Tenant shall be
subject to the provisions of Paragraph 13.1 hereof, and Landlord may withhold
its consent to any such work by Tenant, provided that such consent is not
unreasonably withheld. It shall not be deemed unreasonable for Landlord to
withhold its consent if Tenant proposes to use non-union labor.
2.3 ACCEPTANCE OF PREMISES. By taking possession of the Premises, Tenant shall
be deemed to have accepted the Premises as being in good and sanitary order,
condition and repair and to have accepted the Premises in their condition
existing as of the date Tenant takes possession of the Premises, subject to all
applicable laws, covenants, conditions, restrictions, easements and other
matters of public record and the rules and regulations from time to time
promulgated by Landlord governing the use of the Premises, and Common Area, and
further, to have accepted tenant improvements to be constructed by Landlord (if
any) as being completed in accordance with the plans and specifications for such
improvements, subject only to completion of items on Landlord's punch list.
(**See attached Page 2-A.) Tenant acknowledges that neither Landlord nor
Landlord's agents have made any representation or warranty as to the suitability
of the Premises for the conduct of Tenant's business, the condition of the
Premises, or the use or occupancy which may be made thereof and Tenant has
independently investigated and is satisfied that the Premises are suitable for
Tenant's intended use and that the Premises meets all governmental requirements
for such intended use.
3. TERM
3.1 COMMENCEMENT DATE. The term of this Lease ("Lease Term") shall be for the
period specified in Paragraph 1.5 above, commencing on the date set forth in
Paragraph 1.6 ("Commencement Date"); provided, however, in the event any
improvements to be constructed by Landlord, as set forth on Exhibit "C" are not
completed by the aforesaid Commencement Date or are completed prior to such
Commencement Date, then the Commencement Date shall be deemed to be the date on
which the improvements to be constructed by Landlord are substantially
completed. (***Time is of the essence.) Such improvements shall be deemed to be
substantially completed upon the occurrence of the earlier of the following:
(a) The date on which all improvements to be constructed by Landlord have been
substantially completed except for: (i) punch list items which do not prevent
Tenant from using the Premises for its intended use; (ii) such work as
Landlord is required to perform but which is delayed because of fault or
neglect of Tenant, acts of Tenant or Tenant's agents (including without
limitation delays caused by work done on the Premises by Tenant or Tenant's
agents or by acts of Tenant's contractors or subcontractors) or delays caused
by change orders requested by Tenant or required because of any errors or
omissions in plans submitted by Tenant; and (iii) such work as Landlord is
required to perform but cannot complete until Tenant performs necessary
portions of construction work it has elected or is required to do; or
(b) The issuance of appropriate governmental approvals for occupancy of the
Premises; or
(c) The date Tenant opens for business in the Premises.
If the Commencement Date is a date other than the date set forth in Paragraph
1.6, then the Ending Date set forth in Paragraph 1.7, the rental adjustment
dates set forth in Paragraph 1.8 and any other dates certain specified herein
shall be adjusted accordingly. When the Commencement Date, Ending Date, rental
adjustment dates, and such other dates become ascertainable, Landlord and Tenant
shall specify the same in writing, in the form of the attached Exhibit "D",
which writing shall be deemed incorporated herein. Tenant's failure to execute
and deliver the letter attached hereto as Exhibit "D" shall be a Default by
Tenant hereunder. The expiration of the Lease Term or sooner termination of this
Lease is referred to herein as the "Lease Termination".
3.2 DELAY OF COMMENCEMENT DATE. Landlord shall not be liable for any damage or
loss incurred by Tenant for Landlord's failure for whatever cause to deliver
possession of the Premises by any particular date (including the Commencement
Date), nor shall this Lease be void or voidable on account of such failure to
deliver possession of the Premises; provided that if Landlord does not deliver
possession of the Premises to Tenant by the date which is thirty (30) days from
the date as set forth in Paragraph 1.6 above. Tenant shall have the right to
terminate this Lease by written notice delivered to Landlord within five (5)
days thereafter, and Landlord and Tenant shall be relieved of their respective
obligations hereunder; provided further that said thirty (30) day period shall
be extended by the number of days work on the Premises is delayed due to fault
or neglect of Tenant, acts of Tenant or Tenant's agents, or due to acts of God,
labor disputes, strikes, fires, rainy or stormy weather, acts or failures to act
of public agencies, inability to obtain labor or materials, earthquake, war,
insurrection, riots and other causes beyond Landlord's reasonable control.
3.3 EARLY OCCUPANCY. If Tenant takes possession of the Premises prior to the
Commencement Date, Tenant shall do so subject to all of the terms and conditions
hereof and shall pay the Rentals provided for herein.
3.4 TENANT TO PHYSICALLY OCCUPY PREMISES. Tenant shall, no later than thirty
(30) days after the Commencement Date, go into actual physical occupancy of the
Premises and open the Premises for business in accordance with the uses
specified in Paragraph 6 below; provided, however, the date of Tenant's physical
occupancy of the Premises shall in no event extend the Commencement Date, the
Lease Termination date or the date the payment of Rentals hereunder commences.
Time is of the essence.
14
<PAGE>
PAGE 2-A
2.1 *Except for the right of Landlord to enter upon and use the Common Area
as may be necessary for the performance of Landlord's obligations hereunder,
Tenant shall have the exclusive right to use the Common Area. The foregoing
notwithstanding, Tenant's rights to use that portion of the Common Area marked
by dashed lines on Exhibit "A" shall be subject to the terms and conditions of
that certain Deed from Beatrice C. Wrigley to the City and County of San
Francisco dated October 31, 1949, and recorded November 14, 1949 Book 1875 Page
312 of the Official Records, Santa Clara County and that certain San Francisco
Water Department Land Use Permit by and between the City and County of San
Francisco and Landlord, dated June 21, 1984 and recorded July 3, 1984 at Book I
692 Pages 502-509 of the Official Records, Santa Clara County.
2.3 **Tenant shall be a beneficiary of all warranties received by Landlord
from contractors and subcontractors performing work on the Premises. Landlord
represents to Tenant that it has received or will receive the following
warranties from its contractors and subcontractors in connection with
construction of the Premises and the Improvements:
(a) With respect to the Building shell, a one (1) year warranty from date
of completion (May 9, 1985) (parts and labor) with respect to defects in
construction.
(b) With respect to the interim improvements, a one (1) year warranty from
date of completion (parts and labor) with respect to defects in construction.
15
<PAGE>
4. RENT
4.1 RENT. Tenant shall pay to Landlord as rent for the Premises ("Rent"),
in advance, on the first day of each calendar month, commencing on the date
specified in Paragraph 1.8 and continuing throughout the Lease Term (until
adjusted pursuant to Paragraph 4.4. below) the Rent set forth in Paragraph
1.8 above. Rent shall be prorated, based on thirty days per month, for any
partial month during the Lease Term. Rent shall be payable without
deduction, offset, prior notice or demand in lawful money of the United
States to Landlord at the address herein specified for purposes of notice
or to such other persons or such other places as Landlord may designate in
writing.
4.2 LATE CHARGE. Tenant hereby acknowledges that late payment by Tenant to
Landlord of Rent will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed on Landlord by the
terms of any mortgage or deed of trust covering the Premises. Accordingly,
Tenant shall pay to Landlord, as additional rent (as defined in paragraph
4.3 below), without the necessity of prior notice or demand, a late charge
equal to ten percent (10%) of any installment of Rent which is not received
by Landlord within ten (10) days after the due date for such installment.
The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. In no event shall this provision for a late charge
be deemed to grant to Tenant a grace period or extension of
time within which to pay any installment of Rent or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's
failure to pay such installment of Rent when due, including without
limitation the right to terminate this Lease. In the event any installment
of Rent is not received by Landlord by the thirtieth (30th) day after the
due date for such installment, such installment shall bear interest at the
annual rate set forth in Paragraph 34 below, commencing on the thirty-first
(31st) day after the due date for such installment and continuing until such
installment is paid in full.
4.3 ADDITIONAL RENT. All taxes, charges, costs and expenses and other sums
which Tenant is required to pay hereunder (together with all interest and
charges that may accrue thereon in the event of Tenant's failure to pay the
same), and all damages, costs and expenses which Landlord may incur by
reason of any Default by Tenant shall be deemed to be additional Rent
hereunder ("Additional Rent"). Additional Rent shall accrue commencing on
the Commencement Date. In the event of nonpayment by Tenant of any
Additional Rent, Landlord shall have all the rights and remedies with
respect thereto as Landlord has for the nonpayment of Rent. The term
"Rentals" as used in the Lease shall mean Rent and Additional Rent.
5. SECURITY DEPOSIT - n/a.
6. USE OF PREMISES
6.1 PERMITTED USES. Tenant shall use the Premises and the Common Area only
in conformance with applicable governmental laws, regulations, rules and
ordinances for the purposes set forth in Paragraph 1.9 above, and for no
other purpose without the prior written consent of Landlord, which consent
Landlord will not unreasonably withhold. Any change in use of the Premises
or the Common Area without the prior written consent of Landlord shall be a
Default by Tenant. Tenant and Tenant's agents shall comply with the
provisions of the existing Declaration of Covenants, Conditions, and
Restrictions affecting the Premises and the Common Area. Said Declaration of
Covenants, Conditions, and Restrictions shall not be modified without the
consent of Tenant, which consent shall not be unreasonably withheld.
6.2 TENANT TO COMPLY WITH LEGAL REQUIREMENTS. Tenant shall, at its sole
cost, promptly comply with all laws, statutes, ordinances, rules,
regulations, orders or requirements of all municipal, county, state and
federal authorities and all quasi-governmental authorities relating to or
affecting the use, occupational safety, occupancy or condition of the
Premises or the Common Area, now in force, or which may hereafter be in
force, including without limitation any of the foregoing relating to utility
usage and load or number of permissible occupants or users of the Premises,
whether or not the same are now contemplated by the parties; with the
provisions of all recorded documents affecting the Premises or the Common
Area insofar as the same relate to or affect the use, occupational safety,
occupancy, or condition of the Premises or the Common Area; and with the
requirements of any board of fire underwriters (or similar body now or
hereafter constituted) relating to or affecting the use, occupational
safety, occupancy or condition of the Premises or the Common Area. Tenant's
obligations pursuant to this Paragraph 6.2 shall include without limitation
maintaining or restoring the Premises or the Common Area and making
structural and non-structural alterations and additions in compliance and
conformity with all laws and recorded documents relating to the use,
occupational safety, occupancy or condition of the Premises or the Common
Area during the Lease Term; provided, however, that Landlord shall make any
alteration or addition required to bring the Premises or the Common Area
into compliance with legal requirements in effect at the time the Premises,
any improvements installed therein by Landlord, or the Common Area,
respectively, were originally constructed. At Landlord's option, Landlord
may make the required alteration, addition or change, and Tenant shall pay
the cost thereof as Additional Rent. With respect to any alterations or
additions as may be hereafter required due to a change in laws and
16
<PAGE>
unrelated to Tenant's specific use of the Premises or the Common Area. Tenant
shall be required to pay a pro rata portion of the cost thereof, which amount
shall be determined by multiplying the total cost by a fraction, the numerator
of which is the number of months remaining in the Lease Term at the time of the
alteration or addition, and the denominator of which is the number of months in
the useful life of the alteration or addition. Tenant shall obtain prior to
taking possession of the Premises any permits, licenses or other authorizations
required for the lawful operation of its business at the Premises. The judgment
of any court of competent jurisdiction or the admission of Tenant in any action
or proceeding against Tenant, regardless of whether Landlord be a party thereto
or not, that Tenant has violated such ordinance, regulation, rule, requirement,
recorded document or statute relating to the use, occupational safety, occupancy
or condition of the Premises or the Common Area shall be conclusive of the fact
of such violation by Tenant. Any alterations or additions undertaken by Tenant
pursuant to this Paragraph 6.2 shall be subject to the requirements of Paragraph
13.1 below.
6.3 PROHIBITED USES. Tenant and Tenant's agents shall not commit or suffer to be
committed any waste upon the Premises. Tenant and Tenant's agents shall not do
or permit anything to be done in or about the Premises or Common Area which will
in any way obstruct or interfere with the rights of any authorized users of the
Common Area or occupants of neighboring property, or injure or annoy them.
Tenant shall not conduct or permit any auction or sale open to the public to be
held or conducted on or about the Premises or Common Area. Tenant and Tenant's
agents shall not use or allow the Premises to be used for any unlawful, immoral
or hazardous purpose or any purpose not permitted by this Lease, nor shall
Tenant or Tenant's agents cause, maintain, or permit any nuisance in, on or
about the Premises. Tenant and Tenant's agents shall not do or permit anything
to be done in or about the Premises or Common Area nor bring or keep anything in
the Premises or Common Area which will in any way increase the rate of any
insurance upon the Premises or Common Area or any part thereof or any of its
contents, or cause a cancellation of any insurance policy covering the Premises
or Common Area or any part thereof or any of its contents, nor shall Tenant or
Tenant's agents keep, use or sell or permit to be kept, used or sold in or about
the Premises any articles which may be prohibited by a standard form policy of
fire insurance. In the event the rate of any insurance upon the Premises or
Common Area or any part thereof or any of its contents is increased because of
the acts or omissions of Tenant or Tenant's agents, Tenant shall pay, as
Additional Rent, the full cost of such increase; provided, however this
provision shall in no event be deemed to constitute a waiver of Landlord's right
to declare a default hereunder by reason of such increase or of any other rights
or remedies of Landlord in connection with such increase. Tenant and Tenant's
agents shall not place any loads upon the floor, walls or ceiling of the
Premises which would endanger the Premises or the structural elements thereof,
nor place any harmful liquids in the drainage system of the Premises. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises or Common Area except in enclosed trash containers. No materials,
supplies, equipment, finished products (or semi-finished products), raw
materials, or other articles of any nature shall be stored upon, or be permitted
to remain on, any portion of the Common Area.
Tenant shall not allow any activity which in the reasonable opinion of Landlord
is detrimental to the operation of the Common Area or to tenants of Landlord in
other buildings located on the Common Area or upon real property owned by
Landlord adjacent to the Common Area, including but not limited to any
picketing, work stoppage, or other concerted activity. Landlord shall have the
right to require Tenant, at Tenant's own expense and within a reasonable period
of time, to use Tenant's best efforts to terminate or control any such
picketing, work stoppage or other concerted activity to the extent necessary to
eliminate any interference with the operation of the Common Area or such
tenants. Failure by Tenant to use its best efforts to do so shall be a Default
by Tenant. Nothing contained in this paragraph shall be construed as placing
Landlord in an employer-employee relationship with any of Tenant's employees or
with any other employees who may be involved in such activity.
7. TAXES
7.1 PERSONAL PROPERTY TAXES. Tenant shall cause Tenant's trade fixtures,
equipment, furnishings, furniture, merchandise, inventory, machinery, appliances
and other personal property installed or located on the Premises (collectively
the "personal property") to be assessed and billed separately from the Premises.
Tenant shall pay before delinquency any and all taxes, assessments and public
charges levied, assessed or imposed upon or against Tenant's personal property.
If any of Tenant's personal property shall be assessed with the real property
comprising the Common Area or with the Premises. Tenant shall pay to Landlord,
as Additional Rent, the amounts attributable to Tenant's personal property
within ten (10) days after receipt of a written statement from Landlord setting
forth the amount of such taxes, assessments and public charges attributable to
Tenant's personal property. Tenant shall comply with the provisions of any law,
ordinance, rule or regulation of taxing authorities which require Tenant to file
a report of Tenant's personal property located on the Premises.
7.2 OTHER TAXES PAYABLE SEPARATELY BY TENANT. Tenant shall pay (or reimburse
Landlord, as Additional Rent, if Landlord is assessed), prior to delinquency or
within ten (10) days after receipt of Landlord's statement thereof, any and all
taxes, levies, assessments or surcharges payable by Landlord or Tenant (other
than Landlord's net income, succession, transfer, gift, franchise, estate or
inheritance taxes, and Taxes, as that term is defined in Paragraph 7.3(a) below,
payable as an Operating Expense), whether or not now customary or within the
contemplation of the parties hereto, whether or not now in force or which may
hereafter become effective, including but not limited to taxes:
(a) Upon, allocable to, or measured by the area of the Premises or the Rentals
payable hereunder, including without limitation any gross income, gross
receipts, excise, or other tax levied by the state, any political subdivision
thereof, city or federal government with respect to the receipt of such Rentals;
(b) Upon or with respect to the use, possession, occupancy, leasing, operation
and management of the Premises or any portion thereof;
(c) Upon this transaction or any document to which Tenant is a party creating
or transferring an interest or an estate in the Premises; or
(d) Imposed as a means of controlling or abating environmental pollution or
the use of energy, including, without limitation, any parking taxes, levies or
charges or vehicular regulations imposed by any governmental agency. Tenant
shall also pay, prior to delinquency, all privilege, sales, excise, use,
business, occupation, or other taxes, assessments, license fees, or charges
levied, assessed or imposed upon Tenant's business operations conducted at the
Premises.
In the event any such taxes are payable by Landlord and it shall not be lawful
for Tenant to reimburse Landlord for such taxes, then the Rentals payable
hereunder shall be increased to net Landlord the same net Rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.
7.3 COMMON TAXES.
(a) DEFINITION OF TAXES. The term "Taxes" as used in this Lease shall
collectively mean (to the extent any of the following are not paid by Tenant
pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes; personal
property taxes; taxes based on vehicles utilizing parking areas on the Common
Area; taxes computed or based on rental income or on the square footage of the
Premises (including without limitation any municipal business tax but excluding
federal, state and municipal net income taxes); environmental surcharges; excise
taxes; gross receipts taxes; sales and/or use taxes; employee taxes; water and
sewer taxes, levies, assessments and other charges in the nature of taxes or
assessments (including, but not limited to, assessments for public improvements
or benefit), but excluding assessments existing as of the Date of Lease set
forth in Paragraph 1.3, and all other governmental, quasi-governmental or
special district impositions of any kind and nature whatsoever, regardless of
whether now customary or within the contemplation of the parties hereto and
regardless of whether resulting from increased rate and/or valuation, or whether
extraordinary or ordinary, general or special, unforeseen or foreseen, or
similar or dissimilar to any of the foregoing and which during the Lease Term
are laid, levied, assessed or imposed upon Landlord and/or become a lien upon
or chargeable against the Premises and/or Common Area under or by virtue of any
present or future laws, statutes, ordinances, regulations, or other requirements
of any governmental, quasi-governmental or special district authority
whatsoever. The term "environmental surcharges'' shall include any and all
expenses, taxes, charges or penalties imposed by the Federal Department of
Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or
any regulations promulgated thereunder, or imposed by any other local, state or
federal governmental agency or entity now or hereafter vested with the power to
impose taxes, assessments or other types of surcharges as a means of controlling
or abating
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environmental pollution or the use of energy in regard to the use, operation or
occupancy of the Premises and/or the Common Area. The term "Taxes" shall include
(to the extent the same are not paid by Tenant pursuant to Paragraphs 7.1 and
7.2 above), without limitation, all taxes, assessments, levies, fees,
impositions or charges levied, imposed, assessed, measured, or based in any
manner whatsoever upon or with respect to the use, possession, occupancy,
leasing, operation or management of the Premises and/or Common Area or in lieu
of or equivalent to any Taxes set forth in this Paragraph 7.3(a). In the event
any such taxes are payable by Landlord and it shall not be lawful for Tenant to
reimburse Landlord for such taxes, then the Rentals payable hereunder shall be
increased to net Landlord the same net Rental after imposition of any such tax
upon Landlord as would have been payable to Landlord prior to the imposition of
any such tax.
(b) OPERATING EXPENSE. All Taxes which are levied or assessed or which become a
lien upon the Premises and/or Common Area or which become due or accrue during
the Lease Term shall be an Operating Expense, and Tenant shall pay as Additional
Rent each month during the Lease Term 1/12th of such Taxes, based on Landlord's
estimate thereof, pursuant to Paragraph 12 below. Taxes during any partial tax
fiscal year(s) within the Lease Term shall be prorated according to the ratio
which the number of days during the Lease Term or of actual occupancy of the
Premises by Tenant, whichever is greater, during such year bears to 365.
8. INSURANCE; INDEMNITY; WAIVER
8.1 INSURANCE BY LANDLORD.
(a) Landlord shall, during the Lease Term, procure and keep in force the
following insurance, the cost of which shall be an Operating Expense, payable by
tenant pursuant to Paragraph 12 below:
(i) Property Insurance. "All risk" property insurance, including, without
limitation, coverage for earthquake and flood; boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious mischief; full coverage
plate glass insurance; and demolition. Increased cost of construction and
contingent liability from change in building laws on the Premises and Common
Area, including any improvements or fixtures constructed or installed on the
Premises and Common Area by Landlord. Such insurance shall be in the full
amount of the replacement cost of the foregoing, with reasonable deductible
amounts, which deductible amounts shall be an Operating Expense, payable by
Tenant pursuant to Paragraph 12. Such insurance shall also include rental
income insurance, insuring that one hundred percent (100%) of the Rentals
(as the same may be adjusted hereunder) will be paid to Landlord for a
period of up to twelve (12) months if the Premises are destroyed or damaged,
as may be required by any beneficiary of a deed of trust or any mortgagee of
any mortgage affecting the Premises. Such insurance shall not cover any
leasehold improvements installed in the Premises by Tenant at its expense,
or Tenant's equipment, trade fixtures, inventory, fixtures or personal
property located on or in the Premises; and
(ii) Other. Such other insurance as Landlord deems necessary and prudent.
8.2 INSURANCE BY TENANT. Tenant shall, during the Lease Term, at Tenant's sole
cost and expense, procure and keep in force the following insurance:
(a) n/a.
(b) LIABILITY INSURANCE. Comprehensive general liability insurance for the
mutual benefit of Landlord and Tenant, against any and all claims for personal
injury, death or property damage occurring in, or about the Premises and
Common Area (and Tenant's operations on the Premises), or arising out of
Tenant's or Tenant's agents' use of the Common Area or use or occupancy of the
Premises. Such insurance shall have a combined single limit of not less than
Three Million Dollars ($3,000,000). Such insurance shall contain a cross-
liability (severability of interests) clause and an extended liability
endorsement, including blanket contractual coverage. The minimum limits
specified above are the minimum amounts required by Landlord, and may be
revised by Landlord from time to time to meet changed circumstances, including
without limitation to reflect (i) changes in the purchasing power of the
dollar, (ii) changes indicated by the amount of plaintiffs' verdicts in
personal injury actions in the State of California, or (iii) changes
consistent with the standards required by other landlords in the county in
which the Premises are located. Such liability insurance shall be primary and
not contributing to any insurance available to Landlord, and Landlord's
insurance (if any) shall be in excess thereto. As long as General Signal
Corporation, a New York corporation ("General Signal"), is the guarantor of
Tenant's obligations hereunder, the minimum amounts of insurance required by
Landlord shall not exceed the amount of coverage carried by General Signal for
itself and its subsidiaries, which shall in no event be less than Three
Million Dollars ($3,000,000).
(c) OTHER. Such other insurance as required by law, including, without
limitation, workers' compensation insurance.
(d) FORM OF THE POLICIES. The policies required to be maintained by Tenant
pursuant to Paragraphs 8.2(a), (b), and (c) above shall be with companies, on
forms, with deductible amounts (if any), and loss payable clauses reasonably
satisfactory to Landlord, shall include Landlord and the beneficiary or
mortgagee of any deed of trust or mortgage encumbering the Premises and/or the
real property comprising the Common Area as additional insureds, and shall
provide that such parties may, although additional insureds, recover for any
loss suffered by Tenant's negligence. Certified copies of policies or
certificates of insurance shall be delivered to Landlord prior to the
Commencement Date; a new policy or certificate shall be delivered to Landlord
at least thirty (30) days prior to the expiration date of the old policy.
Tenant shall have the right to provide insurance coverage which it is
obligated to carry pursuant to the terms hereof in a blanket policy, provided
such blanket policy expressly affords coverage to the Premises and to Tenant
as required by this Lease. Tenant shall obtain a written obligation on the
part of Tenant's insurer(s) to notify Landlord and any beneficiary or
mortgagee of a deed of trust or mortgage encumbering the Premises and/or the
real property comprising the Common Area in writing of any delinquency in
premium payments and at least thirty (30) days prior to any cancellation or
modification of any policy. It is contemplated by the parties that the
insurance required pursuant to this Paragraph 8.2 shall be procured and
maintained by General Signal for itself and its subsidiaries.
8.3 FAILURE BY TENANT TO OBTAIN INSURANCE. If Tenant does not take out the
insurance required pursuant to Paragraph 8.2 or keep the same in full force and
effect, Landlord may, but shall not be obligated to, take out the necessary
insurance and pay the premium therefor, and Tenant shall repay to Landlord, as
Additional Rent, the amount so paid promptly upon demand. In addition, Landlord
may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and
all reasonable expenses (including attorneys' fees) and damages which Landlord
may sustain by reason of the failure of Tenant to obtain and maintain such
insurance, it being expressly declared that the expenses and damages of Landlord
shall not be limited to the amount of the premiums thereon.
8.4 INDEMNIFICATION. Tenant shall indemnify, hold harmless, and defend Landlord
(except for Landlord's negligence or willful misconduct) against all
claims, losses or liabilities for injury or death to any person or for damage to
or loss of use of any property arising out of any occurrence in, on or about the
Premises or Common Area, if caused or contributed to by Tenant or Tenant's
agents, or arising out of any occurrence in, upon or at the Premises or on
account of the use, condition, occupational safety or occupancy of the Premises.
Such indemnification shall include and apply to attorneys' fees, investigation
costs, and other costs actually incurred by Landlord. Tenant shall further
indemnify, defend and hold harmless Landlord from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease. The provisions of
this Paragraph 8.4 shall survive Lease Termination with respect to any damage,
injury, death, breach or default occurring prior to such termination. This Lease
is made on the express condition that Landlord shall not be liable for, or
suffer loss by reason of, injury to person or property, from whatever cause, in
any way connected with the condition, use, occupational safety or occupancy of
the Premises specifically including, without limitation, any liability for
injury to the person or property of Tenant or Tenant's agents. The provisions of
this Paragraph 8.4 shall not apply to any damage or injury caused by Landlord's
willful misconduct or negligence.
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8.5 CLAIMS BY TENANT. Landlord shall not be liable to Tenant, and Tenant waives
all claims against Landlord, for injury or death to any person, damage to any
property, or loss of use of any Property in the Premises or Common Area by and
from all causes, including without limitation, any defect in the Premises or
Common Area and/or any damage or injury resulting from fire, steam, electricity,
gas, water or rain, which may leak or flow from or into any part of the
Premises, or from breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
whether the damage or injury results from conditions arising upon the Premises
or Common Area or from other sources. Landlord shall not be liable for any
damamges arising from any act or neglect of any other user of the Common Area.
Tenant or Tenant's agents shall promptly notify the Landlord in writing of any
known defect in the Premises or Common Area. The provisions of this Paragraph
8.5 shall not apply to any damage or injury caused by the Landlord's willful
misconduct or negligence.
8.6 MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, and Tenant
hereby releases Landlord, and their respective officers, agents, employees and
servants, from any and all claims or demands of damages, loss, expense or injury
to the Premises or the Common Area, or to the furnishings, equipment, inventory
or other property of either the Landlord or Tenant in, about or upon the
Premises or the Common Area, which is caused by or results from perils, events
or happenings which are the subject of issuance carried by the respective
parties pursuant to this Paragraph 8 and in force at the time of any such loss,
whether due to the negligence of the other party or its agents and regardless of
cause or origin; provided, however, that such waiver shall be effective only to
the extent permitted by the insurance covering such loss and to the extent such
insurance is not prejudiced thereby.
9. UTILITIES. Tenant shall pay during the Lease Term and prior to delinquency
all charges for water, gas, light, heat, power, electricity, telephone or other
communication service, janitorial service, trash pick-up, sewer and all other
services supplied to or consumed on the Premises (collectively the "Services")
and all taxes, levies, fees, or surcharges therefor. Tenant shall arrange for
Services to be supplied to the Premises and shall contract for all of the
Services in Tenant's name prior to the Commencement Date. The Commencement Date
shall not be delayed by reason of any failure by Tenant to so contract for
Services. In the event that any of the Services cannot be separately billed or
metered to the Premises, or if any of the Services are not separately metered as
of the Commencement Date, the cost of such Services shall be an Operating
Expense and Tenant shall pay such cost to Landlord, as Additional Rent, as
provided in Paragraph 12 below. The lack or shortage of any Services due to any
cause whatsoever shall not affect any obligation of Tenant hereunder, and Tenant
shall faithfully keep and observe all the terms, conditions and covenants of
this Lease and pay all Rentals due hereunder, all without diminution, credit or
deduction.
10. MAINTENANCE AND REPAIRS
10.1 LANDLORD'S RESPONSIBILITIES. Landlord, at Landlord's sole cost and expense,
shall reseal and restripe the existing parking lot and wash the exterior brick
of the Building prior to the Commencement Date. Subject to the provisions of
Paragraph 15 below, Landlord shall maintain in reasonably good order and repair
the structural roof and roof surface, structural and exterior walls (including
painting thereof) and foundations of the Premises, except for any repairs
required because of the wrongful act of Tenant or Tenant's agents, which repairs
shall be made at the expense of Tenant and as Additional Rent. In addition,
Landlord may elect at any time, at its option, to maintain the heating and air
conditioning systems of the Premises. Tenant shall give prompt written notice to
Landlord of any known maintenance work required to be made by Landlord pursuant
to this Paragraph 10.1. The costs of repairs and maintenance which are the
obligation of Landlord hereunder or which Landlord elects to perform hereunder
(excluding the costs of maintenance of the foundations, structural walls,
structural roof and roof surface, which shall be paid by Landlord, except for
any repairs required because of the wrongful act of Tenant or Tenant's agents,
which repairs shall be made at the expense of Tenant and as Additional Rent)
shall be an Operating Expense and Tenant shall pay such costs to Landlord as
Additional Rent, as provided in Paragraph 12 below.
To the extent any labor dispute in which Tenant is involved or of which Tenant
is the object interferes with the performance of Landlord's duties hereunder,
Landlord shall be excused from the performance of such duties during the period
of such interference.
10.2 TENANT'S RESPONSIBILITIES. Except as expressly provided in Paragraph 10.1
above, and except for any repairs required because of the wrongful act of
Landlord or Landlord's agents, which repairs shall be made at the expense of
Landlord, tenant shall, at its sole cost, maintain the entire Premises and every
part thereof, including without limitation, windows, skylights, window frames,
plate glass, freight docks, doors and related hardware, interior walls and
partitions, and the electrical, plumbing, lighting, heating and air conditioning
systems (unless Landlord has elected to keep and maintain the heating and air
conditioning systems pursuant to Paragraph 10.1 above) in good order, condition
and repair. If Landlord has not elected to keep and maintain the heating and air
conditioning systems, Tenant shall deliver to Landlord, every six (6) months
during the Lease Term, a certificate of maintenance or its equivalent, signed by
a licensed HVAC repair and maintenance contractor and statng that the heating
and air conditioning systems servicing the Premises have been inspected,
serviced and are in good order, condition and repair. Tenant's failure to
deliver said certificate or its equivalent shalal be a Default by Tenant. If
Tenant fails to make repairs or perform maintenance work required of Tenant
hereunder or to commence and deligently pursue the same to completion within ten
(10) working days after notice from Landlord specifying the need for such
repairs or maintenance work. Landlord or Landlord's agents may, in addition to
all other rights and remedies available hereunder or by law and without waiving
any alternative remedies, enter into the Premises and make such repairs and/or
perform such maintenance work. If Landlord makes such repairs and/or performs
such maintenance work, Tenant shall reimburse Landlord upon demand and as
Additional Rent, for the cost of such repairs and/or maintenance work. Landlord
shall have no liability to Tenant for any damage, inconvenience or interference
with the use of the Premises by Tenant or Tenant's agents as a result of
Landlord performing any such repairs or maintenance, except for damage,
inconvenience or interference caused by Landlord's willful misconduct or
negligence, Tenant shall reimburse Landlord, on demand and as Additional Rent,
for the cost of damage to the Premises and/or Common Area caused by Tenant or
Tenant's agents. Tenant expressly waives the benefits of any statute now or
hereafter in effect (including without limitation the provisions of subsection 1
of Section 1932, Section 1941 and Section 1942 of the California Civil Code and
any similar law, statute or ordinance now or hereafter in effect) which would
otherwise afford Tenant the right to make repairs at Landdlord's expense (or to
deduct the cost of such repairs from Rentals due hereunder) or to terminate this
Lease because of Landlord's failure to keep the Premises in good and sanitary
order.
11. COMMON AREA
11.1 IN GENERAL. Subject to the terms and conditions of this Lease and such
reasonable rules and regulations as Landlord may from time to time prescribe,
Tenant and Tenant's agents shall have the nonexclusive right to use during the
Lease Term the access roads, sidewalks, landscaped areas and other facilities on
the Common Area. This right to use the Common Area shall terminate upon Lease
Termination. Neither Tenant nor Tenant's agents shall at any time park or
permit the parking of their vehicles in any portion of the Common Area not
designated by Landlord as a parking area.
Landlord reserves the right from time to time to make reasonable changes in the
shape, size, location, amount and extent of the Common Area. Landlord further
reserves the right to promulgate such reasonable rules and regulations relating
to the use of all or any portion of the Common Area and to reasonably amend such
rules and regulations from time to time, with or without advance notice, as may
be reasonably appropriate. Any amendments to the rules and regulations shall be
effective as to Tenant, and binding on Tenant, upon delivery of a copy of such
rules and regulations to Tenant. Tenant and Tenant's agents shall observe such
rules and regulations and any failure by Tenant or Tenant's agents to observe
and comply with the rules and regulations shall be a Default by Tenant.
Landlord shall not be responsible for the nonperformance of the rules and
regulations by any tenants or occupants of the buildings or improvements which
now exist or may hereafter be constructed upon the Common Area or upon the real
property owned by Landlord adjacent to the Common Area or by any other user
authorized by Landlord.
Landlord furthermore reserves the right, after having given Tenant reasonable
notice, to have any vehicles owned by Tenant or Tenant's agents which are parked
in violation of the provisions of this Paragraph 11.1 or in violation of
Landlord's rules and regulations relating to parking, to be towed away at
Tenant's cost.
Landlord shall have the right to close, at reasonable times, all or any portion
of the Common Area for any reasonable purpose, including without limitation,
the prevention of a dedication thereof, or the accrual of rights of any person
or public therein.
11.2 MAINTENANCE BY LANDLORD. Landlord shall operate, manage and maintain the
Common Area. The manner in which the Common Area shall be maintained and the
expenditures for such maintenance shall be at the sole discretion of Landlord.
The cost of such maintenance, operation and management, shall be an "Operating
Expense", and Tenant shall pay such costs to Landlord, as Additional Rent, as
provided in Paragraph 12 below. Alternatively, Landlord may elect at any time,
at its option, to require Tenant to operate, manage and maintain all or any
portion of the Common Area. If Landlord so elects, Tenant shall operate, manage
and maintain that portion of the Common Area designated by Landlord, at
Tenant's sole cost and expense.
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12. OPERATING EXPENSES
12.1 DEFINITION. "Operating Expense" or "Operating Expenses" as used in this
Lease shall mean and include all items identified in other paragraphs of this
Lease as an Operating Expense and the total cost paid or incurred by Landlord
for the operation, maintenance, repair, and management of the Premises and
Common Area, which costs shall include, without limitation; the cost of Services
and utilities supplied to the Premises and Common Area (to the extent the same
are not separately charged or metered to Tenant; water; sewage; fuel;
electricity; lighting systems; fire protection systems; storm drainage and
sanitary sewer systems; HVAC including air conditioning (to the extent the
heating and air-conditioning systems in the Premises are not maintained by
Tenant at Tenant's sole cost and expense); maintenance and repair of the floor
slab; property insurance covering the Premises and any other insurance carried
by Landlord pursuant to Paragraph 8 above; cleaning, sweeping, striping,
resurfacing of parking and driveway areas; cleaning the Common Area following
storms or other severe weather; cleaning and repairing of sidewalks, curbs,
stairways; costs related to irrigation systems; the cost of complying with
rules, regulations and orders of governmental authorities, including, without
limitation, maintenance, alterations and repairs required in connection
therewith; costs related to landscape maintenance; and the cost of contesting
the validity or applicability of any governmental enactments which may affect
Operating Expenses. Operating Expenses shall also include a management fee to
Landlord in an amount equal to ten percent (10%) of the total Operating
Expenses. The specific examples of Operating Expenses stated in this Paragraph
12.1 are in no way intended to and shall not limit the costs comprising
Operating Expenses, nor shall such examples be deemed to obligate Landlord to
incur such costs or to provide such services or to take such actions except as
Landlord may be expressly required in other portions of this Lease, or except as
Landlord, in its sole discretion, may elect. All costs incurred by Landlord in
good faith for the operation, maintenance, repair and management of the Premises
and Common Area shall be deemed conclusively binding on Tenant. The provisions
of this Paragraph 12.1 shall be subject and subordinate to any conflicting
provisions in this Lease, including but not limited to the provisions of
Paragraph 10.1
12.2 PAYMENT OF OPERATING EXPENSES BY TENANT. Tenant shall pay the Operating
Expenses to Landlord as Additional Rent and without deduction or offset. Payment
of Operating Expenses by Tenant shall be made by whichever of the following
methods is from time to time designated by Landlord, and Landlord may change the
method of payment at any time. Operating Expenses actually incurred or paid by
Landlord but not theretofore billed to Tenant, as invoiced by Landlord, shall be
payable by Tenant within ten (10) days after receipt of Landlord's invoice, but
not more often than once each calendar month. Alternatively, Tenant's payment of
Operating Expenses shall be based upon Landlord's estimate of Operating Expenses
and shall be payable in equal monthly installments in advance on the first day
of each calendar month commencing with the month following receipt of Landlord's
estimate (and subject to Landlord's right to change the method of payment).
Within ninety (90) days after the end of each calendar year (or at Lease
Termination) Landlord shall furnish Tenant a statement showing the actual
Operating Expenses for the period to which Landlord's estimate pertains and
shall concurrently either bill Tenant for the balance due (payable upon demand
by Landlord) or credit Tenant's account for the excess previously paid.
13. ALTERATIONS AND IMPROVEMENTS
13.1 IN GENERAL. Tenant shall not make, or permit to be made, any alterations,
changes, enlargements, improvements or additions (collectively "alterations")
in, on, about or to the Premises, or any part thereof, including alterations
required pursuant to Paragraph 6.2, without the prior written consent of
Landlord which consent shall not be unreasonably withheld and without acquiring
and complying with the conditions of all permits required for such alterations
by any governmental authority having jurisdiction thereof. The term
"alterations" as used in this Paragraph 13 shall also include all heating,
lighting, electrical (including all wiring, conduit, outlets, drops, buss ducts,
main and subpanels), air conditioning, and partitioning in the Premises made by
Tenant, regardless of how affixed to the Premises. As a condition to the giving
of its consent, Landlord may impose such requirements which may be reasonably
necessary, including without limitation, the manner in which the work is done; a
right of approval of the contractor by whom the work is to be performed; the
requirement that Tenant post a completion bond in an amount and form reasonably
satisfactory to Landlord; and the requirement that Tenant reimburse Landlord, as
Additional Rent, for Landlord's actual costs incurred in reviewing any proposed
alteration, whether or not Landlord's consent is granted. In the event Landlord
consents to the making of any alterations by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense, in accordance with the plans and
specifications approved by Landlord. Tenant shall give written notice to
Landlord five (5) days prior to employing any laborer or contractor to perform
services related to, or receiving materials for use upon the Premises, and prior
to the commencement of any work or improvement on the Premises. Any alterations
to the Premises made by Tenant shall be made in accordance with applicable laws,
ordinances, regulations and codes and in a first-class workmanlike manner. In
making any such alterations, Tenant shall, at Tenant's sole cost and expense,
file for and secure and comply with any and all permits or approvals required by
any governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. In no event shall Tenant make any
structural changes to the Premises or make any changes to the Premises which
would weaken or impair the structural integrity of the Premises.
13.2 REMOVAL UPON LEASE TERMINATION. At the time Tenant requests Landlord's
consent, Tenant shall request a decision from Landlord in writing as to whether
Landlord will require Tenant, at Tenant's expense, to remove any such
alterations and restore the Premises to their prior condition at Lease
Termination. Landlord may defer such decision until Tenant's request for such
decision prior to the expiration of the Lease Term as described below. In the
event Tenant failed to earlier obtain Landlord's written decision as to whether
Tenant will be required to remove any alteration, or in the event Landlord
elected to defer such decision, then no less than ninety (90) nor more than one
hundred twenty (120) days prior to the expiration of the Lease Term. Tenant by
written notice to Landlord shall request Landlord to inform Tenant whether or
not Landlord desires to have any alterations made to the Premises by Tenant
removed at Lease Termination. Following receipt of such notice, Landlord may
elect to have all or a portion of Tenant's alterations removed from the Premises
at Lease Termination, and Tenant shall, at its sole cost and expense, remove at
Lease Termination such alterations designed by Landlord for removal and repair
all damage to the Premises and Common Area arising from such removal. In the
event Tenant fails to so request Landlord's decision or fails to remove any
alterations designated by Landlord for removal. Landlord may remove any
alterations made to the Premises by Tenant and repair all damage to the Premises
and Common Area arising from such removal, and may recover from Tenant all
reasonable costs and expenses incurred thereby. Tenant's obligation to pay such
costs and expenses to Landlord shall survive Lease Termination. Unless Landlord
elects to have Tenant remove (or, upon Tenant's failure to obtain Landlord's
decision, Landlord removes) any such alterations, all such alterations, except
for moveable furniture and trade fixtures of Tenant, shall become the property
of Landlord upon Lease Termination (without any payment therefor) and remain
upon and be surrendered with the Premises at Lease Termination.
13.3 LANDLORD'S IMPROVEMENTS. All fixtures, improvements or equipment which are
installed, constructed on or attached to the Premises or Common Area by Landlord
shall be a part of the realty and belong to Landlord.
14. DEFAULT AND REMEDIES
14.1 EVENTS OF DEFAULT. The term "Default by Tenant" as used in this Lease shall
mean the occurrence of any of the following events:
(a) Tenant's failure to pay when due any Rentals;
(b) Tenant's vacation or abandonment of the Premises;
(c) Commencement and continuation for at least thirty (30) days of any
case, action or proceeding by, against or concerning Tenant under any
federal or state bankruptcy, insolvency or other debtor's relief law,
including without limitation, (i) a case under Title 11 of the United
States Code concerning Tenant, whether under Chapter 7, 11, or 13 of such
Title or under any other Chapter, or (ii) a case, action or proceeding
seeking Tenant's financial reorganization or an arrangement with any of
Tenant's creditors;
(d) Voluntary or involuntary appointment of a receiver, trustee, keeper, or
other person who takes possession for more than thirty (30) days of
substantially all of Tenant's assets or of any asset used in Tenant's
business on the Premises, regardless of whether such appointment is as a
result of insolvency or any other cause;
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(e) Execution of an assignment for the benefit of creditors of substantially
all assets of Tenant available by law for the satisfaction of judgment
creditors;
(f) Commencement of proceedings for winding up or dissolving (whether
voluntary or involuntary) the entity of Tenant, if Tenant is a corporation
or a partnership;
(g) Levy of a writ of attachment or execution on Tenant's interest under
this Lease, if such unit continues for a period of ten (10) days;
(h) Transfer or attempted Transfer of this Lease or the Premises by Tenant
contrary to the provisions of Paragraph 24 below; or
(i) Breach by Tenant of any term, covenant, condition, warranty, or other
provision contained in this Lease or of any other obligation owing or due to
Landlord.
14.2 REMEDIES. Upon any Default by Tenant, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law, to
which Landlord may resort cumulatively, or in the alternative;
14.21 TERMINATION. Upon any Default by Tenant, Landlord shall have the right
(but not the obligation) to give written notice to Tenant of such default,
and terminate this Lease and Tenant's right to possession of the Premises if
(i) such default is in the payment of Rentals and is not cured within five
(5) working days after any such notice, or, (ii) with respect to the
defaults referred to in subparagraphs 14.1(b), (e), (f), (h) and (i), such
default is not cured within thirty (30) days after any such notice (or if a
default under subparagraphs 14.1(b) or (i) cannot be reasonably cured within
thirty (30) days, if Tenant does not commence to cure the default within the
thirty (30) day period or does not diligently and in good faith prosecute
the cure to completion), or, (iii) with respect to the defaults specified in
subparagraphs 14.1(c), (d) and (g) such default is not cured within the
respective time periods specified in those subparagraphs. The parties agree
that any notice given by Landlord to Tenant pursuant to this Paragraph
14.2.1 shall be sufficient notice for purposes of California Code of Civil
Procedure Section 1151 and Landlord shall not be required to give any
additional notice in order to be entitled to commence an unlawful detainer
proceeding. Upon termination of this Lease and Tenant's right to possession
of the Premises, Landlord shall have the right to recover from Tenant;
(a) The worth at the time of award of the unpaid Rentals which had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which the Rentals which
would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award (computed by discounting at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus
one percent) of the amount by which the Rentals for the balance of the
Lease Term after the time of award exceed the amount of such rental loss
that Tenant proves could be reasonably avoided;
(d) Any other amounts necessary to compensate Landlord for all detriment
proximately caused by the Default by Tenant or which in the ordinary course
of events would likely result, including without limitation the following;
(i) Expenses in retaking possession of the Premises;
(ii) Expenses for cleaning, repairing or restoring the Premises;
(iii) Any unamortized real estate brokerage commission paid in connection
with this Lease;
(iv) Expenses for removing, transporting, and storing any of Tenant's
property left at the Premises (although Landlord shall have no obligation
to remove, transport, or store any such property);
(v) Expenses of reletting the Premises, including without limitation,
brokerage commissions and attorneys' fees;
(vi) Attorneys' fees and court costs; and
(vii) Costs of carrying the Premises such as repairs; maintenance, taxes
and insurance premiums, utilities and security precautions (if any).
(e) The "worth at the time of award" of the amounts referred to in
subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by allowing
interest at an annual rate equal to the greater of: 10%; or 5% plus the
rate established by the Federal Reserve Bank of San Francisco, as of the
25th day of the month immediately preceding the Default by Tenant, on
advances to member banks under Sections 13 and 13(a) of the Federal Reserve
Act, as now in effect or hereafter from time to time amended, not to exceed
the maximum rate allowable by law.
14.2.2 CONTINUANCE OF LEASE. Upon any Default by Tenant and unless and until
Landlord elects to terminate this Lease pursuant to Paragraph 14.2.1 above,
this Lease shall continue in effect after the Default by Tenant and Landlord
may enforce all its rights and remedies under this Lease, including without
limitation, the right to recover payment of Rentals as they become due.
Neither efforts by Landlord to mitigate damages caused by a Default by Tenant
nor the acceptance of any Rentals shall constitute a waiver by Landlord of any
of Landlord's rights or remedies, including the rights and remedies specified
in Paragraph 14.2.1 above.
15. DAMAGE OR DESTRUCTION
15.1 DEFINITION OF TERMS. For the purposes of this Lease, the term: (a)
"Insured Casualty" means damage to or destruction of the Premises from a cause
actually insured against, for which the insurance proceeds paid or made
available to Landlord are sufficient to rebuild or restore the Premises under
then-existing building codes to the condition existing immediately prior to the
damage or destruction; and (b) "Uninsured Casualty" means damage to or
destruction of the Premises from a cause not actually insured against, or from a
cause actually insured against but for which the insurance proceeds paid or made
available to Landlord are for any reason insufficient to rebuild or restore the
Premises under then-existing building codes to the condition existing
immediately prior to the damage or destruction, or from a cause actually insured
against but for which the insurance proceeds are not paid or made available to
Landlord within sixty (60) days of the event of damage or destruction.
15.2 INSURED CASUALTY.
15.2.1 REBUILDING REQUIRED. In the event of an Insured Casualty where the
extent of damage or destruction is less than twenty percent (20%) of the then
full replacement cost of the Premises, Landlord shall rebuild or restore the
Premises to the condition existing immediately prior to the damage or
destruction, provided that there exist no governmental codes or regulations
that would interfere with Landlord's ability to so rebuild or restore.
15.2.2 LANDLORD'S ELECTION. In the event of an Insured Casualty where the
extent of damage or destruction is equal to or greater than twenty percent
(20%) of the then full replacement cost of the Premises, Landlord may, at its
option and at its sole discretion, rebuild or restore the Premises to the
condition existing immediately prior to the damage or destruction, or
terminate this Lease. Landlord shall notify Tenant in writing within sixty
(60) days from the event of damage or destruction of Landlord's election to
either rebuild or restore the Premises or terminate this Lease.
15.2.3 CONTINUANCE OF LEASE. If Landlord is required to rebuild or restore
the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to rebuild or
restore the Premises pursuant to Paragraph 15.2.2, this Lease shall remain in
effect and Tenant shall have no claim against Landlord for compensation for
inconvenience or loss of business during any period of repair or restoration.
15.3 UNINSURED CASUALTY.
15.3.1 LANDLORD'S ELECTION. In the event of an Uninsured Casualty, Landlord
may, at its option and at its sole discretion (i) rebuild or restore the
Premises as soon as reasonably possible at Landlord's expense (unless the
damage or destruction was caused by a negligent or willful act of Tenant, in
which event Tenant shall pay all costs of rebuilding or restoring), in which
event this Lease shall continue in full force and effect or (ii) terminate
this Lease, in which event Landlord shall give written notice to Tenant within
sixty (60) days after the event of damage or destruction of Landlord's
election to terminate this Lease as of the date of the event of damage or
destruction, and if the damage or destruction was caused by a negligent or
willful act to Tenant. Tenant shall be liable therefor to Landlord.
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15.3.2 TENANTS ABILITY TO CONTINUE LEASE. If Landlord elects to terminate this
Lease and the extent of damage or destruction is less than twenty percent (20%)
of the then full replacement cost of the Premises or the proceeds paid or made
available to Landlord are for any reason insufficient to rebuild or restore the
Premises under then-existing building codes to the condition existing
immediately prior to the damage or destruction, and if there exist no
governmental codes or regulations that would interfere with Landlord's ability
to so repair or restore, then Tenant may nevertheless cause the Lease to
continue in effect by (i) notifying Landlord in writing within ten (10) days of
Landlord's notice of termination of Tenant's agreement to pay all costs of
rebuilding or restoring not covered by insurance, and (ii) providing Landlord
with reasonable security for or assurance of such payment. Tenant shall pay to
Landlord in cash no later than thirty (30) days prior to the date of
commencement of construction the reasonable estimated cost of rebuilding or
restoring. In the event Tenant fails to pay such cost to Landlord by the date
specified. Landlord may immediately terminate the Lease and recover from Tenant
all costs incurred by Landlord in preparation for construction. If the actual
cost of rebuilding or restoring exceeds the estimated cost of such work, Tenant
shall pay the difference to Landlord in cash upon notification by Landlord of
the final cost. If the cost of rebuilding or restoring is less than the
estimated cost of such work. Tenant shall be entitled to a refund of the
difference upon completion of the rebuilding or restoring and determination of
final cost.
15.4 TENANT'S ELECTION. Notwithstanding anything to the contrary contained
in this Paragraph 15, Tenant may elect to terminate this Lease in the event the
Premises are damaged or destroyed and, in the reasonable opinion of Landlord's
architect or construction consultants, the restoration of the Premises cannot be
substantially completed within one hundred eighty (180) days after the event of
damage or destruction. Tenant's election shall be made by written notice to
Landlord within ten (10) days after Tenant receives from Landlord the estimate
of the time needed to complete repair or restoration of the Premises. If Tenant
does not deliver said notice within said ten (10) day period. Tenant may not
later terminate this Lease even if substantial completion of the rebuilding or
restoration occurs subsequent to said one hundred eighty (180) day period,
provided that Landlord is proceeding with diligence to rebuild or restore the
Premises. If Tenant delivers said notice within said ten (10) day period, this
Lease shall terminate as of the date of the event of damage or destruction.
15.5 DAMAGE OR DESTRUCTION NEAR END OF LEASE TERM. Notwithstanding anything to
the contrary contained in this Paragraph 15, in the event the Premises are
damaged or destroyed in whole or in part (regardless of the extent of damage)
from any cause during the last twelve (12) months of the Lease Term, Landlord
may, at Landlord's option, terminate this Lease as of the date of the event of
damage or destruction by giving written notice to Tenant of Landlord's election
to do so within thirty (30) days after the event of such damage or destruction.
For purposes of this Paragraph 15.4, if Tenant has been granted an option to
extend or renew the Lease Term pursuant to another provision of this Lease, then
the damage or destruction shall be deemed to have occurred during the last
twelve (12) months of the Lease Term if Tenant fails to exercise its option to
extend or renew within twenty (20) days of the event of damage or destruction.
15.6 TERMINATION OF LEASE. If the Lease is terminated pursuant to this
Paragraph 15, the unused balance of the Security Deposit shall be refunded to
Tenant. The current Rent shall be proportionately reduced during the period
following the event of damage or destruction until the date on which Tenant
surrenders the Premises, based upon the extent to which the damage or
destruction interferes with Tenant's business conducted in the Premises, as
reasonably determined by Landlord, to the extent such loss is covered as an
insured peril by the insurance carried by Landlord pursuant to Paragraph 8.1.
All other Rentals due hereunder shall continue unaffected during such period.
The proceeds of insurance carried by Tenant pursuant to Paragraph 8.2 shall be
paid to Landlord and Tenant, as their interests appear.
15.7 ABATEMENT OF RENTALS. If the Premises are to be rebuilt or restored
pursuant to this Paragraph 15, the then current Rent shall be proportionately
reduced during the period of repair or restoration, based upon the extent to
which the making of repairs interferes with Tenant's business conducted in the
Premises, as reasonably determined by Landlord, to the extent such loss is
covered as an insured peril by the insurance carried by Landlord pursuant to
Paragraph 8.1. All other Rentals due hereunder shall continue unaffected.
15.8 LIABILITY FOR PERSONAL PROPERTY. In no event shall Landlord have any
liability for, nor shall it be required to repair or restore, any injury or
damage to any improvements, alterations or additions to the Premises made by
Tenant, trade fixtures, equipment, merchandise, furniture, or any other property
installed by Tenant or at the expense of Tenant.
15.9 WAIVER OF CIVIL CODE REMEDIES. Landlord and Tenant acknowledge that the
rights and obligations of the parties upon damage or destruction of the Premises
are as set forth herein; therefore Tenant hereby expressly waives any rights to
terminate this Lease upon damage or destruction of the Premises, except as
specifically provided by this Lease, including without limitation any rights
pursuant to the provisions of Subdivision 2 of Section 1932 and Subdivision 4 of
Section 1933 of the California Civil Code, as amended from time to time, and the
provisions of any similar law hereinafter enacted, which provisions relate to
the termination of the hiring of a thing upon its substantial damage or
destruction.
16. CONDEMNATION
16.1 DEFINITION OF TERMS. For the purposes of this Lease, the term: (a)
"Taking" means a taking of the Premises or Common Area or damage related to the
exercise of the power of eminent domain and includes, without limitation, a
voluntary conveyance, in lieu of court proceedings, to any agency, authority,
public utility, person or corporate entity empowered to condemn property; (b)
"Total Taking" means the Taking of the entire Premises or so much of the
Premises of Common Area as to prevent or substantially impair the use thereof by
Tenant for the uses herein specified; provided, however, that in no event shall
the Taking of less than twenty percent (20%) of the Premises be considered a
Total Taking; (c) "Partial Taking" means the Taking of only a portion of the
Premises or Common Area which does not constitute a Total Taking; (d) "Date of
Taking" means the date upon which the title to the Premises or Common Area or a
portion thereof, passes to and vests in the condemnor or the effective date of
any order for possession if issued prior to the date title vests in the
condemnor; (e) "Award" means the amount of any award made, consideration paid,
or damages ordered as a result of a Taking.
16.2 RIGHTS. The parties agree that in the event of a Taking all rights between
them or in and to an Award shall be as set forth herein.
16.3 TOTAL TAKING. In the event of a Total Taking during the Lease Term: (a)
the rights of Tenant under this Lease and the leasehold estate of Tenant in and
to the Premises shall cease and terminate as of the date of Taking; (b) Landlord
shall refund to Tenant any prepaid Rent and the unused balance of the Security
Deposit; (c) Tenant shall pay Landlord any Rentals due Landlord under the Lease,
prorated as of the date of Taking; (d) to the extent the Award is not payable to
the beneficiary or mortgagee of a deed of trust or mortgage affecting the
Premises, Tenant shall receive from the Award those portions of the Award
attributable to trade fixtures of Tenant; (e) the remainder of the Award shall
be paid to and be the property of Landlord.
16.4 PARTIAL TAKING. In the event of a Partial Taking during the Lease Term
that does not prevent Tenant from conducting its business in substantially the
same manner as prior to the Partial Taking: (a) the rights of Tenant under the
Lease and the leasehold estate of Tenant in and to the portion of the Premises
taken shall cease and terminate as of the Date of Taking; (b) from and after the
Date of Taking the Rent shall be an amount equal to the product obtained by
multiplying the then market value of the Premises immediately prior to the
Taking; (c) Tenant shall receive from the Award the portions of the Award
attributable to trade fixtures of Tenant; and (d) the remainder of the Award
shall be paid to and be the property of Landlord.
17. LIENS
17.1 PREMISES TO BE FREE OF LIENS. Tenant shall pay for all labor and services
performed for, and all materials used by or furnished to Tenant, Tenant's
agents, or any contractor employed by Tenant with respect to the Premises.
Tenant shall indemnify and hold Landlord harmless from and keep the Premises and
Common Area free from any liens, claims, demands, encumbrances or judgments,
including all costs, liabilities and attorneys' fees with respect thereto,
created or suffered by reason of any labor of services performed for, or
materials used by or furnished to Tenant or Tenant's agents or any contractor
employed by Tenant will
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respect to the Premises, Landlord shall have the right, at all times, to post
and keep posted on the Premises any notices permitted or required by law, or
which Landlord shall deem proper, for the protection of Landlord and the
Premises and Common Area, and any other party having an interest therein, from
mechanics' and materialmen's liens, including without limitation a notice of
nonresponsibility. In the event Tenant is required to post an improvement bond
with a public agency in connection with any work performed by Tenant on or to
the Premises, Tenant shall include Landlord as an additional obligee.
17.2 NOTICE OF LIEN: BOND. Should any claims of lien be filed against, or any
action be commenced affecting the Premises, Tenant's interest in the Premises or
the Common Area, Tenant shall give Landlord notice of such lien or action within
five (5) business days after Tenant receives notice of the filing of the lien or
the commencement of the action. In the event that Tenant shall not, within
twenty days following the imposition of any such lien, cause such lien to be
released of record by payment or posting of a proper bond, Landlord shall have,
in addition to all other remedies provided herein and by law, the right, but not
the obligation, to cause the same to be released by such means as Landlord shall
deem proper, including payment of the claim giving rise to such lien or posting
of a proper bond. All such sums paid by Landlord and all expenses incurred by
Landlord in connection therewith, including reasonable attorneys' fees and
costs, shall be payable to Landlord by Tenant as Additional Rent on demand.
18. LANDLORD'S RIGHT OF ACCESS TO PREMISES
Landlord reserves and shall have the right and Tenant and Tenant's agents shall
permit Landlord and Landlord's agents to enter the Premises at any reasonable
time for the purpose of (i) inspecting the Premises, (ii) performing Landlord's
maintenance and repair responsibilities set forth herein, (iii) posting notices
of non-responsibility, (iv) placing on the Premises ordinary "For Lease" signs
at any time within ninety (90) days prior to Lease Termination, or at any time
Tenant is in default hereunder, or at such other times as agreed to by Landlord
and Tenant, (v) protecting the Premises in the event of an emergency, and (vi)
exhibiting the Premises to prospective purchasers, lenders or tenants. In the
event of an emergency, Landlord shall have the right to use any and all means
which Landlord may deem proper to gain access to the Premises. Any entry to the
Premises by Landlord or Landlord's agents in accordance with this Paragraph 18
or any other provision of this Lease shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of
the Premises, or an eviction of Tenant from the Premises or any portion thereof
nor give Tenant the right to abate the Rentals payable under this Lease. Tenant
hereby waives any claims for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned by Landlord's or Landlord's agents'
entry into the Premises as permitted by this paragraph 18 or any other provision
of this Lease.
19. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
Except as otherwise expressly provided herein, if Tenant shall at any time fail
to make any payment or perform any other act required to be made or performed by
Tenant under this Lease, Landlord may upon ten (10) days written notice to
Tenant, but shall not be obligated to and without waiving or releasing Tenant
from any obligation under this Lease, make such payment or perform such other
act to the extent that Landlord may deem desirable, and in connection therewith,
pay expenses and employ counsel. All sums so paid by Landlord and all penalties,
interest and reasonable costs in connection therewith shall be due and payable
by Tenant as Additional Rent upon demand.
20. LENDER REQUIREMENTS
20.1 SUBORDINATION. This Lease, at Landlord's option, shall be subject and
subordinate to the lien of any mortgages or deeds of trust (including all
advances thereunder, renewals, replacements, modifications, supplements,
consolidations, and extensions thereof) in any amount(s) whatsoever now or
hereafter placed on or against or affecting the Premises and/or the real
property comprising the Common Area or Landlord's interest or estate therein,
without the necessity of the execution and delivery of any further instruments
on the part of Tenant to effectuate such subordination. If any mortgagee or
beneficiary shall elect to have this Lease prior to the lien of its mortgage or
deed of trust, and shall give written notice thereof to Tenant, this Lease shall
be deemed prior to such mortgage or deed of trust, whether this Lease is dated
prior or subsequent to the date of such mortgage or deed of trust or the date of
the recording thereof.
20.2 SUBORDINATION AGREEMENTS. Tenant shall execute and deliver, without charge
therefor, such further instruments evidencing subordination of this Lease to the
lien of any mortgages or deeds of trust affecting the Premises and/or real
property comprising the Common Area as may be required by Landlord within ten
(10) days following Landlord's request therefor; provided that such mortgagee or
beneficiary under such mortgage or deed of trust agrees in writing that this
Lease shall not be terminated in the event of any foreclosure if Tenant is not
in default under this Lease. Failure of Tenant to execute such instruments
evidencing subordination of this Lease shall constitute a Default by Tenant
hereunder.
20.3 APPROVAL BY LENDERS. Tenant recognizes that the provisions of this Lease
may be subject to the approval of any financial institution that may make a loan
secured by a new or subsequent deed of trust or mortgage affecting the Premises
and/or real property comprising the Common Area. If the financial institution
should require, as a condition to such financing, any modifications of this
Lease in order to protect its security interest in the Premises, including
without limitation, modification of the provisions relating to damage to and/or
condemnation of the Premises, Tenant agrees to execute the appropriate
amendments; provided, however, that no modification shall substantially change
the size, location or dimension of the Premises, or increase the Rentals payable
by Tenant hereunder or substantially increase or change Tenant's rights or
obligations under the Lease. If Tenant refuses to execute any such amendment,
Landlord may, in Landlord's discretion, terminate this Lease.
20.4 ATTORNMENT. In the event of foreclosure or the exercise of the power of
sale under any mortgage or deed of trust made by Landlord and covering the
Premises and/or real property comprising the Common Area, Tenant shall attorn to
the purchaser upon any such foreclosure or sale and recognize such purchaser as
the Landlord under this Lease, provided such purchaser expressly agrees in
writing to be bound by the terms of the Lease, including, but not limited to,
the quiet enjoyment provisions of Paragraph 39.
20.5 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
(a) DELIVERY BY TENANT. Tenant shall, within ten (10) days following request
by Landlord therefor and without charge, execute and deliver to Landlord any
and all documents, estoppel certificates, and current financial statements of
Tenant reasonably requested by Landlord in connection with the sale or
financing of the Premises and/or real property comprising the Common Area, or
reasonably requested by any lender making a loan affecting the Premises and/or
real property comprising the Common Area. Landlord may require that Tenant in
any estoppel certificate shall (i) certify that this Lease is unmodified and
in full force and effect (or, if modified, state the nature of such
modification and certify that this Lease, as so modified, is in full force and
effect) and has not been assigned, (ii) certify the date to which Rentals are
paid in advance, if any, (iii) acknowledge that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specify
such defaults if claimed, (iv) evidence the status of this Lease as may be
required either by a lender making a loan to Landlord to be secured by a deed
of trust or mortgage covering the Premises and/or real property comprising the
Common Area or a purchaser of the Premises and/or real property comprising the
Common Area from Landlord, (v) warrant that in the event any beneficiary of
any security instrument encumbering the Premises and/or real property
comprising the Common Area forecloses on the security instrument or sells the
Premises and/or real property comprising the Common Area pursuant to any power
of sale contained in such security instrument, such beneficiary shall not be
liable for the Security Deposit, (vi) certify the date Tenant entered into
occupancy of the Premises and that Tenant is conducting business at the
Premises, (vii) certify that all improvements to be constructed on the
Premises by Landlord have been substantially completed except for punch list
items which do not prevent Tenant from using the Premises for its intended
use, and (viii) certify such other matters relating to the Lease and/or
Premises as may be requested by a lender making a loan to Landlord or a
purchaser of the Premises and/or real property comprising the Common Area
from Landlord. Any such estoppel certificate may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises and/or real
property comprising the Common Area. Any financial statements of Tenant shall
include an opinion of a certified public accountant (if available) and a
balance sheet and profit and loss statement for the most recent fiscal year,
all prepared in accordance with generally accepted accounting principles
consistently applied. Notwithstanding the foregoing, the most recent certified
financial statements, balance sheet and profit and loss statement of General
Signal shall satisfy the requirements of this Paragraph 20.5.
(b) NONDELIVERY BY TENANT. Tenant's failure to deliver an estoppel certificate
as required pursuant to Paragraph 20.5(a) above shall be conclusive upon
Tenant that (i) this Lease is in full force and effect, without modification
except as may be represented by Landlord and has not been assigned, (ii) there
are now no uncured defaults in Landlord's performance, (iii) no Rentals have
been paid in advance except those that are set forth in this Lease, (iv) no
beneficiary of any security instrument encumbering the Premises and/or real
property comprising the Common Area shall be liable for the Security Deposit
in the event of a foreclosure or sale under such security instrument, (v) the
improvements to be constructed on the Premises by Landlord have been
substantially completed except for punch list items which do not prevent
Tenant from
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using the Premises for its intended use, and (vi) Tenant has entered into
occupancy of the Premises on such date as may be represented by Landlord and is
open and conducting business at the Premises. Tenant's failure to deliver any
financial statements, estoppel certificates or other documents as required
pursuant to Paragraph 20.5(a) above shall be a Default by Tenant.
21. HOLDING OVER
This Lease shall terminate without further notice at the expiration of the Lease
Term. It is the desire of Landlord either to enter into a new lease with Tenant
for the Premises prior to the expiration of the Lease Term, or to have Tenant
vacate the Premises pursuant to Paragraph 35 below. Therefore, any holding over
by Tenant after Lease Termination shall not constitute a renewal or extension of
the Lease Term, nor give Tenant any rights in or to the Premises except as
expressly provided in this Lease. Any holding over after Lease Termination with
the consent of Landlord shall be construed to be a tenancy from month to month,
at 200% of the monthly Rent for the month preceding Lease Termination in
addition to all Additional Rent payable hereunder, and shall otherwise be on the
terms and conditions herein specified insofar as applicable. If Tenant remains
in possession of the Premises after Lease Termination without Landlord's
consent, Tenant shall indemnify Landlord against any loss or liability resulting
from Tenant's failure to surrender the Premises, including without limitation,
any claims made by any succeeding tenant based on delay in the availability of
the Premises.
22. NOTICES
Any notice required or desired to be given under this Lease shall be in writing,
and all notices shall be given by personal delivery or mailing. All notices
personally given on Tenant may be delivered to any person apparently in charge
at the Premises or to the corporate officer or agent of Tenant if Tenant is a
corporation, or on any one signatory party if more than one party signs this
Lease on behalf of Tenant; any notice so given shall be binding upon all
signatory parties as if served upon each such party personally. Any notice given
pursuant to this Paragraph 22 shall be deemed to have been given when personally
delivered, or if mailed, when seventy-two hours have elapsed from the time when
such notice was deposited in the United States mail certified or registered mail
and postage prepaid, addressed to the party at the last address given for
purposes of notice pursuant to the provisions of this Paragraph 22. At the date
of execution of this Lease, the addresses of Landlord and Tenant are set forth
in Paragraph 1.11 above.
23. ATTORNEYS' FEES
In the event either party hereto shall bring any action or legal proceeding for
damages for an alleged breach of any provision of this Lease, to recover
Rentals, to enforce an indemnity obligation, to terminate the tenancy of the
Premises, or to enforce, protect, interpret, or establish any term, condition,
or covenant of this Lease or right or remedy of either party, the prevailing
party shall be entitled to recover, as a part of such action or proceeding,
reasonable attorneys' fees and court costs, including attorneys' fees and costs
for appeal, as may be fixed by the court or jury.
24. ASSIGNMENT, SUBLETTING AND HYPOTHECATION
24.1 IN GENERAL. Tenant shall not voluntarily sell, assign or transfer all or
any part of Tenant's interest in this Lease or in the Premises or any part
thereof, sublease all or any part of the Premises, or permit all or any part of
the Premises to be used by any person or entity other than Tenant or Tenant's
employees, except as specifically provided in this Paragraph 24.
24.2 VOLUNTARY ASSIGNMENT AND SUBLETTING.
(a) NOTICE TO LANDLORD. Tenant shall, by written notice, advise Landlord of
Tenant's desire on a stated date (which date shall not be less than thirty
(30) days nor more than ninety (90) days after the date of Tenant's notice) to
assign this Lease or to sublet all or any part of the Premises for any part of
the Lease Term. Said notice shall state that the notice constitutes an offer
to terminate the Lease or Tenant's interest in the portion of the Premises
specified pursuant to Paragraph 24.2(b) if the notice applies to a proposed
assignment of the Lease or Tenant's interest therein, a proposed sublease of
all or any part of the Premises for more than fifty percent (50%) of the
remainder of the Lease Term, or a proposed sublease of more than fifty percent
(50%) of the Premises for any period. Tenant's notice shall state the name,
legal composition and address of the proposed assignee or subtenant, and
Tenant shall provide the following information to Landlord with said notice:
a true and complete copy of the proposed assignment agreement or sublease;
financial statement of the proposed assignee or subtenant prepared in
accordance with generally accepted accounting principles within one year prior
to the proposed effective date of the assignment or sublease; the nature of
the proposed assignee's or subtenant's business to be carried on in the
Premises; the payments to be made or other consideration to be given on
account of the assignment or sublease; a current financial statement of
Tenant; and such other pertinent information as may be requested by
Landlord, all in sufficient detail to enable Landlord to evaluate the proposed
assignment or sublease and the prospective assignee or subtenant. Tenant's
notice shall not be deemed to have been served or given until such time as
Tenant has provided Landlord with all information reasonably requested by
Landlord pursuant to this Paragraph 24.2. Tenant shall immediately notify
Landlord of any modification to the proposed terms of such assignment or
sublease. Tenant may withdraw its notice at anytime prior to exercise by
Landlord of Landlord's right to terminate as described in Paragraph 24.2(b).
(b) OFFER TO TERMINATE. If Tenant notifies Landlord of its desire to assign this
Lease or any interest herein, to sublet all or any part of the Premises for
more than fifty percent (50%) of the remainder of the Lease Term, or to sublet
more than fifty percent (50%) of the Premises for any period. Tenant's notice
shall constitute an offer to terminate this Lease or Tenant's interest in the
portion of the Premises specified and Landlord shall have the right, to be
exercised by giving written notice to Tenant within thirty (30) days after
receipt of Tenant's notice, to terminate the Lease (i) entirely, in the event of
a proposed assignment or a sublease of the entire Premises for the remainder of
the Lease Term, (ii) as to the portion of the Premises which is the subject of a
proposed sublease for more than fifty percent (50%) of the remainder, or (iii)
as to the portion of the Premises which is the subject of a proposed sublease of
more than fifty percent (50%) of the Premises for any period, as specified in
Tenant's notice. For purposes of this Paragraph 24.2(b), (i) the term of a
proposed sublease shall include all options to extend or renew, and (ii) a
proposed sublease shall be deemed to be for the remainder of the Lease Term if
the term of the proposed sublease will expire within one year of the end of the
Lease Term. If Tenant's notice specifies all of the Premises and Landlord elects
to terminate, this Lease shall terminate on the date stated in the notice given
by Tenant pursuant to Paragraph 24.2(a), subject to any obligations which have
accrued and are unfulfilled as of such date. If Tenant's notice specifies less
than all of the Premises and Landlord elects to terminate, this Lease shall
terminate on the date stated with respect to that portion of the Premises, and
Base Rent and all other costs and expenses payable by Tenant hereunder shall be
adjusted pro rata, based upon the number of net leaseable square feet
retained by Tenant after the termination, compared to the total number of net
leaseable square feet in the entire Premises excluding any areas of the
Premises designated in the proposed sublease for ingress and egress and common
areas, if any. The Lease as so amended shall continue thereafter in full force
and effect. Landlord and Tenant shall execute an amendment to this Lease
specifying the new Premises, the adjusted Base Rent, a reasonable method for
apportioning maintenance and operating obligations based on the multi-tenant
nature of the Premises, and Tenant's sharer of costs and expenses; provided,
however, that failure by either party to execute such an amendment shall not
affect the validity of this Lease.
(c) LANDLORD'S CONSENT. If Landlord does not exercise its right to terminate
pursuant to Paragraph 24.2(b) within thirty (30) days after receipt of
Tenant's notice or if a proposed sublease is not subject to the provisions of
Paragraph 24.2(b), Landlord shall not unreasonably withhold its consent to the
proposed assignment or subletting, on the terms and conditions specified in said
notice. If Tenant's notice fails to state that it constitutes an offer to
terminate the Lease as may be required pursuant to Paragraph 24.2(a), such
notice shall be deemed insufficient for the purposes of this Paragraph 24.2, and
Landlord may withhold its consent to the proposed assignment or subletting in
Landlord's absolute discretion. Without otherwise limiting the criteria upon
which Landlord may withhold its consent to any proposed assignment or sublease,
if Landlord withholds its consent where Tenant is in default at the time of the
giving of Tenant's notice or at any time thereafter, or where the net worth of
the proposed assignee or subtenant (according to generally accepted accounting
principles) is substantially less than the greater of (i) the net worth of
Tenant immediately prior to the assignment or sublease, (ii) or the net worth of
Tenant at the time this Lease is executed, such withholding of consent shall be
presumptively reasonable. Any and all rent paid by an assignee or subtenant,
including, but not limited to, any rent in excess of the Rentals to be paid
under this Lease (prorated in the event of a sublease of less than the entire
Premises), shall be paid directly to Landlord, as Additional Rent, at the time
and place specified in this Lease.* For the purposes of this Paragraph 24, the
term "rent" shall include any consideration of any kind received, or to be
received, by Tenant from an assignee or subtenant, if such sums are related to
Tenant's interest in this Lease or in the Premises, including, but not limited
to, key money, bonus money, and payments (substantially in excess of the fair
market value thereof) for Tenant's assets, fixtures, trade fixtures, inventory,
accounts, goodwill, equipment, furniture, general intangibles, and any capital
stock or other equity ownership interest
*The foregoing notwithstanding, with respect to any sublease, all rents in
excess of the Rentals to be paid under this Lease (prorated on the basis of the
square footage of the subleased portion) shall be paid fifty percent (50%) to
Landlord, as and when received, and fifty percent (50%) to Tenant, after
deducting any advertising expenses, sublessee improvements or brokerage fees
actually incurred by Tenant in connection therewith, amortized over the term of
the sublease.
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of Tenant. Any assignment or subletting without Landlord's consent shall
be voidable at Landlord's option, and shall constitute a Default by
Tenant. Landlord's consent to any one assignment or sublease shall not
constitute a waiver of the provisions of this Paragraph 24 as to any
subsequent assignment or sublease nor a consent to any subsequent
assignment or sublease; further, unless the parties otherwise agree in
writing. Landlord's consent to an assignment or sublease shall not release
Tenant from Tenant's obligations under this Lease, and Tenant shall remain
jointly and severally liable with the assignee or subtenant. If Landlord
agrees to release Tenant from its obligations hereunder upon an assignment
of the Lease, General Signal shall also be released from its obligations
as guarantor.
(d) ASSUMPTION OF OBLIGATIONS. In the event Landlord consents to any
assignment, such consent shall be conditioned upon the assignee expressly
assuming and agreeing to be bound by each of Tenant's covenants,
agreements and obligations contained in this Lease, pursuant to a written
assignment and assumption agreement in a form approved by Landlord.
Landlord's consent to any assignment or sublease shall be evidenced by
Landlord's signature on said assignment and assumption agreement or on
said sublease or by a separate written consent. In the event Landlord
consents to a proposed assignment or sublease, such assignment or sublease
shall be valid and the assignee or subtenant shall have the right to take
possession of the Premises only if an executed original of the assignment
or sublease is delivered to Landlord, and such document contains the same
terms and conditions as stated in Tenant's notice to Landlord given
pursuant to Paragraph 24.2(a) above, except for any such modifications to
which Landlord has consented in writing.
24.3 COLLECTION OF RENT. Tenant hereby irrevocably gives to and confers upon
Landlord, as security for Tenant's obligations under this Lease, the right,
power and authority to collect all rents from any assignee or subtenant of
all or any part of the Premises as permitted by this Paragraph 24, or
otherwise, and Landlord, as assignee of Tenant, or a receiver for Tenant
appointed on Landlord's application, may collect such rent and apply it
toward Tenant's obligations under this Lease; provided, however, that until
the occurrence of any Default by Tenant or except as provided by the
provisions of Paragraph 24.2(b) above. Tenant shall have the right to
collect such rent. Upon the occurrence of any Default by Tenant, Landlord
may at any time without notice in Landlord's own name sue for or otherwise
collect such rent, including rent past due and unpaid, and apply the same,
less costs and expenses of operations and collection, including reasonable
attorneys' fees, toward Tenant's obligations under this Lease. Landlord's
collection of such rents shall not constitute an acceptance by Landlord of
attornment by such subtenants; in the event of a Default by Tenant, Landlord
shall have all rights provided by this Lease and by law, and Landlord may,
upon re-entry and taking possession of the Premises, eject all parties in
possession or eject some and not others, or eject none, as Landlord shall
determine in Landlord's sole discretion.
24.4 NO BONUS VALUE. Subject to the provisions of Paragraph 24.2(c), it is
the intent of the parties hereto that this Lease shall confer upon Tenant
only the right to use and occupy the Premises, and to exercise such other
rights as are conferred upon Tenant by this Lease. The parties agree that
this Lease is not intended to have a bonus value, nor to serve as a vehicle
whereby Tenant may profit by a future assignment or sublease of this Lease
or the right to use or occupy the Premises as a result of any favorable
terms contained herein or any future changes in the market for leased space.
It is the intent of the parties that any such bonus value that may attach to
this Lease shall be and remain the exclusive property of Landlord.
24.5 CORPORATIONS AND PARTNERSHIPS. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary, or by operation
of law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more of the partnership, any
assignment(s) of fifty percent (50%) or more (cumulatively) of any interest
in the capital or profits of the partnership, or the dissolution of the
partnership shall be deemed an assignment of this Lease requiring the prior
written consent of Landlord. If Tenant is a corporation, any dissolution,
merger, consolidation or other reorganization of Tenant, any sale or
transfer (or cumulative sales or transfers) of the capital stock of Tenant
in excess of fifty percent (50%), or any sale (or cumulative sales) of all
of the assets of Tenant shall be deemed an assignment of this Lease
requiring the prior written consent of Landlord, provided that no such
consent will be required as long as General Signal continues to be the
guarantor of the Lease. Any such withdrawal or substitution of partners or
assignment of any interest in or dissolution of a partnership tenant, and
any such sale of stock or assets of a corporate tenant without the prior
written consent of Landlord shall be a Default by Tenant hereunder. The
foregoing notwithstanding, the sale or transfer of any or all of the capital
stock of a corporation, the capital stock of which is now or hereafter
becomes publicly traded, shall not be deemed an assignment of this Lease.
24.6 REASONABLE PROVISIONS. Tenant expressly agrees that the provisions of
this Paragraph 24 are not unreasonable standards or conditions for purposes
of Section 1951.4(b)(2) of the California Civil Code, as amended from time
to time.
24.7 ATTORNEYS' FEES. Tenant shall pay, as Additional Rent, Landlord's
actual attorneys' fees for reviewing, investigating, processing and/or
documenting any requested assignment or sublease, whether or not Landlord's
consent is granted.
24.8 INVOLUNTARY TRANSFER. No interest of Tenant in this Lease shall be
assignable by operation of law, including, without limitation, the transfer
of this Lease by testacy or intestacy. Each of the following acts shall be
considered an involuntary assignment:
(a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for
the benefit of creditors, or a proceeding under the Bankruptcy Act is
instituted in which Tenant is the bankrupt; or, if Tenant is a partnership
or consists of more than one person or entity, if any partner of the
partnership or other person or entity is or becomes bankruptor insolvent,
or makes an assignment for the benefit of creditors;
(b) Levy of a writ of attachment or execution on this Lease;
(c) Appointment of a receiver with authority to take possession of the
Premises in any proceeding or action to which Tenant is a party; or (d)
Foreclosure of any lien affecting Tenant's interest in the Premises, which
lien was not consented to by Landlord pursuant to Paragraph 24.9.
An involuntary assignment shall constitute a Default by Tenant and Landlord
shall have the right to terminate this Lease, in which case this Lease shall
not be treated as an asset of Tenant. In the event the Lease is not
terminated, the provision sof Paragraph 24.2(c) regarding rents paid by an
assignee or subtenant and Paragraph 24.4 shall apply. If a writ of
attachment or execution is levied on this Lease, or if any involuntary
proceeding in bankruptcy is brought against Tenant or a receiver is
appointed. Tenant shall have sixty (60) days in which to cause the
attachment or execution to be removed, the involuntary proceeding dismissed,
or the receiver removed.
24.9 HYPOTHECATION. Tenant shall not hypothecate, mortgage or encumber
Tenant's interest in this Lease or in the Premises or otherwise use this
Lease as a security device in any manner without the consent of Landlord,
which consent Landlord may withhold in its absolute discretion. Consent by
Landlord to any such hypothecation or creation of a lien or mortgage shall
not constitute consent to an assignment or other transfer of this Lease
following foreclosure of any permitted lien or mortgage.
24.10 BINDING ON SUCCESSORS. The provisions of this Paragraph 24 expressly
apply to all heirs, successors, sublessees, assignees and transfers of
Tenant.
SUCCESSORS
25. Subject to the provisions of Paragraph 24 above and Paragraph 30.2(a)
below, the covenants, conditions, and agreements contained in this Lease
shall be binding on the parties hereto and on their respective heirs,
successors and assigns.
LANDLORD DEFAULT; MORTGAGE PROTECTION
26. Landlord shall not be in default under this Lease unless Tenant shall
have given Landlord written notice of the breach and, within thirty (30)
days after notice, Landlord has not cured the breach or, if the breach is
such that it cannot reasonably be cured under the circumstances within
thirty (30) days, has not commenced diligently to prosecute the cure to
completion. Any money judgment obtained by Tenant based upon Landlord's
breach of this Lease shall be satisfied only out of the proceeds of the sale
or disposition of Landlord's interest in the Premises (whether by Landlord
or by execution of judgment). In the event of any default on the part of
Landlord under this Lease, Tenant shall give notice by registered or
certified mail to any beneficiary of a deed of trust or any mortgage of a
mortgage affecting the Premises and/or real property comprising the Common
Area whose address shall have been furnished to Tenant, and shall offer such
beneficiary or mortgage a reasonable opportunity too cure the default,
including time to obtain possession of the Premises by power of sale or
judicial foreclosure, if such should prove necessary to effect a cure.
Landlord shall take no act that would reduce Landlord's equity in the
Building to less than One Million Dollars ($1,000,000), determined by the
capitalized income appraisal method.
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27. EXHIBITS
All exhibits attached to this Lease shall be deemed to be incorporated herein by
the individual reference to each such exhibit, and all such exhibits shall be
deemed to be a part of this Lease as though set forth in full in the body of the
Lease.
28. SURRENDER OF LEASE NOT MERGER
The voluntary merger surrender of this Lease by Tenant, or a mutual cancellation
thereof, shall not work a merger and shall, at the option of Landlord, terminate
all or any existing subleases or subtenants, or may, at the option of Landlord,
operate as an assignment to Landlord of any or all such subleases or subtenants.
29. WAIVER
The waiver by Landlord of any breach of any term, covenant or condition herein
contained (or the acceptance by Landlord of any performance by Tenant after the
time the same shall become due) shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach thereof or of any other term,
covenant or condition herein contained, unless otherwise expressly agreed to by
Landlord in writing. The acceptance by Landlord of any sum less than that which
is required to be paid by Tenant shall be deemed to have been received only on
account of the obligation for which it is paid (or for which it is allocated by
Landlord, in Landlord's absolute discretion, if Tenant does not designate the
obligation as to which the payment should be credited), and shall not be deemed
an accord and satisfaction notwithstanding any provisions to the contrary
written on any check or contained in any letter of transmittal. The acceptance
by Landlord of any sum tendered by a purported assignee or transferee of Tenant
shall not be deemed a consent by Landlord to any assignment or transfer of
Tenant's interest herein. No custom or practice which may arise between the
parties hereto in the administration of the terms of this Lease shall be
construed as a waiver or diminution of Landlord's right to demand performance by
Tenant in strict accordance with the terms of this Lease.
30. GENERAL
30.1 CAPTIONS AND HEADINGS. The captions and paragraph headings used in this
Lease are for convenience of reference only. They shall not be construed to
limit or extend the meaning of any part of this Lease and shall not be deemed
relevant in resolving any question of interpretation or construction of any
paragraph of this Lease.
30.2 DEFINITIONS.
(a) LANDLORD. The term Landlord as used in this Lease, so far as the covenants
or obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner at the time in question of the fee title to the
Premises. In the event of any transfer(s) of such interest, the Landlord
herein named (and in case of any subsequent transfers or conveyances, the then
grantor) shall have no further liability under this Lease to Tenant except as
to matters of liability which have accrued and are unsatisfied as of the date
of such transfer, it being intended that the covenants and obligations
contained in this Lease on the part of Landlord shall be binding on Landlord
and its successors and assigns only during and in respect of their respective
periods of ownership of the fee; provided that any funds in the possession of
Landlord or the then grantor and as to which Tenant has an interest, less any
deductions permitted by law or this Lease, shall be turned over to the
grantee. The covenants and obligations contained in this Lease on the part of
Landlord shall, subject to the provisions of this Paragraph 30.2(a), be
binding upon each Landlord and such Landlord's heirs, personal
representatives, successors and assigns only during its respective period of
ownership. Except as provided in this Paragraph 30.2(a), this Lease shall not
be affected by any transfer of Landlord's interest in the Premises, and Tenant
shall attorn to any transferee of Landlord provided that all of Landlord's
obligations hereunder are assumed in writing by such transferee.
(b) AGENTS. For purposes of this Lease and without otherwise affecting the
definition of the word "agent" or the meaning of an "agency", the term
"agents" shall be deemed to include the agents, employees, officers,
directors, servants, invitees, contractors, successors, representatives,
subcontractors, guests, customers, suppliers, partners, affiliated companies,
and any other person or entity related in any way to the respective party,
Tenant or Landlord.
(c) INTERPRETATION OF TERMS. The words "Landlord" and "Tenant" as used herein
shall include the plural as well as the singular. Words in the neuter gender
include the masculine and feminine and words in the masculine or feminine
gender include the neuter.
30.3 COPIES. Any executed copy of this Lease shall be deemed an original for
all purposes.
30.4 TIME OF ESSENCE. Time is of the essence as to each and every provision
in this Lease requiring performance within a specified time.
30.5 SEVERABILITY. In case any one or more of the provisions contained herein
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
However, if Tenant's obligation to pay the Rentals is determined to be invalid
or unenforceable, this Lease at the option of Landlord shall terminate.
30.6 GOVERNING LAW. This lease shall be construed and enforced in accordance
with the laws of the State of California.
30.7 JOINT AND SEVERAL LIABILITY. If Tenant is more than one person or entity,
each such person or entity shall be jointly and severally liable for the
obligations of Tenant hereunder. If Tenant is a husband and wife, the
obligations hereunder shall extend to their sole and separate property as well
as community property.
30.8 CONSTRUCTION OF LEASE PROVISIONS. Although printed provisions of this Lease
were prepared by Landlord, this Lease shall not be construed either for or
against Tenant or Landlord, but shall be construed in accordance with the
general tenor of the language to reach a fair and equitable result.
30.9 CONDITIONS. All agreements by Tenant contained in this Lease, whether
expressed as covenants or conditions, shall be construed to be both covenants
and conditions, conferring upon Landlord, in the event of a breach thereof, the
right to terminate this Lease.
30.10 TENANT'S FINANCIAL STATEMENTS. Tenant hereby warrants that all financial
statements delivered by Tenant to Landlord are true, correct, and complete, and
prepared in accordance with generally accepted accounting principles. Tenant
acknowledges and agrees that Landlord is relying on such financial statements in
accepting this Lease, and that a breach of Tenant's warranty as to such
financial statements shall constitute a Default by Tenant.
30.11 WITHHOLDING OF LANDLORD'S CONSENT. Notwithstanding any other provision of
this Lease, where Tenant is required to obtain the consent (whether written or
oral) of Landlord to do any act, or to refrain from the performance of any act.
Tenant agrees that if Tenant is in default with respect to any substantial term,
condition, covenant or provision of this Lease, then Landlord shall be deemed to
have acted reasonably in withholding its consent if said consent is in fact,
withheld.
31. SIGNS
Tenant shall not place or permit to be placed any sign or decoration on the
Common Area or the exterior of the Premises or that would be visible from the
exterior of the Premises, without the prior written consent of Landlord, which
consent will not be unreasonably withheld. In no event shall any such sign
revolve, rotate, move or create the illusion of revolving, rotating or moving or
be internally illuminated and, except for a spotlight which Tenant may install
on the existing monument sign, there shall be no exterior spotlighting or other
illumination on any such sign. Tenant, upon written notice by Landlord, shall
immediately remove any of Tenant's signs or decorations that are visible from
the exterior of the Premises which were installed without Landlord's prior
written consent, which shall not be unreasonably withheld or that Tenant has
placed or permitted to be placed on the Common Area or the exterior of the
Premises without the prior written consent of Landlord. If Tenant fails to so
remove such sign or decoration within five (5) working days after Landlord's
written notice, Landlord may enter the Premises and remove such sign or
decoration and Tenant shall pay Landlord, as Additional Rent upon demand, the
cost of such removal. All signs placed on the Premises or Common Area by Tenant
shall comply with all recorded documents affecting the Premises, including but
not limited to any Declaration of Conditions, Covenants and Restrictions; the
sign criteria, which will be attached hereto as Exhibit "E" if applicable (as
the same may be amended from time to time); and applicable statutes, ordinances,
rules and regulations of governmental agencies having jurisdiction thereof. At
Landlord's option, Tenant shall at Lease Termination remove any sign which is
has placed on the Premises or the Common Area, and shall, at its sole cost,
repair any damage caused by the installation or removal of such sign.
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32. LANDLORD AS PARTY DEFENDANT
If, by reason of any act or omission by Tenant or Tenant's agents, Landlord is
made a party defendant concerning this Lease (other than as a defendant in an
action brought against Landlord by Tenant or Tenant's agent), the Premises, or
the Common Area, Tenant shall indemnify Landlord against all liability
incurred (or threatened against) Landlord as a party defendant including all
damages, costs and attorneys' fees.
33. LANDLORD NOT A TRUSTEE
Landlord shall not be deemed to be a trustee of any funds paid to Landlord by
Tenant (or held by Landlord for Tenant) pursuant to this Lease, including
without limitation the Security Deposit. Landlord shall not be required to keep
any such funds separate from Landlord's general funds. Any funds held by
Landlord pursuant to this Lease shall not bear interest.
34. INTEREST
Any payment due from Tenant to Landlord, except for Rent received by Landlord
within thirty (30) days after the same is due, shall bear interest from the date
due until paid, at an annual rate equal to the greater of: ten percent (10%); or
five percent (5%) plus the rate established by the Federal Reserve Bank of San
Francisco, as of the twenty-fifth (25th) day of the month immediately preceding
the due date, on advances to member banks under Sections 13 and 13(a) of the
Federal Reserve Act, as now in effect or hereafter from time to time amended. In
addition, Tenant shall pay all costs and attorneys' fees incurred by Landlord in
the collection of such amounts.
35. SURRENDER OF PREMISES
On the last day of the Lease Term or upon the sooner termination of this Lease,
Tenant shall, to the reasonable satisfaction of Landlord, surrender the Premises
to Landlord in good condition (reasonable wear and tear excepted) with all
originally painted interior walls washed, or re-painted if marked or damaged and
other interior walls cleaned and repaired or replaced, all carpets cleaned and
in good condition, the air conditioning, ventilating and heating equipment
inspected, serviced and repaired by a reputable and licensed service firm
(unless Landlord has elected to maintain heating and air conditioning systems
pursuant to Paragraph 10.1 above), and all floors cleaned and waxed. Tenant
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed shall be deemed abandoned by Tenant.
Furthermore, Tenant shall immediately repair all damage to the Premises and
Common Area caused by any such removal. If the Premises are not so surrendered
at Lease Termination, Tenant shall indemnify Landlord against any loss or
liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant or
losses to Landlord due to lost opportunities to lease to succeeding tenants.
36. NO PARTNERSHIP OR JOINT VENTURE
Nothing in this Lease shall be construed as creating a partnership or joint
venture between Landlord, Tenant, or any other party, or cause Landlord to be
responsible for the debts or obligations of Tenant or any other party.
37. ENTIRE AGREEMENT
Any agreements, warranties, or representations not expressly contained herein
shall in no way bind either Landlord or Tenant, and Landlord and Tenant
expressly waive all claims for damages by reason of any statement,
representation, warranty, promise or agreement, if any, not contained in this
Lease. This Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, whether written or oral,
between Landlord and its agents and Tenant and its agents with respect to the
Premises, Common Area or this Lease. This Lease constitutes the entire agreement
between the parties hereto and no addition to, or modification of, any term or
provision of this Lease shall be effective until and unless set forth in a
written instrument signed by both Landlord and Tenant.
38. SUBMISSION OF LEASE
Submission of this instrument for Tenant's examination or execution does not
constitute a reservation of space nor an option to lease. This instrument shall
not be effective until executed by both Landlord and Tenant. Execution of this
Lease by Tenant shall constitute an offer by Tenant to lease the Premises, which
offer shall be deemed accepted by Landlord when this Lease is executed by
Landlord and delivered to Tenant.
39. QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that upon Tenant paying Rentals and
performing its covenants and conditions under the Lease, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises for the Lease Term,
subject, however, to the terms of this Lease and of any mortgages or deeds of
trust affecting the Premises and/or the real property comprising the Common
Area, and the rights reserved by Landlord hereunder. Any purchaser upon any
foreclosure or exercise of the power of sale under any mortgage or deed of trust
made by Landlord and covering the Premises to whom Tenant xxxxxx pursuant to
Paragraph 20.4 above shall be bound by the terms if this Paragraph 39.
40. AUTHORITY
The undersigned parties hereby warrant that they have proper authority and are
empowered to execute this Lease on behalf of the Landlord and Tenant,
respectively. If Tenant is a corporation (or partnership), each individual
executing this Lease on behalf of said corporation (or partnership) represents
and warrants that he is duly authorized to execute and deliver this Lease on
behalf of said corporation in accordance with a duly adopted resolution of the
Board of Directors of said corporation or in accordance with the bylaws of said
corporation (or on behalf of said partnership in accordance with the partnership
agreement of such partnership), and that this Lease is binding upon said
corporation (or partnership) in accordance with its terms. If Tenant is a
corporation, Tenant shall, upon execution of this Lease, deliver to Landlord a
certified copy of the resolution of the Board of Directors of said corporation
authorizing or ratifying the execution of this Lease or a certificate of the
Secretary or Assistant Secretary of Tenant stating that a resolution is not
necessary. In the event Tenant should fail to deliver such resolution to
Landlord upon execution of this Lease, Landlord shall not be deemed to have
waived its right to require delivery of such resolution, and at any time during
the Lease Term Landlord may request Tenant to deliver the same, and Tenant
agrees it shall thereafter promptly deliver such resolution to Landlord. If
Tenant is a corporation, Tenant warrants that: (a) Tenant is a valid and
existing corporation; (b) Tenant is qualified to do business in California; (c)
All fees and all franchise and corporate taxes are paid to date, and will be
paid when due; (d) All required forms and reports will be filed when due; and
(e) The signers of this Lease are properly authorized to execute this Lease.
41. BUILDING PLANS
Tenant acknowledges that any plan of the Premises and Common Area which may
have been displayed or furnished to Tenant or which may be a part of Exhibit
"A" is tentative; Landlord may change the exterior of the Premises and the
shape, size, location, number, and extent of the Common Area improvements
shown on any such plan and eliminate or add any improvements to the Common
Area in Landlord's reasonable sole discretion; provided, however, that the
Premises shall be substantially as shown on such plan.
42. ADDENDUM
Paragraphs 43 through 50 are added hereto and made a part of this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease effective as of the
date set forth below.
LANDLORD: TENANT:
CAMSI II, a California general TELECOMMUNICATIONS TECHNOLOGY, INC.,
partnership a Delaware corporation
- ------------------------------ ------------------------------------
By: WESTALL CORPORATION, a California By: /s/ Norman B. Petermeier
---------------------------------- --------------------------------
corporation, its General Partner Title President
---------------------------------- ------------------------------
By: /s/ Kimball W. Small, President By:
---------------------------------- --------------------------------
KIMBALL W. SMALL, President Title:
---------------------------------- -----------------------------
By: KIMBALL SMALL INVESTMENTS 102, Date: 12/20/85
a California limited partnership, ------------------------------
its General Partner
By: WESTALL CORPORATION, a
California corporation,
its General Partner
By /s/ Kimball W. Small
---------------------------
KIMBALL W. SMALL, President
27
<PAGE>
ADDENDUM TO THAT CERTAIN NET LEASE AGREEMENT DATED DECEMBER 20, 1985, BY AND
BETWEEN TELECOMMUNICATION TECHNOLOGY, INC., A DELAWARE CORPORATION ("TENANT")
AND CAMSI II, A CALIFORNIA GENERAL PARTNERSHIP ("LANDLORD")
- ------------------------------------------------------------------------------
43. Option to Extend Lease Term. In consideration for Tenant not having been
in default under this Lease more than three (3) times in any one (1) calendar
year during the Lease Term, Landlord hereby grants to Tenant the option to
extend the Lease Term for one (1) additional period of five (5) years ("Extended
Term"), on the following terms and conditions:
(a) Tenant shall give Landlord written notice of its exercise of the
option to extend the Lease Term no earlier than twelve (12) months nor later
than six (6) months before the date the Lease Term would end but for said
exercise. Time is of the essence.
(b) Tenant may not extend the Lease Term pursuant to this Paragraph 43
if Tenant has been in default in the performance of any of the terms and
conditions of this Lease more than three (3) times in any one (1) calendar year
prior to the date of Tenant's notice of exercise of this option, or if Tenant
shall have assigned or otherwise transferred its interest in this Lease and/or
the Premises, whether or not Landlord's consent to such assignment or transfer
has been given. If Tenant is in default under this Lease on the date that the
Extended Term is to commence, then Landlord may elect to terminate this Lease
notwithstanding any notice given by Tenant of an exercise of its option to
extend.
(c) All terms and conditions of this Lease shall apply during the
Extended Term, except that the Rent for the Extended Term shall be determined in
accordance with Paragraph 44 below.
(d) Once Tenant delivers notice of its exercise of the option to extend
the Lease Term, Tenant may not withdraw such exercise and, subject to the
provisions of this paragraph, such notice shall operate to extend the Lease
Term. Upon the extension of the Lease Term pursuant to this paragraph, the term
"Lease Term" as used in this Lease shall thereafter include the Extended Term
and the Lease Termination date shall be the expiration date of the Extended
Term.
44. Rent During Extended Term. If Tenant elects to extend the Lease Term
pursuant to Paragraph 43 above, the Rent for the Extended Term shall be an
amount equal to ninety percent (90%) of the fair market rental value of the
Premises in relation to market conditions at the time of the extension
(including, but not limited to, rental rates for comparable space with
comparable tenant improvements (e.g., a 77,200 square foot comparable building
with tenant improvements of Twenty Dollars ($20) per square foot [adjusted for
cost of living increases during the Lease Term], and in a comparable location)
and taking into consideration any adjustments to rent based upon direct costs
(operating expenses) and taxes, load factors, financing charges, and/or cost of
living or other rental adjustments; the relative strength of the tenants; the
size of the space; and any other factors which affect market rental values at
the time of extension); provided, that the Rent for the Extended Term shall in
no
-28-
<PAGE>
event be lower than the Rent for the last Lease Year of the original Lease Term.
The Rent for the Extended Term shall be determined as follows:
(a) Mutual Agreement. After timely receipt by Landlord of Tenant's
notice of exercise of the option to extend the Lease Term, Landlord and Tenant
shall have a period of fifteen (15) days in which to agree on the Rent for
Extended Term. If Landlord and Tenant agree on the Rent during that period, they
shall immediately execute an amendment to this Lease stating the Rent for the
Extended Term. If Landlord and Tenant are unable to so agree, the provisions of
Paragraph 44(b) shall apply.
(b) Appraisal. Within five (5) days after the expiration of the
fifteen (15) day period described in Paragraph 44(a) above, each party, at its
cost and by giving notice to the other party, shall appoint an M.A.I. real
estate appraiser, with at least five (5) years full-time commercial appraisal
experience in the area in which the Premises are located, to appraise and set
the fair market rental value of the Premises. If a party does not appoint an
appraiser within five (5) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the fair market rental value. The cost of such sole
appraiser shall be borne equally by the parties. If two appraisers are appointed
by the parties as provided in this paragraph, the two appraisers shall meet
promptly and attempt to set the fair market rental value. If they are unable to
agree within twenty (20) days after the last appraiser has been appointed, then
the two appraisers shall select a third appraiser meeting the qualifications
stated in this Paragraph 44(b) within ten (10) days after the last day the two
appraisers are given to set the fair market rental value. If they are unable to
agree on the third appraiser, either of the parties to this Lease, by giving ten
(10) days notice to the other party, may apply to the presiding judge of the
Superior Court of Santa Clara County for the selection of a third appraiser who
meets the qualifications stated above. Each of the parties shall bear one-half
(1/2) of the cost of appointing the third appraiser and of paying the third
appraiser's fee. The third appraiser, however selected, shall be a person who
has not previously acted in any capacity for either party. Within twenty (20)
days after the selection of the third appraiser, the majority of the appraisers
shall set the fair market rental value. If the majority of the appraisers are
unable to set the fair market rental value within said twenty (20) day period,
the three appraisals shall be added together and the total divided by three; the
resulting quotient shall be the fair market rental value of the Premises. Ninety
percent (90%) of such amount shall be the Rent for the Extended Term. Provided,
however, that if any appraisal differs from the median appraisal by an amount
equal to more than ten percent (10%) of such median appraisal, that appraisal
shall be disregarded, and the average of the remaining appraisals (or the
remaining appraisal) shall be the fair market rental value. In establishing the
fair market rental value, the appraiser or appraisers shall consider the
reasonable market rental value for the highest and best use for the Premises
(including, but not limited to, rental rates for comparable space with
comparable tenant improvements and any adjustments to rent based upon direct
costs (operating expenses) and taxes, load
29
<PAGE>
factors, financing charges, and/or cost of living or other rental adjustments;
the relative strength of the tenants; and the size of the space); without regard
to the existence of this Lease but taking into consideration the absolute
nature of this Lease.
45. Moving Costs. On the Commencement Date, Landlord shall reimburse Tenant
for its actual out-of-pocket moving expenses incurred in relocating to the
Premises, not to exceed the sum of Sixty Thousand Dollars ($60,000).
46. Existing Leases. In consideration of Tenant entering into this Lease,
Landlord shall assume all future obligations of Tenant under those certain
leases more particularly described below from the later of (i) the Commencement
Date or (ii) the date on which Tenant vacates the below-described premises in
the condition required at lease termination pursuant to the terms of each such
lease:
<TABLE>
<CAPTION> Size Monthly Lease
Address of Premises (Sq. Ft.) Rent Expiration Landlord
- ------------------- --------- ------- ---------- --------
<S> <C> <C> <C> <C>
525 Del Rey Avenue 3,065 $1,992.25 8/31/88 Harris
Sunnyvale Properties
535 Del Rey Avenue 20,000 6,616.00 11/14/87 Perry/
Sunnyvale Arrillaga
555 Del Rey Avenue 23,600 7,600.00 11/14/87 Perry
Sunnyvale Industrial
Park
650 Vaqueros Avenue 6,120 2,950.00 11/30/87 Pacific
Sunnyvale Property
Management
</TABLE>
Tenant shall indemnify and hold Landlord harmless for all obligations under said
leases, including but not limited to obligations to restore and repair any
damage to said Premises, incurred or relating to time periods up to and
including the date of Tenant's vacation of said Premises.
On or before the date on which Tenant vacates each of the above-described
premises, but no sooner than thirty (30) days before the date on which Tenant
vacates the respective premises, and as a condition precedent to Landlord's
obligation under this Paragraph 46 to assume the obligations of Tenant therefor,
Tenant shall deliver to Landlord an estoppel certificate from the landlord under
the respective lease in the form attached as Exhibit "F" hereto.
47. Right of First Refusal. If at any time during the Lease Term, Landlord
desires to sell the Premises, Landlord shall first offer to sell the Premises to
Tenant by delivering to Tenant a written notice of the proposed price. Landlord
shall not offer the Premises for sale to a third party until Tenant has had a
period of forty-five (45) days to respond to Landlord's offer and to negotiate
with Landlord the complete terms of an agreement for the purchase and sale of
the Premises. In the event Landlord and Tenant have not executed an agreement
for the purchase and sale of the Premises within said forty-five (45) day
period, Landlord may thereafter offer the Premises for sale to third parties,
and Tenant shall have
30
<PAGE>
no further right to acquire the Premises pursuant to this Paragraph 47.
48. Right of First Negotiation -- Expansion Building. Landlord hereby grants
to Tenant the right of first negotiation with respect to a building to be
constructed by Landlord (the "Expansion Building") on that certain real property
immediately adjacent to the Land on the north, commonly referred to as Parcel
No. 18 (the "Expansion Land"), on the terms and conditions set forth herein. The
Expansion Building shall consist of approximately thirty-three thousand five
hundred eighteen (33,518) square feet, the design of which shall be determined
by Landlord in Landlord's sole discretion. In no event shall construction of the
Expansion Building commence earlier than January 1, 1988. No late than sixty
(60) days prior to the date on which Landlord proposes to commence construction
of the Expansion Building, Landlord shall offer to lease the Expansion
Building to Tenant. In the event that Landlord and Tenant have not executed a
lease agreement for the Expansion Building within one hundred twenty (120) days
after the date of delivery of Landlord's notice to Tenant, Landlord may
thereafter offer the Expansion Building for lease to third parties, and Tenant
shall have no further right to lease the Expansion Building pursuant to this
Paragraph 48. Landlord hereby agrees that, except for that parcel of property
commonly known as Parcel No. 21, the Expansion Land will be the last parcel of
land developed by Landlord within the North Valley Business Park.
49. Condition of Title. Landlord represents and warrants that there are no
liens or encumbrances affecting the real property described in Exhibit "B" other
than as shown in the preliminary title report prepared by Santa Clara Land Title
Company dated August 6, 1985, No. SP 2220-A, a copy of which has been provided
to Tenant, and that Landlord intends to create no additional liens prior to the
Commencement Date other than the lien of a permanent loan.
50. Environmental Compliance. Landlord warrants and represents to Tenant
that, to the best knowledge of Landlord and without making tests or specific
inquiry, before the commencement of the term of this Lease, there have not been
any (a) toxic, hazardous or regulated substances, (b) toxic, hazardous or
special wastes, or (c) underground tanks, vessels, piping or containers, as all
such terms are defined under applicable federal, state and local laws, on or
below the surface of the real property. Landlord will defend, indemnify and hold
harmless Tenant against any and all costs of compliance with local, state and
federal environmental laws, statutes, ordinances and regulations that Tenant
incurs as a result of any (a) toxic, hazardous or regulated substances, (b)
toxic, hazardous or special wastes, or (c) underground tanks, vessels, piping or
containers, as all such terms are defined under applicable federal, state and
local laws, that were on or below the surface of the real property as of or
before the commencement of the term of this Lease. This indemnity shall not
extend to, nor shall Landlord have any liability for, any consequential damages
which may be suffered by Tenant in connection with any of the above-described
conditions.
31
<PAGE>
EXHIBIT A
(PROPERTY DESCRIPTION AND
LOCATION DIAGRAMS APPEAR HERE)
32
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION:
All that certain real property situate in the City of Milpitas, County of Santa
Clara, State of California, described as follows:
PARCEL 1, as shown upon that certain Map entitled, "PARCEL MAP, ALL OF PARCELS
19 AND 21 OF THE PARCEL MAP RECORDED IN BOOK 461 OF MAPS, PAGES 36 AND 37, SANTA
CLARA COUNTY RECORDS AND A PORTION OF THE MILPITAS RANCHO, CITY OF MILPITAS,
CALIFORNIA", which Map was filed for record July 3, 1984 in Book 531 of Maps at
Page 17, Santa Clara County Records.
33
<PAGE>
EXHIBIT "C"
IMPROVEMENT AGREEMENT
This Improvement Agreement ("Agreement") is made part of that Lease dated
December 20, 1985 by and between CAMSI II, a California general partnership
("Landlord"), and TELECOMMUNICATIONS TECHNOLOGY, INC., a Delaware corporation
("Tenant"). Landlord and Tenant agree that the following terms are hereby added
to the Lease:
1. Definitions. Unless otherwise defined in this Agreement, capitalized terms
used herein shall have the same meaning and definition as set forth for such
terms in the Lease. The terms listed below, when used in this Agreement, shall
mean the following:
(a) Approved Interior Plans. The term "Approved Interior Plans" shall have the
meaning set forth in Paragraph 2(a) of this Agreement.
(b) Improvements. The term "Improvements" shall mean all improvements to be
constructed by Landlord within the Premises pursuant to the Approved Interior
Plans.
(c) Improvement Allowance. The term "Improvement Allowance" shall mean the
maximum amount Landlord is required to spend toward the payment of Improvement
Costs for the Improvements, which amount is One Million Five Hundred Forty-Five
Thousand Dollars ($1,544,000) (the product obtained by multiplying (i) Twenty
Dollars ($20) per square foot by (ii) 77,200 square feet (the "Gross Area" of
the Premises)). The foregoing amount is subject to increase pursuant to
Paragraph 2(e) below. The Improvement Allowance shall apply solely to general
purpose improvements, and not to special purpose improvements which are unique
to Tenant's intended use of the Premises, as determined by Landlord in its
reasonable judgment.
(d) Improvement Costs. The term "Improvement Costs" shall mean and include
all of the following:
(i) All "hard" construction costs for the construction of the Improvements
according to the Approved Interior Plans and all approved changes thereto,
including, but not limited to:
(A) All labor and supervision costs;
(B) Costs of all materials and supplies;
(C) Contract price for all construction work undertaken by general
contractors and sub-contractors;
(D) Fees, taxes or other charges levied by governmental or quasi-
governmental agencies (including public utilities) in connection with the
issuance of all authorizations, approvals, licenses, and permits necessary
to undertake construction of the Improvements;
(E) The cost of all equipment and fixtures provided for in the Approved
Interior Plans, including the
34
<PAGE>
cost of installation;
(F) The cost of all concrete, welding, survey and other testing expenses;
(G) The cost of premiums for surety bonds, if any, including but not
limited to payment and performance bonds and mechanics' lien bonds;
(H) The cost of installing a meter or meters in the Premises to measure
the utility services supplied to and consumed in the Premises; and
(I) The cost of installing standard utility services (i.e., standard HVAC
controls and distribution facilities; standard electrical panels,
distribution facilities, wiring, fixtures, switches and receptacles) and
special utility services (i.e., services other than those specified above).
(ii) All "soft" construction costs directly or indirectly related to the
construction of the Improvements including, but not limited to, the following:
(A) Engineering, space planning and architectural fees for preparation of
all plans, specifications and working drawings and processing of
applications for all governmental authorizations, approvals, licenses and
permits;
(B) Fees of engineers, space planners, architects, attorneys and others
providing professional or extra services in connection with the construction
of the Improvements or the supervision of the construction; and
(C) Inspection fees, recording costs and filing fees.
(e) Prime Contractor and Architect. The terms "Architect" and "Prime
Contractor" shall have the respective meanings set forth in Paragraph 2(b)(i) of
this Agreement.
2. Construction of Improvements. Landlord agrees to construct the Improvements
in the Premises in conformance with the Approved Interior Plans approved by both
Landlord and Tenant and developed pursuant to this Paragraph 2.
(a) Approval of Plans. On or before December 1, 1986, Tenant shall have
delivered to Landlord information sufficient for Landlord to develop preliminary
plans and specifications for the Improvements, including information sufficient
for Landlord's contractor to determine Tenant's air conditioning requirements.
Landlord shall deliver such preliminary plans to Tenant for its approval, which
shall not be unreasonably withheld, within fifteen (15) days after execution of
this Lease by Tenant. If Tenant disapproves such plans, then the parties shall
confer and negotiate in good faith to reach agreement on preliminary plans and
specifications for the Improvements. Such preliminary plans and specifications
shall be approved by both parties no later than January 22, 1986. As soon as the
preliminary plans and specifications are approved by both Landlord and Tenant,
Landlord shall cause to be prepared final plans and specifications for the
Improvements that are consistent with and are logical
35
<PAGE>
evolutions of the preliminary plans and specifications approved by the parties.
As soon as such final plans and specifications are completed, Landlord shall
deliver the same to Tenant for its approval. Such final plans and specifications
shall be approved by both parties no later than February 4, 1986. As soon as
approved by Landlord and Tenant, Landlord shall submit such final plans and
specifications and working drawings to all appropriate governmental agencies for
approval. Immediately after all such governmental approvals have been obtained,
three (3) copies of such final plans and specifications shall be initialled and
dated by Landlord and Tenant. The final plans and specifications so approved,
and all change orders specifically permitted by this Agreement, are referred to
herein as the "Approved Interior Plans" and shall become part of this Lease as
though set forth in full. Landlord shall deliver to Tenant a copy of the
Approved Interior Plans within five (5) days of receipt of all necessary
governmental approvals.
(b) Architectural and Construction Contracts. Landlord shall contract for the
design and construction of the Improvements in the following manner:
(i) It is presently contemplated that the Improvements will be designed and
constructed by Devcon Construction, Inc., architects and general contractors,
of Milpitas, California, however, Landlord shall have no obligation to hire
Devcon Construction, Inc., or any other specific architect or general
contractor, for the purpose of designing and constructing the Improvements,
and Landlord may select for such purposes any licensed architect and general
contractor it may deem qualified to perform such work. The architect and
general contractor so selected by Landlord are referred to herein as the
"Architect" and "Prime Contractor", respectively.
(ii) Prior to commencement of construction of the Improvements, Landlord
shall cause the Prime Contractor to prepare and submit to Landlord and Tenant
an itemized breakdown of the "hard" costs (defined in Paragraph 1(d)(i)) for
the Improvements.
(iii) If the overall cost of the Improvements (i.e., "hard" costs including
Prime Contractor's fees, plus estimated "soft" costs, including architect's
fees) exceeds the Improvement Allowance, then, at Tenant's option, the parties
shall confer in good faith to modify the Approved Interior Plans to reduce the
estimated overall cost of the Improvements.
(c) Changes to Approved Interior Plans. Once the Approved Interior Plans have
been finally approved by Landlord and Tenant and the general construction
contract signed with the Prime Contractor, neither Landlord nor Tenant shall
have the right to order extra work or change orders with respect to the
construction of the Improvements without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed. All extra work or
change orders requested by either Landlord or Tenant shall be made in writing,
shall specify the amount of delay or the time saved resulting therefrom, shall
specify any added or reduced cost resulting therefrom, and shall become
effective and a part of the Approved Interior Plans once approved in writing by
both
36
<PAGE>
parties.
(d) Commencement and Completion of the Improvements. As soon as (i) the
Approved Interior Plans have been Developed as provided above, (ii) all
necessary governmental approvals have been obtained, and (iii) Landlord has
entered into a general construction contract with Prime Contractor for
construction of the Improvements, Landlord shall cause construction of the
Improvements to be commenced and diligently prosecuted to completion so that the
Improvements may be substantially completed on or before May 1, 1986, but
without representation or warranty as to when the Improvement will be completed.
(e) Payment of Improvement Cost: Adjustment of Rent. The Rent specified in
Paragraph 1.8 of the Lease was computed based on the total Improvement Costs not
exceeding Twenty Dollars ($20) per square foot of Gross Area. Landlord shall pay
all Improvement Costs up to an amount equal to the Improvement Allowance.
In the event that the total Improvement Cost exceeds Twenty Dollars ($20) per
square foot of Gross Area but does not exceed Twenty-Five Dollars ($25) per
square foot of Gross Area (for a total cost of One Million Nine Hundred Thirty
Thousand Dollars [$1,930,000]), fifty percent (50%) of the amount of said excess
cost shall be repaid by Tenant to Landlord in the form of an increase in Rent,
the "per square foot" amount of which shall be equal to the quotient obtained by
dividing one-half (1/2) of the difference between (i) the actual Improvement
Costs (but in no event more than the maximum Improvement Allowance of
Twenty-Five Dollars ($25) per square foot of Gross Area or a total cost of One
Million Nine Hundred Thirty Thousand Dollars [$1,930,000]) and (ii) Twenty
Dollars ($20) per square foot ($1,544,000), by seventy-seven thousand two
hundred (77,200) and amortizing said quotient over the remaining balance of the
nine (9) year rental payment term at the rate of one and one-half percent
(1-1/2%) per month.
In the event the Improvement Costs exceed the Improvement Allowance by more
than Five Dollars ($5) per square foot (i.e., exceed a total of One Million Nine
Hundred Thirty Thousand Dollars [$1,930,000]), Tenant shall repay to Landlord
the entire amount of the excess over Twenty-Five Dollars ($25) per square foot
of Gross Area in the form of an increase in Rent, the "per square foot" amount
of which shall be a sum equal to the quotient obtained by dividing the excess of
the actual Improvement Costs over One Million Nine Hundred Thirty Thousand
Dollars ($1,930,000) by seventy-seven thousand two hundred (77,200) and
amortizing said quotient over the remaining balance of the nine (9) year rental
payment term at the rate of one and one-half percent (1-1/2%) per month.
3. Headings. The Paragraph headings used in this Agreement are for convenience
of reference only. They shall not be construed to limit or extend the meaning of
any part of this Agreement, and shall not be deemed relevant in resolving any
questions of interpretation or construction of any Paragraph of this Agreement.
37
<PAGE>
LANDLORD:
Dated: Dec. 23, 1985 CAMSI II, a California general
--------------- partnership
By: WESTALL CORPORATION, a California
corporation, its General Partner
By /s/ Kimball W. Small
----------------------
KIMBALL W. SMALL,
President
By: KIMBALL SMALL INVESTMENTS 102,
a California limited partnership,
its General Partner
By: WESTALL CORRPORATION, a Cali-
fornia corporation, its
General Partner
By /s/ Kimball W. Small
----------------------
KIMBALL W. SMALL,
President
TENANT:
Dated: 12-20-85 TELECOMMUNICATIONS TECHNOLOGY,
--------------- INC., a Delaware corporation
By /s/ Norman B. Petermeier
-------------------------
Its President
-------------------------
By
-------------------------
Its
-------------------------
38
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
This is an amendment ("Amendment") to that certain Net Lease Agreement dated
December 20, 1985 ("Lease"), by and between TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation ("Tenant"), and CAMSI II, a California general
partnership ("Landlord").
RECITALS
--------
A. Landlord and Tenant are parties to the Lease for the demise of that certain
building located in the City of Milpitas, County of Santa Clara, State of
California, shown cross-hatched on the site plan attached hereto as Exhibit "A"
and commonly referred to as 185 South Milpitas Boulevard.
B. Landlord and Tenant desire to modify and amend the Lease as more
particularly described below.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraphs 46 and 48 of the Lease are hereby deleted in their entirety.
2. Except as otherwise provided herein, the terms and conditions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 24th day
of October, 1986.
LANDLORD:
CAMSI II, a California
general partnership
By: WESTALL CORPORATION, a
California corporation,
its General Partner
By /s/ Kimball W. Small
----------------------
Kimball W. Small,
President
By: KIMBALL SMALL INVESTMENTS 102,
a California limited
partnership, its General Partner
39
<PAGE>
By: WESTALL CORPORATION, a
California corporation,
its General Partner
By /s/ Kimball W. Small
----------------------
Kimball W. Small,
President
TENANT:
TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation
By /s/ Norman B. Petermeier
--------------------------
Its President
--------------------------
By
----------------------------
Its
---------------------------
Acknowledged and agreed to
by Lease Guarantor:
GENERAL SIGNAL CORPORATION,
a New York corporation
By /s/ Edward C. Prellwitz
---------------------------
Edward C. Prellwitz
Its Vice President - Planning
-------------------------
40
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
This is an amendment ("Amendment") to that certain Net Lease Agreement dated
December 20, 1985 ("Lease"), by and between TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation ("Tenant"), and the Fraser Family Trust, successor in
interest to CAMSI II, a California general partnership ("Landlord").
RECITALS
--------
A. Landlord and Tenant are parties to the Lease for the demise of that certain
building located in the City of Milpitas, County of Santa Clara, State of
California, shown cross-hatched on the site plan attached hereto as Exhibit "A"
and commonly referred to as 185 South Milpitas Boulevard.
B. Landlord and Tenant desire to modify and amend the Lease as more
particularly described below.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 8.1 of the Lease is hereby deleted in its entirety.
2. Paragraph 8.2 of the Lease shall be amended to include the following:
(a) PROPERTY INSURANCE. "All risk" property insurance, including, without
limitation, coverage for earthquake and flood; boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious mischief; full coverage
plate glass insurance; and demolition, increased cost of construction and
contingent liability from change in building laws on the Premises and Common
Area,
41
<PAGE>
including any improvements or fixtures constructed or installed on the Premises
and Common Area by Landlord. Such insurance shall be in the full amount of the
replacement cost of the foregoing, with reasonable deductible amounts, which
deductible shall be paid by Tenant. Such insurance shall also include rental
income insurance, insuring that one hundred percent (100%) of the Rentals (as
the same may be adjusted hereunder) will be paid to Landlord for a period of up
to twelve (12) months if the Premises are destroyed or damaged, as may be
required by any beneficiary of a deed of trust or any mortgagee of any mortgage
affecting the Premises.
3. Except as otherwise provided herein, the terms and conditions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 30th day
of September, 1988.
LANDLORD:
Fraser Family Trust
By: /s/ Peter M. Fraser
----------------------------
----------------------------
TENANT:
TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Norman B. Petermeier
----------------------------
President
42
<PAGE>
EXHIBIT A
(PROPERTY DESCRIPTION AND
LOCATION DIAGRAMS APPEAR HERE)
43
<PAGE>
Exhibit "Y" to Sublease
(PROPERTY DESCRIPTION AND
LOCATION DIAGRAMS APPEAR HERE)
44
<PAGE>
Exhibit "Z" to Sublease
LEGAL DESCRIPTION:
All that certain real property situate in the City of Milpitas, County of Santa
Clara, State of California, described as follows:
PARCEL 1, as shown upon that certain Map entitled, "PARCEL MAP, ALL OF PARCELS
19 AND 21 OF THE PARCEL MAP RECORDED IN BOOK 461 OF MAPS, PAGES 36 AND 37, SANTA
CLARA COUNTY RECORDS AND A PORTION OF THE MILPITAS RANCHO, CITY OF MILPITAS,
CALIFORNIA", which Map was filed for record July 3, 1984 in Book 531 of Maps at
Page 17, Santa Clara County Records.
45
<PAGE>
CONSENT TO SUBLEASE
The Bryan Family Partnership II, Ltd., the Landlord (as ultimate
successor-in-interest to CAMSI II, a California general partnership) under that
certain Net Lease Agreement with General Signal Corporation as Tenant (as
successor-in-interest to Telecommunications Technology, Inc.), dated December
20, 1985, for the Premises described therein, hereby consents to the sublease of
the Premises to Conner Peripherals, Inc. pursuant to that certain Sublease
Agreement attached hereto as Exhibit "A"; provided, however, that such consent
shall be without waiver of the restriction in the aforementioned Net Lease
Agreement concerning any further subletting (except as provided in Paragraph
2(c) below).
In addition, the Bryan Family Partnership II, Ltd. (hereinafter, the "Master
Lessor") acknowledges that it is beneficial to have Conner Peripherals, Inc.
sublet the Premises, and in consideration thereof hereby makes the following
certifications and agreements:
1. Master Lessor certifies that: (i) the copy of the Master Lease attached to
the Sublease as Exhibit "X" constitutes the entire Master Lease and all
amendments relating thereto; (ii) the Master Lease is in full force and effect;
and (iii) there currently is no Default by Tenant (as that phrase is defined in
the Master Lease), default by the Master Lessor, or, to the best of Master
Lessor's knowledge, other event which (with the giving of notice or the passage
of time or both) could constitute a Default by Tenant or default by the Master
Lessor under the Master Lease.
2. The Master Lessor agrees:
(a) to give Conner Peripherals, Inc. (hereinafter, the "Sublessee"), at the
same time and in the same manner as such notice is given to General Signal
Corporation (hereinafter, the "Sublessor"), a copy of any written notice
advising the Sublessor of a Default by Tenant under the Master Lease or of an
event of which the Master Lessor has knowledge which (with the giving of further
notice or the passage of time or both) would constitute a Default by Tenant
under the Master Lease: and to accept tender of payment or performance by
Sublessee to remedy any such Default by Tenant;
(b) to adhere, under the circumstances and subject to the conditions specified
therein, to the same restrictions on entry into the Premises imposed on the
Sublessor under Paragraph 9(e)(10) of the Sublease; and
(c) that its prior written consent will not be required in the case of a
sublease of the Premises or assignment of this
46
<PAGE>
Sublease by Sublessee to (i) a subsidiary, affiliate, division or corporation
controlled by or under common control with Sublessee, (ii) a successor
corporation related to Sublessee by merger, consolidation, non-bankruptcy
reorganization or government action, or (iii) a purchaser of substantially all
of the assets of Sublessee's division occupying the Premises.
(d) to release Sublessee, and its officers, agents, employees and servants
from any and all claims or demands of damages, loss, expense or injury to the
Premises or the Common Area, or to the furnishings, fixtures, equipment,
inventory or other property of either Master Lessor or Sublessee in, about or
upon the Premises or the Common Area, which is caused by or results from
perils, events or happenings which are the subject to insurance carried by the
Master Lessor, Sublessor or Sublessee pursuant to the Master Lease or the
Sublease and in force at the time of any such loss, whether due to the
negligence of the Sublessee or its agents and regardless of cause or origin;
provided, however, that such waiver shall be effective only to the extent
permitted by the insurance covering such loss and to the extent such insurance
is not prejudiced thereby.
IN WITNESS WHEREOF, the Master Lessor has executed this Consent to Sublease as
of the 23rd day of February, 1993.
THE BRYAN FAMILY PARTNERSHIP II, LTD.
/s/ Robert A. Bryan
BY: ____________________________
Robert A. Bryan, Trustee
General Partner
47
<PAGE>
(Kimball Small Properties Letterhead)
October 24, 1986
Mr. Norman B. Petermeier, President
TELECOMMUNICATIONS TECHNOLOGY, INC.
195 So. Milpitas Boulevard
Milpitas, CA 95035
Re: 185 So. Milpitas Boulevard, Milpitas, California
Dear Mr. Petermeier:
In consideration of Telecommunications Technology, Inc., a Delaware Corporation
("Tenant") entering into that certain First Amendment to Lease dated October 24,
1986, amending that certain Net Lease Agreement by and between Tenant and Camsi
II, a California general partnership ("Landlord") dated December 20, 1985 (the
"New Lease"), Landlord and Tenant agree to the following:
Existing Leases. In consideration of Tenant entering into the Lease, Landlord
shall assume all future obligations of Tenant under those certain leases more
particularly described below from April 28, 1986:
<TABLE>
<CAPTION>
Size Monthly Lease
Address of Premises (Sq. Ft.) Rent Expiration Landlord
- ------------------- --------- --------- ---------- --------
<S> <C> <C> <C> <C>
525 Del Rey Ave. 3,065 $1,992.25 8/31/86 Harris
Sunnyvale Properties
535 Del Rey Ave. 20,000 6,616.00 11/14/87 Perry/
Sunnyvale Arrillaga
555 Del Rey Ave. 23,600 7,600.00 11/14/87 Perry
Sunnyvale Industrial
Park
650 Vaqueros Ave. 6,120 2,950.00 11/30/87 Pacific
Sunnyvale Property
Management
</TABLE>
48
<PAGE>
Norman B. Petermeier, President
October 24, 1986
Page 2
Tenant shall indemnify and hold Landlord harmless for all obligations under said
leases, incurred or relating to time periods up to and including April 28, 1986.
Attached is a statement agreed to by Tenant and Landlord regarding the condition
of the premises as of April 28, 1986.
Right of First Negotiation-Expansion Building. In consideration of Tenant
entering into the Lease, Landlord hereby grants to Tenant the right of first
negotiation with respect to a building to be constructed by Landlord (the
"Expansion Building") on that certain real property immediately adjacent to
the Land on the north, commonly referred to as Parcel No. 18 (the "Expansion
Land"), on the terms and conditions set forth herein. The Expansion Building
shall consist of approximately 33,518 square feet, the design of which shall
be determined by Landlord in Landlord's sole discretion. In no event shall
construction of the Expansion Building commence earlier than January 1, 1988.
No later than sixty (60) days prior to the date on which Landlord proposes to
commence construction of the Expansion Building, Landlord shall offer to lease
the Expansion Building to Tenant. In the event that Landlord and Tenant have
not executed a Lease agreement for the Expansion Building, then one hundred
twenty (120) days after the date of delivery of Landlord's notice to Tenant,
Landlord may thereafter offer the Expansion Building for lease to third
parties, and Tenant shall have no further right to lease the Expansion
Building pursuant to this letter agreement. Landlord hereby agrees that,
except for that parcel of property commonly known as Parcel No. 21, the
Expansion Land will be the last parcel of land developed by Landlord within
the North Valley Business Park.
Very truly yours,
CAMSI II, a California
general partnership
By: WESTALL CORPORATION,
its General Partner
/s/ Kimball W. Small
By_____________________
KIMBALL W. SMALL
President
49
<PAGE>
Norman B. Petermeier, President
October 24, 1986
Page 3
By: KIMBALL SMALL INVESTMENTS 102
a California limited partnership
its General Partner
By: WESTALL CORPORATION
a California corporation,
its General Partner
/s/ Kimball W. Small
By_______________________
KIMBALL W. SMALL,
President
AGREED TO AND ACCEPTED BY:
TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation
/s/ Norman B. Petermeier
By___________________________
President
Title________________________
By___________________________
Title________________________
Date: _______________________
50
<PAGE>
SECOND AMENDMENT TO LEASE
This is an amendment ("Amendment") to that certain Net Lease Agreement dated
December 20, 1985 ("Lease"), by and between TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation ("Tenant"), and the Fraser Family Trust, successor in
interest to CAMSI II, a California general partnership ("Landlord").
RECITALS
A. Landlord and Tenant are parties to the Lease for the demise of that certain
building located in the City of Milpitas, County of Santa Clara, State of
California, shown cross-hatched on the site plan attached hereto as Exhibit "A"
and commonly referred to as 185 South Milpitas Boulevard.
B. Landlord and Tenant desire to modify and amend the Lease as more
particularly described below.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 8.1 of the Lease is hereby deleted in its entirety.
2. Paragraph 8.2 of the Lease shall be amended to include the following:
(a) PROPERTY INSURANCE. "All risk" property insurance, including, without
limitation, coverage for earthquake and flood; boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious mischief; full coverage
plate glass insurance; and demolition, increased cost of construction and
continent liability from change in building laws on the Premises and Common
Area,
51
<PAGE>
including any improvements or fixtures constructed or installed on the Premises
and Common Area by Landlord. Such insurance shall be in the full amount of the
replacement cost of the foregoing, with reasonable deductible amounts, which
deductible shall be paid by Tenant. Such insurance shall also include rental
income insurance, insuring that one hundred percent (100%) of the Rentals (as
the same may be adjusted hereunder) will be paid to Landlord for a period of up
to twelve (12) months if the Premises are destroyed or damaged, as may be
required by any beneficiary of a deed of trust or any mortgagee of any mortgage
affecting the Premises.
3. Except as otherwise provided herein, the terms and conditions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the 30th day
of September, 1988.
LANDLORD:
Fraser Family Trust
/s/ Peter M. Fraser
By: ______________________
______________________
TENANT:
TELECOMMUNICATIONS TECHNOLOGY, INC.,
a Delaware corporation
/s/ Norman B. Petermeier
By: __________________________
President
52
<PAGE>
-------------------------------------------------------------
=============================================================
-------------------------------------------------------------
CREDIT AGREEMENT
Dated as of December 23, 1993
among
CONNER PERIPHERALS, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Agent
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
-------------------------------------------------------------
=============================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS........................ 1
1.1 Defined Terms........................................... 1
1.2 Other Definitional Provisions........................... 23
ARTICLE II
THE CREDITS....................... 24
2.1 Amounts and Terms of Commitments........................ 24
2.2 Loan Accounts........................................... 25
2.3 Procedure for Borrowing................................. 25
2.4 Conversion and Continuation Elections................... 26
2.5 Voluntary Termination or Reduction of Commitments....... 28
2.6 Optional Prepayments.................................... 28
2.7 Mandatory Prepayment.................................... 29
2.8 Repayment............................................... 29
2.9 Interest................................................ 29
2.10 Fees................................................... 30
2.11 Computation of Fees and Interest....................... 30
2.12 Payments by the Company................................ 31
2.13 Payments by the Banks to the Agent..................... 32
2.14 Sharing of Payments, etc............................... 33
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY.......... 33
3.1 Taxes................................................... 33
3.2 Illegality.............................................. 37
3.3 Increased Costs and Reduction of Return................. 37
3.4 Funding Losses.......................................... 38
3.5 Inability to Determine Rates............................ 39
3.6 Certificates of Banks................................... 39
ARTICLE IV
CONDITIONS PRECEDENT.................. 40
4.1 Conditions of Commitments............................... 40
(a) Credit Agreement................................. 40
(b) Resolutions; Incumbency.......................... 40
(c) Articles of Incorporation; By-laws
and Good Standing................................ 40
(d) Legal Opinions................................... 40
(e) Payment of Fees.................................. 41
(f) Certificate...................................... 41
(g) Financial Statements............................. 41
(h) Certified Documents.............................. 41
(i) Other Documents.................................. 41
</TABLE>
<PAGE>
<TABLE>
Page
----
<S> <C>
4.2 Conditions to all Borrowings............................ 41
(a) Notice of Borrowing.............................. 41
(b) Continuation of Representations and
Warranties....................................... 41
(c) No Existing Default.............................. 41
(d) No Material Adverse Change....................... 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES............. 42
5.1 Corporate Existence and Power........................... 42
5.2 Corporate Authorization; No Contravention............... 43
5.3 Governmental Authorization.............................. 43
5.4 Binding Effect.......................................... 43
5.5 Litigation.............................................. 43
5.6 No Default.............................................. 44
5.7 ERISA Compliance........................................ 44
5.8 Use of Proceeds; Margin Regulations..................... 45
5.9 Title to Properties; Liens.............................. 45
5.10 Taxes................................................... 45
5.11 Financial Condition..................................... 45
5.12 Environmental Matters................................... 46
5.13 Regulatory Entities..................................... 46
5.14 No Burdensome Restrictions.............................. 47
5.15 Solvency................................................ 47
5.16 Labor Relations......................................... 47
5.17 Intellectual Property Matters........................... 47
5.18 Subsidiaries............................................ 48
5.19 Broker's; Transaction Fees.............................. 48
5.20 Insurance............................................... 48
5.21 Internal Control........................................ 48
5.22 Full Disclosure......................................... 48
ARTICLE VI
AFFIRMATIVE COVENANTS................. 49
6.1 Financial Statements.................................... 49
6.2 Certificates; Other Information......................... 50
6.3 Notices................................................. 50
6.4 Preservation of Corporate Existence, Etc................ 52
6.5 Maintenance of Property................................. 53
6.6 Insurance............................................... 53
6.7 Payment of Obligations.................................. 53
6.8 Compliance with Laws.................................... 53
6.9 Inspection of Property and Books and Records............ 54
6.10 Environmental Laws...................................... 55
6.11 Use of Proceeds......................................... 55
6.12 Internal Controls....................................... 55
6.13 Subordinated Debt Notices............................... 56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
NEGATIVE COVENANTS..................... 56
7.1 Limitation on Liens..................................... 56
7.2 Dispositions of Assets.................................. 61
7.3 Consolidations and Mergers.............................. 65
7.4 Loans and Investments................................... 66
7.5 Limitation on Subsidiary Debt........................... 71
7.6 Transactions with Affiliates............................ 71
7.7 Compliance with ERISA................................... 71
7.8 Restricted Payments..................................... 72
7.9 Modified Quick Ratio.................................... 73
7.10 Leverage Ratio.......................................... 73
7.11 Minimum Tangible Net Worth.............................. 73
7.12 Losses in One Quarter................................... 74
7.13 Losses in Two Consecutive Quarters...................... 74
7.14 Change in Business...................................... 74
7.15 Accounting Changes...................................... 74
7.16 Indenture/Note Amendment................................ 74
7.17 Cessation of Business................................... 74
ARTICLE VIII
EVENTS OF DEFAULT................... 75
8.1 Event of Default........................................ 75
(a) Non-Payment...................................... 75
(b) Non-Payment of Other Amounts..................... 75
(c) Representation or Warranty....................... 75
(d) Specific Defaults................................ 75
(e) Other Defaults................................... 75
(f) Cross-Default.................................... 75
(g) Cross-Acceleration............................... 76
(h) Bankruptcy or Insolvency......................... 76
(i) Involuntary Proceedings.......................... 77
(j) ERISA............................................ 77
(k) Monetary Judgments............................... 78
(l) Non-Monetary Judgments........................... 78
(m) Invalidity of Subordination
Provisions....................................... 78
8.2 Remedies................................................ 78
8.3 Rights Not Exclusive.................................... 79
8.4 Certain Financial Covenant Defaults..................... 79
ARTICLE IX
THE AGENT....................... 79
9.1 Appointment and Authorization........................... 79
9.2 Delegation of Duties.................................... 79
9.3 Liability of Agent...................................... 80
9.4 Reliance by Agent....................................... 80
9.5 Notice of Default....................................... 81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.6 Credit Decision......................................... 81
9.7 Indemnification......................................... 82
9.8 Agent in Individual Capacity............................ 82
9.9 Successor Agent......................................... 82
ARTICLE X
MISCELLANEOUS...................... 83
10.1 Amendments and Waivers................................. 83
10.2 Notices................................................ 84
10.3 No Waiver; Cumulative Remedies......................... 84
10.4 Costs and Expenses..................................... 85
10.5 Indemnity.............................................. 85
10.6 Payments Set Aside..................................... 85
10.7 Successors and Assigns................................. 86
10.8 Assignments, Participations, etc....................... 86
10.9 Set-off................................................ 88
10.10 Termination of the Commitments under Existing Facility. 88
10.11 Notification of Addresses, Lending Offices, Etc........ 88
10.12 Counterparts........................................... 89
10.13 Severability........................................... 89
10.14 No Third Parties Benefited............................. 89
10.15 Governing Law and Jurisdiction......................... 89
10.16 Waiver of Jury Trial................................... 89
10.17 Entire Agreement....................................... 90
SCHEDULES
- ---------
Schedule 2.1(a) Commitments
Schedule 2.3(c) Payment Offices
Schedule 7.1 Permitted Liens
Schedule 7.4(h) Permissible Banks
Schedule 7.4(p) Investments
EXHIBITS
- --------
Exhibit 2.3 Notice of Borrowing
Exhibit 2.4 Notice of Conversion/Continuation
Exhibit 4.1(d)(i) Opinion of Company's Counsel
Exhibit 6.1(b) Consolidating Statement Certificate
Exhibit 6.2(a) Compliance Certificate
Exhibit 6.13 Notice to Trustee
Exhibit 10.8(a) Assignment and Acceptance
</TABLE>
<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT is entered into as of December 23, 1993, among CONNER
PERIPHERALS, 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 agent for the Banks (the "Agent").
-----
WHEREAS, the Banks have agreed to make available to the Company a revolving
credit facility 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
-----------
1.1 Defined Terms. In addition to the terms defined elsewhere in this
-------------
Agreement, the following terms have the following meanings:
"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, by
contract or otherwise. Without limitation, any director, executive officer
or beneficial owner of ten percent (10%) or more of the equity of a Person
shall for the purposes of this Agreement, be deemed to control the other
Person.
"Agent" means Bank of America National Trust and Savings Association in
-----
its capacity as agent for the Banks hereunder, and any successor agent.
"Agent-Related Persons" means BofA and any successor agent arising
---------------------
under Section 9.9, together with their respective Affiliates, including the
Arranger (in the case of BofA), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Commitment" means the combined Commitments of the Banks in
--------------------
the amount of $100,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.
<PAGE>
"Agreement" means this Credit Agreement, together with the exhibits and
---------
Schedules hereto and the Disclosure Letter, in each case, as amended,
supplemented or modified from time to time.
"Annual Disposition Measurement Period" has the meaning specified in
-------------------------------------
subsection 7.2(f)(i)(B).
"Applicable Margin" means
-----------------
<TABLE>
<CAPTION>
=======================================================
For each day on which the The Applicable
aggregate principal of Margin, per annum,
outstanding Loans (after is:
taking into account any ____________________
Loans made or paid on such For Base For
day) is: Rate Euro-
Loans: dollar
Rate
Loans:
- -------------------------------------------------------
<S> <C> <C>
Less than or equal to 50% 0.00% 1.00%
of the Aggregate
Commitment
- -------------------------------------------------------
More than 50% of the 0.25% 1.25%
Aggregate Commitment
=======================================================
</TABLE>
The Applicable Margin shall be adjusted automatically as to all Loans
then outstanding as of the effective date of any change in the Applicable
Margin, as set forth therein.
"Arcada Holdings" means that certain corporation formed, or to be
---------------
formed, pursuant to the Arcada Letter of Intent to act as the holding
company for the Company's software disk back-up, data management,
hierarchical storage management and related applications business.
"Arcada Letter of Intent" means that certain Letter of Intent, entered
-----------------------
into as of December 13, 1993, between Archive Corporation, a wholly-owned
subsidiary of the Company, the Company and Quest Development Corporation.
"Arranger" means BA Securities, Inc., a wholly-owned subsidiary of
--------
BankAmerica Corporation. The Arranger is a registered broker-dealer and
permitted to underwrite and deal in Ineligible Securities.
"Asset Disposition Date" has the meaning specified in subsection
----------------------
7.2(f)(i)(A).
"Assignee" has the meaning specified in Section 103.
--------
"Assignment and Acceptance" has the meaning specified in subsection
-------------------------
10.8(a).
<PAGE>
"Attorney Costs" means and includes all reasonable fees and
----------------
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursement
of internal counsel.
"Banks" means the financial institutions from time to time party to
-----
this Agreement.
"Base Rate" means, for any day, the higher of:
---------
(a) 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." (It 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.);
and
(b) 0.50% per annum above the latest Federal Funds 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 Loan that bears interest based on the Base
--------------
Rate.
"Board of Directors" means, at any time, the board of directors of the
------------------
Company or any committee thereof which, in the instance, shall have the
lawful power to exercise the power and authority of such board of directors.
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans made to the
---------
Company on the same day by the Banks pursuant to Article II.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or other day
------------
on which commercial banks in Boston, New York City or San Francisco are
authorized or required by law to close and, if the applicable Business Day
relates to any Eurodollar Rate Loan, means such a day on which dealings are
carried on in the London 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,
<PAGE>
regarding capital adequacy of any bank or of any corporation controlling a
bank.
"Capitalized Lease Obligations" means any rental obligation of the
-----------------------------
Company or any of its Subsidiaries that, under GAAP, is required to be
capitalized on the books of the Company and its Subsidiaries, taken at the
amount thereof accounted for as indebtedness net of interest expense
determined on a consolidated basis, in accordance with GAAP.
"Cash Equivalents" means all Investments described in subsections
----------------
7.4(a), (c), (f), (g), (h), (i), (j), (k) and (l), to the extent classified
as current assets in accordance with GAAP.
"Cash Flow Contribution" means, for any period, in respect of any
----------------------
Property of the Company or a Subsidiary of the Company, the amount of
Consolidated Operating Cash Flow fairly attributable to such Property during
such period, expressed as a percentage of such Consolidated Operating Cash
Flow.
"Change in Control" means the direct or indirect acquisition by any
-----------------
person (as such term is used in Section 13(d) and Section 14(d)(2) of the
Exchange Act), or related persons constituting a group (as such term is used
in Rule 13d-5 under the Exchange Act), of
(i) beneficial ownership of issued and outstanding shares of
voting stock of the Company, the result of which acquisition is that
such person or such group possesses in excess of 50% of the combined
voting power of all then issued and outstanding voting stock of the
Company, or
(ii) the power to elect, appoint, or cause the election or
appointment of at least a majority of the members of the Board of
Directors.
"Closing Date" means the date on which all conditions precedent set
------------
forth in Section 4.1 are satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commitment", with respect to each Bank, has the meaning specified in
----------
subsection 2.1(a).
"Commitment Percentage" means, as to any Bank, the percentage
---------------------
equivalent of such Bank's Commitment divided by the Aggregate Commitment.
"Consolidated Assets" means, as of any date of determination, the
-------------------
aggregate amount of all assets of the Company and its Subsidiaries that
would, in accordance with
<PAGE>
GAAP, be required to be shown as assets on a consolidated balance sheet of
the Company and its Subsidiaries as of such date.
"Consolidated Current Liabilities" means, as of any date of
--------------------------------
determination, all amounts which would, in accordance with GAAP, be included
under current liabilities on a consolidated balance sheet of the Company and
its Subsidiaries at such date.
"Consolidated Net Income" for any fiscal period means net earnings (or
-----------------------
loss) after income taxes of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, but excluding:
(a) any gain or loss arising from the sale of capital assets
(other than any gain or loss of less than $100,000 from any such sale);
(b) any gain or loss arising from any write-up of assets
subsequent to December 31, 1992 (other than as a consequence of a
physical review of inventory or other assets), any gain arising from the
acquisition of any securities of the Company or any Subsidiary, or any
other extraordinary item;
(c) earnings of any Person, substantially all the assets of which
have been acquired in any manner, realized by such other Person prior to
the date of such acquisition;
(d) net earnings of any Person (other than a Subsidiary) in which
the Company or any Subsidiary shall have an ownership interest unless
such net earnings shall have actually been received by the Company or
such Subsidiary in the form of cash distributions or cancellation of
Debt;
(e) any portion of the net earnings of any Subsidiary that for any
reason is unavailable, by law or pursuant to any contractual
restriction, for payment of dividends to the Company or any other
Subsidiary;
(f) the earnings of any Person to which assets of the Company
shall have been sold, transferred or disposed of, or into which the
Company shall have merged, prior to the date of such transaction; and
(g) any portion of the net earnings of the Company that cannot be
converted into United States dollars;
all determined in accordance with GAAP.
<PAGE>
"Consolidated Operating Cash Flow" means, for any period, determined on
--------------------------------
a consolidated basis for the Company and its Subsidiaries,
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of depreciation and amortization accrued
for such period by the Company and its Subsidiaries (to the extent, but
only to the extent, each component of such aggregate amount was
reflected in the computation of Consolidated Net Income for such period)
determined on a consolidated basis.
"Consolidated Senior Debt" means, at any time, without duplication, the
------------------------
amount of Senior Debt outstanding at such time, determined on a consolidated
basis.
"Consolidated Subsidiary" means, at any time, any Subsidiary of the
-----------------------
Company that in accordance with GAAP would be consolidated with the Company
for financial reporting purposes.
"Contingent Obligation" means, as applied to the Company and its
---------------------
Subsidiaries, any direct or indirect liability of any such Person with
respect to any Indebtedness, lease (other than operating lease obligations),
dividend, letter of credit or other obligation (the "primary obligations") of
another Person, other than the Company or any of its Consolidated
Subsidiaries (the "primary obligor"), including, without limitation, any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any Property
constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) 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, or (c) 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
(d) otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof or (e) the liability of a general
partner in connection with a partnership that is not a Subsidiary of such
Person; provided, however, that the term Contingent Obligation shall not
-----------------
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligation supported by such Contingent Obligation or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof.
<PAGE>
"Contractual Obligations" 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.
"Controlled Group" means the Company and all Persons (whether or not
----------------
incorporated) under common control with the Company or any of its
Subsidiaries pursuant to section 414(b) or (c) of the Code.
"Conversion/Continuation Date" means any date on which the Company
----------------------------
elects to convert a Base Rate Loan to a Eurodollar Rate Loan or a Eurodollar
Rate Loan to a Base Rate Loan, or to continue a Eurodollar Rate Loan maturing
on such date as a Eurodollar Rate Loan with a new Interest Period, all as set
forth in a Notice of Conversion/Continuation.
"Debt" of any Person, at any time, means:
----
(a) indebtedness for money borrowed of such Person;
(b) indebtedness that is secured by any Lien on Property owned by
such Person, whether or not the indebtedness secured thereby shall have
been assumed by such Person;
(c) Capitalized Lease Obligations of such Person;
(d) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of
business) and other contingent liabilities (whether direct or indirect)
of such Person in connection with the obligations, stock or dividends of
any other Person, provided that guarantees by such Person of contingent
--------
obligations of other Persons shall be excluded from this clause (d);
(e) obligations of such Person under any contract providing for
the making of loans, advances or capital contributions to any other
Person, or for the purchase of any Property from any other Person, in
each case primarily in order to enable such other Person to maintain
working capital, net worth or any other balance sheet condition or to
pay debts, dividends or expenses, to the extent that such other Person
is obligated to maintain such condition or make such payments and has
failed to do so;
(f) obligations of such Person under any contract for the purchase
of materials, supplies or other Property or services if such contract
(or any related document) requires that payment for such materials,
<PAGE>
supplies or other Property or services shall be made regardless of
whether or not delivery of such materials, supplies or other Property or
services is ever made or tendered; and
(g) obligations under any other contract which, in legal effect,
is substantially equivalent to a guarantee, provided that guarantees by
--------
such Person of contingent obligations of other Persons shall be excluded
from this clause (g),
all as determined in accordance with GAAP, provided that such items shall
--------
only constitute Debt to the extent that, in accordance with GAAP, such items
would be (and only to the extent such items would be) included in determining
total liabilities as shown on the liability side of the balance sheet of such
Person (assuming that such Person was the primary obligor in respect of the
underlying obligation with respect to any guarantee or other contingent
obligation, as contemplated by the next succeeding sentence), provided,
--------
further, that notwithstanding the foregoing, "Debt" shall not include (i)
-------
accrued compensation, (ii) taxes payable and deferred taxes, (iii) trade
payables, including intercompany payables in the nature of trade payables,
(iv) any obligations payable, at the option of the obligor, in equity
securities of the obligor, or (v) any guarantee or contingent liability or
obligation with respect to any of the items set forth in the foregoing
clauses (i) to (iv), inclusive. For purposes of computing the amount of any
obligation specified in either of the foregoing clauses (d) or (g), it shall
be assumed that the indebtedness or other obligations which are the subject
of such guarantee, endorsement or other contingent liability are direct
obligations of the obligor on such guarantee, endorsement or contingent
liability (but not in an amount in excess of the maximum liability of such
obligor) and, therefore, are of the nature and type of, and bear interest at
the rate applicable to, such indebtedness or other obligations.
"Default" means any event which, with the giving of notice, the lapse of
-------
time, or both, would constitute an Event of Default other than an Event of
Default described in Section 8.1(b).
"Determination Date" means the last day of each fiscal quarter of the
------------------
Company.
"Disclosure Letter" means that certain letter of even date herewith by
-----------------
the Company addressed to the Agent containing the Schedules referenced in
Article V hereof.
"documents" includes any and all instruments, documents, agreements,
---------
certificates and other writings, however evidenced.
<PAGE>
"Dollars," "dollars" and "$" each mean lawful money of the United
------- ------- -
States.
"Domestic Lending Office" means, with respect to each Bank, the office
-----------------------
of that Bank designated as such in the signature pages hereto or such other
office of the Bank as it may from time to time specify to the Company and the
Agent.
"Domestic Receivables" means all receivables of the Company and any
--------------------
Consolidated Subsidiary of the Company having its chief executive office
located in the United States, as determined in accordance with GAAP,
excluding any receivable representing an obligation of the Company or any
Subsidiary of the Company.
"Eligible Receivables" means all Domestic Receivables and Foreign
--------------------
Receivables, provided, however, that Foreign Receivables shall not exceed 50%
-------- -------
of such aggregate amount.
"Eligible Transferee" 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; or (ii) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
----
political subdivision of any such country, and having 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.
"Environmental Claim" 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 or threat to public health, personal injury
(including sickness, disease or death), property damage, natural resources
damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement, discharge,
emission or release (including intentional and unintentional, negligent and
non-negligent, sudden or non-sudden, accidental or non-accidental placement,
spills, leaks, discharges, emissions or releases) of any Hazardous Material
at, in or from Property, whether or not owned by the Company, or (b) any
other circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
"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
<PAGE>
Authorities, in each case relating to environmental, health and safety;
including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 USC (S)(S) 4601, et. seq.), the Clean Air Act (42
USC (S) 7401), the Federal Water Pollution Control Act of 1972 (33 USC (S)
1251), the Solid Waste Disposal Act (42 USC (S) 6901), the Federal Resource
Conservation and Recovery Act (42 USC (S)(S) 6901 et seq.), the Toxic
Substances Control Act (15 USC (S) 2601), the Emergency Planning and
Community Right-to-Know Act, the California Hazardous Waste Control Law
(Health and Safety Code (S)(S) 25100 et. seq.), the California Solid Waste
Management, Resource, Recovery and Recycling Act (Government Code (S)
66796.22), the California Water Code and the California Health and Safety
Code.
"Environmental Permits" means all licenses, permits, authorizations and
---------------------
registrations required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any regulation promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Company or any Subsidiary of the
Company within the meaning of section 414(b) or 414(c) of the Code.
"ERISA Event" means (a) a Reportable Event with respect to a Qualified
-----------
Plan or a Multiemployer Plan; (b) a withdrawal by any member of the
Controlled Group from a Qualified 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); (c) a complete or partial withdrawal (as such
terms are defined in section 4201(b) of ERISA) by any member of the
Controlled Group from a Multiemployer Plan; (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 Qualified Plan or Multiemployer Plan subject to Title IV of
ERISA; (e) a failure to make required contributions to a Qualified Plan or
Multiemployer Plan; (f) an event or condition which could reasonably be
expected to constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Qualified
Plan or Multiemployer Plan; (g) the imposition of any liability under Title
IV of ERISA, other than PBGC premiums due but not delinquent under section
4007 of ERISA, upon any member of the Controlled Group; (h) an application
for a funding waiver or an extension of any amortization period pursuant to
section 412 of the Code with respect to any Qualified Plan, Multiemployer
Plan or any other plan that would be a Qualified Plan or Multiemployer Plan
if the term "Controlled Group" were defined to include Persons under common
control with the Company or any of its
<PAGE>
Subsidiaries pursuant to section 414(m) or (o) of the Code; or (i) any member
of the Controlled Group engages in or otherwise becomes liable for a non-
exempt prohibited transaction (as defined in section 406 of ERISA or section
4975 of the Code with respect to any Qualified Plan or Multiemployer Plan).
"Existing Facility" means the Credit Agreement dated as of January 3,
-----------------
1992, as heretofore amended, among the Company, the several financial
institutions party thereto and Bank of America National Trust and Savings
Association, as agent for such financial institutions.
"Eurodollar Lending Office" means with respect to each Bank, the office
-------------------------
of such Bank designated as such in the signature pages hereto or such other
office of such Bank as such Bank may from time to time specify to the Company
and the Agent.
"Eurodollar Rate" means, for any Interest Period, with respect to
---------------
Eurodollar Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the nearest 1/16th of 1%) determined by
the Agent as follows:
LIBOR
Eurodollar 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 nearest 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") having a term comparable to such Interest Period; and
"LIBOR" means the rate of interest per annum determined by the
-----
Agent to be the rate of interest per annum (rounded upward to the
nearest 1/16th of 1%) notified to the Agent by the Reference Bank 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, a
Eurodollar Rate Loan by the Reference Bank and having a maturity
comparable to such Interest Period would be offered 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.
<PAGE>
The Eurodollar Rate shall be adjusted automatically as to all
Eurodollar Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Loan" means a Loan that bears interest at a rate based
--------------------
on the Eurodollar Rate.
"Event of Default" means any of the events specified in Section 8.1.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"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 FRB (including any such successor, "H.15(519)")
on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if 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.
"Foreign Receivables" means all receivables of any Consolidated
-------------------
Subsidiary of the Company not having its chief executive office located in
the United States, as determined in accordance with GAAP, excluding any
receivable representing an obligation of the Company or any Subsidiary of
the Company.
"Four Quarter Period" has the meaning specified in subsection
-------------------
7.2(f)(ii)(A).
"FRB" means the Board of Governors of the Federal Reserve System or any
---
successor thereof.
"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), or in such other statements by such other
entity as may be in general use by significant segments of 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,
<PAGE>
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of any of the foregoing, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hazardous Materials" means all those substances which are regulated by,
-------------------
or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a
pollutant, contaminant, waste, solid waste, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or toxic
substance, or petroleum or petroleum derived substance or waste.
"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
ordinary course trade payables); (c) all reimbursement obligations with
respect to surety bonds, letters of credit, bankers' acceptances and similar
instruments (in each case, whether or not matured); (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
(even though 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 Capitalized Lease Obligations; (g) all net obligations
with respect to Rate Contracts; (h) all indebtedness referred to in
paragraphs (a) through (g) 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 (but only to the extent of the
lesser of (x) the indebtedness referred to in paragraphs (a) through (g)
above so secured or (y) the fair market value of the Property subject to such
Lien); and (i) all direct or indirect guaranties in respect of and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in paragraphs (a) through (g)
above.
"Indemnified Liabilities" has the meaning specified in Section 10.5.
-----------------------
"Indemnified Person" has the meaning specified in Section 10.5.
------------------
<PAGE>
"Ineligible Securities" means securities which may not be underwritten
---------------------
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. (S) 24, Seventh), as amended.
"Insolvency Proceeding" means (a) any case, action or proceeding before
---------------------
any court or other Governmental Authority of competent jurisdiction 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 (12 U.S.C. (S)
101 et seq.).
-- ---
"Interest Payment Date" means, with respect to a Eurodollar Rate Loan,
---------------------
the last day of each Interest Period applicable to such Loan and, with
respect to a Base Rate Loan, the last day of each calendar quarter and each
date such Base Rate Loan is converted into a Eurodollar Rate Loan; provided,
--------
however, that if any Interest Period for a Eurodollar Rate Loan exceeds three
-------
months, interest shall also be paid on the date which falls three months
after the beginning of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Rate Loan, the
---------------
period commencing on the Business Day the Loan is disbursed or on the
Conversion/Continuation Date on which the Loan is converted into or continued
as a Eurodollar 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 which 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 immediately 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 be requested for any Loan that
extends beyond the Termination Date.
<PAGE>
"Investment" has the meaning specified in Section 7.4.
----------
"IRS" means the Internal Revenue Service or any entity succeeding to any
---
of its principal functions under the Code.
"Italian Debt" means Indebtedness incurred by Conner Peripherals Europe
------------
S.p.A., in an aggregate principal amount (expressed in Italian Lire)
equivalent to approximately $16,800,000 of the date of this Agreement, and
not to exceed such principal amount except as a result of currency
fluctuations, plus accrued interest in respect thereof, arising under the
following agreements: (i) the agreement dated as of December 10, 1991,
entered into with Finaosta S.p.A. in the original principal amount of Lire
9,000,000,000, (ii) the agreement dated as of December 29, 1992, entered into
with Finaosta S.p.A., in the original principal amount of Lire 4,500,000,000,
(iii) agreement dated as of June 25, 1991, entered into with Finaosta S.p.A.,
in the original principal amount of Lire 10,000,000,000, (iv) agreement dated
as of October 31, 1989, entered into with I.M.I. Istituto Mobiliare Italiano
and Olivetti System & Network S.r.l., in the original principal amount of
Lire 10,350,000,000, and (v) agreement dated as of April 30, 1991, entered
into with I.M.I. Instituto Mobiliare Italiano and Olivetti System & Network
S.r.l., in the original principal amount of Lire 6,400,000,000.
"Lending Office" means, with respect to any Bank, the office or offices
--------------
of the Bank specified as its "Lending Office" or "Domestic Lending Office" or
"Eurodollar Lending Office", as the case may be, beneath its name on the
applicable signature page hereto, or such other office or offices of the Bank
as it may from time to time specify to the Company and the Agent.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
security interest, assignment intended for security (whether whole or
partial, absolute or contingent) or of accounts or chattel paper, charge or
deposit arrangement, encumbrance, lien (statutory or other) or other priority
or preferential arrangement of any kind or nature whatsoever in respect of
any Property owned or held by any Person (including, without limitation,
those created by, arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a lessor under a Capitalized Lease
Obligation, 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 UCC or any
comparable law) and any contingent or other agreement to provide any of the
foregoing.
"Loan" means an extension of credit by a Bank to the Company pursuant to
----
Article II, and may be a Base Rate Loan or Eurodollar Rate Loan.
<PAGE>
"Loan Agreements" means this Agreement, together with all amendments,
---------------
modifications and supplements thereto from time to time entered into by the
parties hereto in accordance with the terms hereof, and any and all consents,
waivers and other instruments and agreements executed by the parties hereto
in connection with any of the foregoing.
"Loan Documents" means the Loan Agreements, together with all
--------------
certificates, delivered from time to time to the Agent in connection
therewith, including without limitation the Disclosure Letter.
"Majority Banks" means at any time Banks holding at least sixty percent
--------------
(60%) of the then aggregate unpaid principal amount of the Loans, or, if no
such principal amount is then outstanding, Banks having at least sixty
percent (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 Compliance Effect" means a material adverse change in
----------------------------------
or a material adverse effect upon, any of (a) the operations, business,
properties, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole; (b) the ability of the
Company to perform its obligations and to avoid any Event of Default under
any Loan Agreement (other than any such non-performance or any Event of
Default which has been waived in accordance with the terms hereof); or (c)
the legality, validity, binding effect or enforceability of any Loan
Agreement.
"Material Adverse Payment Effect" means a material adverse change in, or
-------------------------------
a material adverse effect upon, any of (a) the operations, business,
properties, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole; (b) the ability of the
Company to perform its Obligations hereunder in accordance with their terms;
or (c) the legality, validity, binding effect or enforceability of any Loan
Agreement.
"Material Subsidiary" means, at any time, (a) any Consolidated
-------------------
Subsidiary which either (i) at such time owns assets having a net book value
equal to or greater than ten percent (10%) of Consolidated Assets, or (ii)
for the most recent fiscal quarter or the most recent fiscal year had income
from operations equal to or greater than five percent (5%) of the income from
operations for the Company and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP, and (b) any Consolidated Subsidiary owning
more than 50% of the voting stock or other equity interest of any Subsidiary
described in clause (a) of this definition.
<PAGE>
"Miscellaneous Payment Amounts" means the amount of any and all fees,
-----------------------------
expenses, costs, indemnity and reimbursement obligations and other
Obligations arising and outstanding from time to time hereunder, other than
(a) the principal amount of the Loans, (b) interest accrued thereon (or on
accrued interest), and (c) fees described in Section 2.10.
"Miscellaneous Payment Notice" means a written notice by the Agent or
----------------------------
any Bank entitled to receive any such payment amount, to the Company,
relating to any Miscellaneous Payment Amount and containing a reasonable
description of such Miscellaneous Payment Amount.
"Multiemployer Plan" means a "multiemployer plan" (within the meaning of
------------------
section 4001(a)(3) of ERISA) and to which any member of the Controlled Group
makes, is making, or is obligated to make contributions or has made, or been
obligated to make (at any time during the five (5) calendar years preceding
the date of this Agreement), contributions.
"Net Proceeds" means, with respect to a sale of equity securities, the
------------
gross proceeds thereof reduced by all reasonable out-of-pocket costs and
expenses paid or incurred by the Company directly in connection therewith,
including underwriter's commissions or discounts, registration and filing
fees, legal and accounting fees, and printing costs.
"1991 Indenture" means that certain Indenture dated as of March 1, 1991
--------------
by the Company to The First National Bank of Boston, as Trustee, as
supplemented through the date hereof.
"1992 Indenture" means that Indenture dated as of March 1, 1992, by and
--------------
between the Company and The First National Bank of Boston, as trustee,
relating to 6 1/2% convertible subordinated debentures due 2002, as
supplemented through the date hereof.
"Note Agreement" means that certain Note Agreement dated as of March 29,
--------------
1991 by and among the Company and the Purchasers listed on Annex 1 thereto,
as heretofore amended and as further amended from time to time in accordance
with the terms hereof.
"Note Purchase Agreement" means that certain Note Purchase Agreement
-----------------------
dated as of June 1, 1989 by and among the Company and the purchasers named in
Appendix 1 thereto relating to $15,000,000 in Series A and $15,000,000 in
Series B notes of the Company, as heretofore amended and as further amended
from time to time in accordance with the terms hereof.
"Notice of Borrowing" means a notice given by the Company to the Agent
-------------------
pursuant to Section 2.3, in substantially the form of Exhibit 2.3.
-----------
<PAGE>
"Notice of Conversion/Continuation" means a notice given by the Company
---------------------------------
to the Agent pursuant to Section 2.4, in substantially the form of Exhibit
-------
2.4.
---
"Notice of Lien" means any "notice of lien" or similar document intended
--------------
to be filed or recorded with any court, registry, recorder's office, central
filing office or Governmental Authority for the purpose of evidencing,
creating, perfecting or preserving the priority of a Lien securing
obligations owing to a Governmental Authority.
"Obligations" means all Loans, and other Indebtedness, advances, debts
-----------
and payment obligations owing by the Company to any Bank, the Agent, or any
other Person required to be indemnified under any Loan Agreement, of any kind
or nature, present or future, arising under any Loan Agreement, whether
arising by reason of an extension of credit, loan, guaranty, indemnification
or in any other manner, whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising.
"Other Taxes" has the meaning specified in subsection 3.1(b).
-----------
"Participant" has the meaning specified in subsection 10.8(d).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Banks" has the meaning specified in subsection 7.4(h).
---------------
"Permitted Investments" has the meaning specified in Section 7.4.
---------------------
"Permitted Liens" has the meaning specified in Section 7.1.
---------------
"Person" means an individual, partnership, corporation, 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 or any member of the Controlled Group sponsors or
maintains or to which the Company or member of the Controlled Group makes or
is obligated to make contributions, and includes any Multiemployer Plan or
Qualified Plan.
"Preferred Stock" means, at any time, with respect to any Person,
---------------
capital stock of such Person that is preferred as to the payment of
dividends, or as to the distribution of Property on any voluntary or
involuntary liquidation or
<PAGE>
dissolution of such Person, over any other class of capital stock of such
Person (in each case, taken at the greater of its voluntary or involuntary
liquidation preference at the time of calculation thereof, but exclusive of
accrued dividends), provided, that the term "Preferred Stock" shall not
--------
include up to $6,500,000 of the shares of preferred stock of Arcada Holdings
issued, or to be issued, as contemplated by the Arcada Letter of Intent.
"Property" means any interest in any kind of property or asset, whether
--------
real, personal or mixed, and whether tangible or intangible.
"Purchase Money Mortgage" means a Lien held by any Person (whether or
-----------------------
not the seller of the assets covered by such Lien) on tangible Property
(other than assets acquired to replace, repair, upgrade or alter tangible
Property owned by the Company or any of its Subsidiaries on the date of this
Agreement), provided that such Lien:
--------
(a) secures all or a portion of the related purchase price or
construction costs of such Property;
(b) encumbers only tangible Property, accretions and accessions
thereto and (in the case of any Lien in respect of improvements to real
estate) any theretofore unimproved real Property on which such Property
is located (and the proceeds of the disposition thereof) acquired or
constructed with the proceeds of the indebtedness secured by such Lien;
and
(c) is created concurrently with or within one year of the
acquisition or substantial completion of construction of such tangible
Property.
"Qualified Plan" means a pension plan (as defined in section 3(2) of
--------------
ERISA) intended to be tax-qualified under section 401(a) of the Code and
which any member of the Controlled Group sponsors, maintains, or to which it
makes 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 period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"Rate Contracts" means interest rate and currency swap agreements, cap,
--------------
floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Reference Bank" means BofA, or any successor "Reference Bank"
--------------
designated by the Majority Banks.
<PAGE>
"Reportable Event" means any of the events set forth in Section 4043(b)
----------------
of ERISA or the regulations thereunder other than a Reportable Event as to
which the provision of thirty (30) days' notice to the PBGC is waived under
applicable regulations, a withdrawal from a Plan described in Section 4063 of
ERISA, or a cessation of operations described in Section 4062(e) of ERISA.
"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, with respect to financial matters, the Chief Financial
Officer or the Treasurer of the Company.
"Restricted Payment" has the meaning specified in subsection 7.8(a).
------------------
"Sale/Leaseback Transaction" means any transaction or series of related
--------------------------
transactions in which the Company or a Subsidiary of the Company sells or
transfers any of its Property to any Person (other than to the Company or to
a Subsidiary of the Company) and within one (1) year thereafter rents or
leases such transferred Property or substantially similar Property from any
Person.
"Sale/Leaseback Transaction Amount" means, on any date, after giving
---------------------------------
effect to all Sale/Leaseback Transactions occurring on such date, the greater
of:
(a) the present value, discounted at six and one-half percent
(6.5%) per annum, of all unpaid payment obligations of the Company and
its Subsidiaries in respect of all Sale/Leaseback Transactions in effect
on such date; or
(b) the depreciated purchase price of all Property, subject to
Sale/Leaseback Transactions at such time, on such date.
"Section 20 Subsidiary" means the subsidiary of the bank holding company
---------------------
of any Bank, which has been granted authority by the FRB to underwrite and
deal in Ineligible Securities.
"Senior Debt" means, at any time, (a) all Debt of the Company
-----------
outstanding at such time that is not Subordinated Debt, except for
Subordinated Debt that the Company has become obligated to prepay, redeem or
otherwise purchase or acquire (other than obligations to make mandatory
prepayments or mandatory redemptions scheduled at the time of issuance of
<PAGE>
such Subordinated Debt), and (b) all Debt and Preferred Stock of any
Subsidiary of the Company.
"Solvent" means, (a) as to the Company at any time, that (i) the fair
-------
value of the Property of the Company is greater than the amount of the
Company's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of section 101(31) of the United States Bankruptcy Code (12 U.S.C.
(S) 101 et seq.); (ii) the present fair saleable value of the Property of the
-- ---
Company is not less than the amount that will be required to pay the probable
liability of the Company on its debts as they become absolute and matured;
(iii) the Company is able to realize upon its Property and pay its debts and
other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (iv) the
Company does not intend to, and does not believe that it will, incur debts or
liabilities beyond the Company's ability to pay as such debts and liabilities
mature; and (v) the Company is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which the Company's
Property would constitute unreasonably small capital; and (b) as to the
Company and its Subsidiaries on a consolidated basis, that (i) the fair value
of the consolidated assets of such Persons is greater than the amount of such
Persons' consolidated liabilities (including, contingent and unliquidated
liabilities) as such value would be established and liabilities evaluated for
purposes of section 101(31) of the United States Bankruptcy Code (12 U.S.C.
(S) 101, et seq.); and (ii) the present fair saleable value of the
-------
consolidated assets of such Persons is not less than the amount that will be
required to pay the probable liability of such Persons on their consolidated
liabilities as they become absolute and matured.
"Subordinated Debt" means all Debt of the Company under the 1991
-----------------
Indenture, the 1992 Indenture, or which is subject to subordination
provisions in favor of the holders of the Obligations no less favorable to
such holders than those attached to the Note Agreement as Annex 4 or is
otherwise consented to in writing as "Subordinated Debt" by the Majority
Banks.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests 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.
<PAGE>
"Tangible Assets" means, at any time, as to the Company and its
---------------
Subsidiaries on a consolidated basis, all assets (including, without
duplication, the capitalized value of any leasehold interest under any
Capitalized Lease Obligation) of such Persons, except:
------
(a) the aggregate amount of deferred assets, other than prepaid
insurance and prepaid taxes, in excess of $10,000,000;
(b) patents, copyrights, trademarks, trade names, franchises,
goodwill and other similar intangible assets; and
(c) unamortized debt discount and expense (other than not more
than $6,500,000 of unamortized debt expense attributable to the issuance
of Indebtedness prior to the date hereof (which expense shall be
included in ("Tangible Assets")).
---------------
"Tangible Net Worth" means at any time, as to the Company and its
------------------
Subsidiaries on a consolidated basis:
(a) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation and other proper reserves relating
to such assets) at which the Tangible Assets would be shown on a
consolidated balance sheet at such time prepared in accordance with GAAP
(subject to any modification required by the definition of "Tangible
Assets"), but excluding any amount on account of write-ups of assets
after December 31, 1992 (other than as a consequence of a physical
review of inventory or other assets), at such time, minus
-----
(b) the amount at which the liabilities of the Company and its
Subsidiaries would be shown on such balance sheet, and including as
liabilities all reserves for contingencies and other potential
liabilities (specifically including therein, without limitation,
actuarially determined unfunded vested pension liabilities and the
liabilities in respect of other post-retirement benefits) and all
minority interests in the Company's Subsidiaries at such time, all
determined in accordance with GAAP (subject to any modification required
by the preceding parenthetical expression in this clause (b)).
"Taxes" has the meaning specified in subsection 3.1(a).
-----
"Termination Date" means the earlier to occur of the second anniversary
----------------
of the Closing Date and December 31, 1995, subject to extension as provided
in subsection 2.1(b), or such earlier date on which the Commitments shall
terminate in accordance with the provisions of this Agreement.
<PAGE>
"Three Year Disposition Measurement Period" has the meaning specified in
-----------------------------------------
subsection 7.2(f)(iii)(B).
"Total Liabilities" means at any time, as to the Company and its
-----------------
Subsidiaries on a consolidated basis, all liabilities of such Persons which
in accordance with GAAP would be shown on the liability side of a
consolidated balance sheet of the Company, as determined in accordance with
GAAP.
"Transferred Property" has the meaning specified in subsection
--------------------
7.2(f)(i)(B).
"Transfers" has the meaning specified in Section 7.2.
---------
"UCC" means the Uniform Commercial Code as in effect in the State of
---
California, or to the extent such laws would be deemed the applicable law
under California Uniform Commercial Code Section 9103, any other
jurisdiction.
"Unfunded Pension Liabilities" means the excess of the present value of
----------------------------
a Qualified Plan's or Multiemployer Plan's benefit liabilities under section
4001(a)(16) of ERISA over the current value of such Qualified Plan's or
Multiemployer Plan's assets.
"United States" and "U.S." each mean the United States of America.
------------- ----
"Wholly-Owned Subsidiary" means a Subsidiary of the Company (or of any
-----------------------
Subsidiary of the Company) of which 100% of the voting stock is owned
beneficially and of record, directly or indirectly, by the Company (or one or
more Wholly-Owned Subsidiaries of the Company or a combination thereof),
provided that directors qualifying shares and shares issued to comply with
local ownership legal requirements not exceeding in the aggregate 3% of the
voting stock of such Subsidiary may be owned by Persons other than the
Company or a Subsidiary of the Company.
1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified herein or therein, all terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto.
(b) All accounting terms not expressly defined herein shall be construed,
except where the context otherwise requires, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied (subject to mandatory changes in GAAP).
(c) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this
<PAGE>
Agreement, and section, schedule and exhibit references are to this Agreement
unless otherwise specified. The meaning of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. The term
"including" is not limiting and means "including without limitation." The term
"pro rata" means, with respect to the Banks, ratably in accordance with the
respective Commitment Percentages.
(d) 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."
(e) References to agreements 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 this Agreement.
(f) References to statutes or regulations are to be construed as including
all statutory and regulatory provisions consolidating, amending or replacing the
statute or regulation.
(g) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(h) This Agreement and the other Loan Documents are the result of
negotiations among and has 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.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitments.
--------------------------------
(a) Each Bank severally agrees, on the terms and conditions hereinafter set
forth, to make Loans to the Company from time to time on any Business Day during
the period from the Closing Date to the Termination Date, in an aggregate amount
not to exceed at any time outstanding the amount set forth opposite the Bank's
name in Schedule 2.1(a) under the heading "Commitment" (such amount as the same
---------------
may be reduced pursuant to Section 2.5 or as a result of one or more assignments
pursuant to Section 10.8, the Bank's "Commitment"); provided, however, that,
---------- -------- -------
after giving effect to any Borrowing, the aggregate principal amount of all
outstanding Loans shall not exceed the Aggregate Commitment. Within the limits
of each Bank's Commitment, and subject to the other terms and conditions hereof,
the Company may borrow under
<PAGE>
this subsection 2.1(a), prepay pursuant to Section 2.6 and reborrow pursuant to
this subsection 2.l(a).
(b) Upon the written request of the Company, received by the Agent not less
than ninety (90) days prior to the then current Termination Date and upon the
written concurrence not less than thirty (30) days prior to such Termination
Date by all of the Banks with such request, the Termination Date may be extended
in the sole discretion of the Agent and the Banks for successive additional one-
year periods commencing on the then current Termination Date. In the event such
written concurrence from the Banks is not received by the Agent at least thirty
(30) days prior to the Termination Date, the Termination Date shall not be
extended. The Agent will promptly notify each Bank of the receipt by it of a
request under this subsection.
2.2 Loan Accounts. The Loans made by each Bank shall be evidenced by one or
-------------
more loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Agent and each Bank
shall be conclusive (absent manifest error) of the amount of the Loans made by
the Banks to 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. The Agent shall cause to be maintained a register in which the Agent
shall record the Loans by each Bank and any transfers or assignments thereof.
With respect to such register, the Agent shall be entitled to rely on any
information provided to it by any Person reasonably believed by it to be
authorized by the Company or any Bank to deliver such information. The Agent
shall have no liability in connection with the maintenance of such register
except for acts of gross negligence or willful misconduct.
2.3 Procedure for Borrowing.
-----------------------
(a) Each Borrowing shall be made upon the written notice (or notice via
facsimile transmission, confirmed by a telephone call by the Company, provided
such notice is immediately confirmed by an original written notice sent by mail
or overnight courier) of the Company, 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 time)) (i) three Business Days prior to the requested
Borrowing Date, in the case of Eurodollar Rate Loans; and (ii) one Business Day
prior to the requested Borrowing Date, in the case of Base Rate Loans,
specifying:
(A) the amount of the Borrowing, which shall be in an aggregate minimum
principal amount of $10,000,000 for Eurodollar Rate Loans or $5,000,000 for
Base Rate Loans or in either case any integral multiple of $1,000,000 in
excess of the applicable minimum principal amount;
<PAGE>
(B) the requested Borrowing Date, which shall be a Business Day;
(C) whether the Borrowing is to be comprised of Eurodollar Rate Loans
or Base Rate Loans (or a combination thereof); and
(D) the duration of the Interest Period or Interest Periods applicable
to such Loans included in such notice. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing of Eurodollar
Rate Loans, such Interest Period shall be three (3) months.
(b) Upon receipt of the Notice of Borrowing, the Agent will promptly notify
each Bank of its receipt thereof and of the amount of such Bank's Commitment
Percentage of the Borrowing.
(c) Each Bank will make the amount of its Commitment Percentage of each
Borrowing available to the Agent for the account of the Company at the office
set forth on Schedule 2.3(c), or otherwise specified by the Agent in accordance
---------------
with Section 10.2 for payment by 11:00 A.M. (San Francisco time) on the
Borrowing Date requested by the Company in funds immediately available to the
Agent. Unless any applicable condition specified in Article IV has not been
satisfied, 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 the Agent with the aggregate of the amounts made available to the
Agent by the Banks and in like funds as received by the Agent.
(d) Subsection 2.3(a) notwithstanding, if the Company shall not have given a
timely Notice of Borrowing to be made on the last day of any Interest Period for
outstanding Loans, then unless the Agent shall have received notice that the
Company elects not to make a Borrowing on such day (such notice to have been
received at least one Business Day prior to such day) the Agent shall be deemed
to have received a Notice of Borrowing from the Company requesting Base Rate
Loans to be made on such day in an amount equal to the amount of such
outstanding Loans (reduced to the extent necessary to reflect any reductions of
the Commitments on or prior to such day).
2.4 Conversion and Continuation Elections.
-------------------------------------
(a) The Company may upon irrevocable written notice to the Agent by delivery
of a Notice of Conversion/Continuation in accordance with subsection 2.4(b):
(i) elect to convert on any Business Day, any Base Rate Loans (or any
part thereof in an amount not less than $10,000,000 or an integral multiple
of $1,000,000 in excess thereof) into Eurodollar Rate Loans;
<PAGE>
(ii) elect to convert on any Interest Payment Date, any Eurodollar Rate
Loans maturing on such Interest Payment Date (or any part thereof in an
amount not less than $5,000,000 or an integral multiple of $1,000,000 in
excess thereof) into Base Rate Loans; or
(iii) elect to renew, on any Interest Payment Date therefor, any
Eurodollar Rate Loans (or any part thereof in an amount not less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Eurodollar Rate Loans
- --------
shall have been reduced, by payment, prepayment, or conversion of part thereof
to be less than $10,000,000, the Eurodollar 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 Eurodollar Rate Loans shall terminate and the
Company shall reimburse each Bank for any actual loss or actual expense
sustained or incurred as set forth in subsection 3.4 hereof.
(b) The Company shall deliver by telex, cable or facsimile, confirmed by a
telephone call by the Company and confirmed immediately by an original writing
sent by mail or overnight courier, a Notice of Conversion/Continuation to be
received by the Agent not later than 9:00 A.M. (San Francisco 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 Eurodollar 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:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the nature of the proposed conversion or continuation; and
(D) the duration of the requested Interest Period or Interest Periods
for Eurodollar Rate Loans. If the Notice of Conversion/Continuation shall
fail to specify the duration of the Interest Period, such Interest Period
shall be three (3) months.
(c) If upon the expiration of any Interest Period, the Company has failed to
select timely a new Interest Period to be applicable to the respective
Eurodollar Rate Loans, or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Eurodollar Rate Loans
into Base Rate Loans effective as of the expiration date of such expiring
Interest Period.
<PAGE>
(d) Upon receipt of a Notice of Conversion/Continuation, the Agent will
promptly notify each Bank of its receipt thereof, 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
with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the existence of a
Default or Event of Default pursuant to Section 8.1(a), (b) or (g), the Company
may not elect to have a Loan converted into or continued as a Eurodollar Rate
Loan, and during the existence of a Default or Event of Default other than
pursuant to Section 8.1(a), (b) or (g), the Company may not elect to have a Loan
converted into or continued as a Eurodollar Rate Loan with an Interest Period
longer than one month.
(f) Notwithstanding any other provision contained in this Agreement, after
giving effect to any conversion or continuation of any Loans, there shall not be
more than five (5) different Interest Periods in respect of Eurodollar Rate
Loans in effect.
2.5 Voluntary Termination or Reduction of Commitments. The Company may,
-------------------------------------------------
upon not less than three Business Days' prior notice to the Agent, terminate the
Aggregate Commitments or permanently reduce the Aggregate Commitment by an
aggregate minimum amount of $5,000,000, or any integral multiple of $1,000,000
in excess thereof, provided that no such reduction or termination shall be
--------
permitted if, after giving effect thereto and to any prepayments of the Loans
made on the effective date thereof, the then outstanding principal amount of the
Loans would exceed the amount of the Aggregate Commitment then in effect and,
provided, further, that once reduced in accordance with this Section 2.5, the
- -------- -------
Aggregate Commitments may not be increased. Any reduction of the Aggregate
Commitments shall be applied pro rata to each Bank's Commitment in accordance
with such Bank's Commitment Percentage. All accrued commitment fees to, but not
including the effective date of any reduction or termination of the Commitments
shall be paid on the effective date of such reduction or termination.
2.6 Optional Prepayments. Subject to Section 3.4, the Company may, at any
--------------------
time or from time to time, upon notice to the Agent as described in the
following sentence, ratably prepay Loans in whole or in part, in minimum amounts
of $5,000,000 for Base Rate Loans and $10,000,000 for Eurodollar Rate Loans or
in either case any multiple of $1,000,000 in excess of the applicable minimum
amount. Such notice of prepayment shall be provided to the Agent by no later
than 9:00 A.M. (San Francisco time) not less than three Business Days prior to
the proposed date of prepayment in respect of any Eurodollar Rate Loans, and by
no later than 9:00 A.M. (San Francisco time) not less than one Business Day
prior to the proposed date of prepayment in respect of any Base Rate Loans.
Such notice of prepayment shall specify
<PAGE>
the date and amount of such prepayment and whether such prepayment is of Base
Rate Loans or Eurodollar Rate Loans, or any combination thereof. Such notice
shall not thereafter be revocable by the Company, and the Agent will promptly
notify each Bank of its receipt thereof. 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 3.4.
2.7 Mandatory Prepayment. The principal amount of the outstanding Loans,
--------------------
together with all interest accrued thereon, and amounts required pursuant to
Section 3.4, shall be immediately due and payable, and the Commitments shall
terminate, upon the occurrence of a Change in Control. If the aggregate
outstanding amount of the Loans shall at any time be less than $5,000,000, such
outstanding principal amount, together with all interest accrued thereon shall
be immediately due and payable, together with amounts required pursuant to
Section 3.4.
2.8 Repayment. The Company agrees to repay to the Banks in full on the
---------
Termination Date the aggregate principal amount of the Loans outstanding on such
date.
2.9 Interest.
--------
(a) Subject to subsection 2.9(c), each Loan shall bear interest on the
outstanding principal amount thereof from the date when made until it becomes
due at a rate per annum equal to the Eurodollar Rate or the Base Rate, as the
case may be, 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 Loans
pursuant to Section 2.6 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof and, after the occurrence and during the
continuance of any Event of Default, interest shall be payable on demand.
(c) If any amount of principal of or interest on any Loan, or any other
amount payable under Section 2.10 hereof is not paid in full when due (whether
at stated maturity, by acceleration, demand or otherwise), the Company agrees to
pay interest on such unpaid principal, interest or fee from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon, to the extent permitted by applicable law,
payable on demand, at a rate per annum equal to the applicable rate, which shall
be the Base Rate for either Base Rate or Eurodollar Rate Loans, plus two percent
(2%); provided, however, that in respect of payments of principal or interest
-------- -------
coming due in respect of any Eurodollar Rate Loans prior to the termination of
the then current interest period, the
<PAGE>
applicable rate shall be the Eurodollar Rate plus two percent (2%) until the end
of such then current Interest Period.
(d) Interest shall accrue on unpaid Miscellaneous Payment Amounts at a rate
per annum equal to the Base Rate commencing on the day that is five Business
Days after the date a Miscellaneous Payment Notice is given by the Agent or the
applicable Bank to the Company; provided that from the 30th day after a
Miscellaneous Payment Notice is given, to the extent permitted by applicable
law, interest shall accrue on outstanding amounts at the rate per annum equal to
the Base Rate plus 2%. All such interest shall be paid upon demand.
2.10 Fees.
----
(a) The Company shall pay to the Agent an agency fee for the Agent's account
and an arrangement fee for the Arranger's account in the amounts and at the time
or times set forth in the commitment letter dated December 3, 1993 from the
Agent and the Arranger to, and accepted and agreed by, the Company, which
letter, to the extent it relates to the payment of fees, is incorporated herein
by reference.
(b) The Company shall pay to the Agent for the account of each Bank a
commitment fee of 0.5 percent per annum on the average daily unused portion of
such Bank's Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent. Such commitment fee shall accrue from the
Closing Date to the Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each quarter commencing on March 31, 1994
through the Termination Date, with the final payment to be made on the
Termination Date; provided that, in connection with any reduction or termination
--------
of Commitments under Section 2.5, 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 IV are not met.
(c) On the Closing Date, the Company shall pay to the Agent for the account
of each Bank which has committed $30,000,000 or more to this credit, an upfront
fee equal to 0.25 percent of the aggregate amount of each such Bank's
Commitment.
2.11 Computation 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
<PAGE>
interest under this Agreement 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- or 366-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) The Agent will, with reasonable promptness, notify the Company and the
Banks of each determination of a Eurodollar Rate, provided that any failure to
--------
do so shall not relieve the Company of any liability hereunder.
(c) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Company and
the Banks in the absence of manifest error. The Agent will, at the request of
the Company or any Bank, deliver to the Company or the Bank, as the case may be,
a statement showing any quotation used by the Agent in determining any interest
rate.
2.12 Payments by the Company.
-----------------------
(a) All payments (including prepayments) to be made by the Company on
account of principal, interest, fees and Miscellaneous Payment Amounts shall be
made without set-off or counterclaim and shall be made to the Agent, for the
account of the Banks (except as otherwise provided in subsection 2.13(b) and
Sections 3.l, 3.3 and 3.4), at the Agent's office referenced on Schedule 2.3(c)
---------------
or otherwise notified by the Agent in accordance with Section 10.2, in dollars
and in immediately available funds no later than 9:00 A.M. (San Francisco time).
The Agent will promptly distribute to each Bank its pro rata share of such
principal, interest, fees or other amounts, in like funds as received, except to
the extent non-ratable payments are expressly provided for herein. Any payment
which is received by the Agent later than 9:00 A.M. (San Francisco time) shall
be deemed to have been received on the immediately succeeding Business Day.
(b) Whenever any payment hereunder shall be stated to be 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; subject to the provisions set forth in the
definition of "Interest Period" herein.
(c) Unless the Agent receives notice from the Company prior to the date on
which any payment is due to the Banks hereunder that the Company will not make
such payment in full as and when due, 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
<PAGE>
distributed to such Bank or in the event of receipt by the Agent of partial
payment by the Company, such Bank's ratable portion of the amount not paid by
the Company, together with interest thereon for each day from the date such
amount is distributed to such Bank until the date such Bank repays such amount
to the Agent, at the Federal Funds Rate as in effect on such date. In the event
the Agent actually receives a payment of principal from the Company in
accordance with the terms of this Agreement by 9:00 A.M. (San Francisco time)
and does not pay the Banks their portion of such payment on the same day, the
Banks shall receive interest from the Agent at the Federal Funds Rate for each
day such payment is not received.
2.13 Payments by the Banks to the Agent.
----------------------------------
(a) Subject to the terms and conditions hereof, each Bank shall make
available to the Agent in immediately available funds for the account of the
Company the amount of its Commitment Percentage of any Borrowing.
(b) 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 Commitment Percentage 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 within two Business Days 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 certificate of the
Agent submitted to any Bank with respect to amounts owing under this subsection
2.13(b) 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 within two Business Days following such Borrowing
Date, the Agent shall 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.
(c) 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
<PAGE>
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.
2.14 Sharing of Payments, etc. If, other than as provided in subsection
-------------------------
2.9(d) or 2.10(a) or Section 3.1, 3.3, 3.4 or 10.4, 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
Commitment Percentage of payments on account of the Loans obtained by all the
Banks, such Bank shall forthwith (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 Commitment Percentage (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
pursuant to this Section 2.14 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.8) 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 shall keep records (which shall be conclusive and binding in the
absence of manifest error), of participations purchased pursuant to this Section
2.14 and shall in each case notify the Banks following any such purchases or
repayments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.1 Taxes.
-----
(a) Subject to subsection 3.1(g), any and all payments by the Company to
each Bank or the Agent under this Agreement shall be made free and clear of, and
without deduction or withholding for, 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 under the laws of which such Bank or
the Agent, as the case may be, is organized or maintains a Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes").
-----
<PAGE>
(b) In addition, the Company shall pay 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 Agreement (hereinafter referred to as "Other Taxes").
-----------
(c) Subject to subsection 3.1(g), the Company shall indemnify and hold
harmless each Bank and the Agent upon demand for the full amount of Taxes or
Other Taxes (including without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 3.1) 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. Each of the Agent and
the Banks hereby severally agrees to notify the Company with reasonable
promptness if it obtains knowledge of such Taxes or Other Taxes.
(d) 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, subject to subsection 3.1(g):
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.1) 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 been made;
(ii) the Company shall make such deductions; and
(iii) the Company shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(e) Within thirty (30) days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(f) Each Bank which is a foreign person (i.e., a person other than a United
States person for United States Federal income tax purposes) agrees that:
(i) it shall, no later than the Closing Date (or, in the case of a Bank
which becomes a party hereto pursuant to Section 10.7 after the Closing Date,
the date upon which the Bank becomes a party hereto) deliver to the Company
through the Agent two accurate and complete signed originals of Internal
Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two
accurate and complete signed originals of Internal Revenue Service
<PAGE>
Form 1001 or any successor thereto ("Form 1001"), as appropriate, in each
case indicating that the Bank is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time the Bank makes any changes necessitating a new
Form, it shall with reasonable promptness deliver to the Company through the
Agent in replacement for, or in addition to, the forms previously delivered
by it hereunder, two accurate and complete signed originals of Form 4224; or
two accurate and complete signed originals of Form 1001, as appropriate, in
each case indicating that the Bank is on the date of delivery thereof
entitled to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in (ii)
above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Bank and if the delivery of the same be lawful,
deliver to the Company through the Agent two accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Bank; and
(iv) it shall, promptly upon the Company's reasonable request to that
effect, deliver to the Company such other forms or similar documentation as
may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Bank's tax status for withholding
purposes.
(g) The Company will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to subsection 3.1(d) to any
Bank for the account of any Lending Office of such Bank:
(i) if the obligation to pay such additional amounts would not have
arisen but for a failure by such Bank to comply with its obligations under
subsection 3.1(f) in respect of such Lending Office;
(ii) if such Bank shall have delivered to the Company a Form 4224 in
respect of such Lending Office pursuant to subsection 3.1(f)(i), and such
Bank shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by the
Company hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or in the official
interpretation of such law or regulations by any governmental authority
charged with the interpretation or
<PAGE>
administration thereof (whether or not having the force of law) after the
date of delivery of such Form 4224; or
(iii) if the Bank shall have delivered to the Company a Form 1001 in
respect of such Lending Office pursuant to subsection 3.1(f)(ii), and such
Bank shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by the
Company hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or any applicable tax
treaty or regulations or in the official interpretation of any such law,
treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) after the date of delivery of such Form 1001.
(h) If, at any time, the Company requests any Bank to deliver any forms or
other documentation pursuant to subsection 3.1(f)(iv), then the Company shall,
on demand of such Bank through the Agent, reimburse such Bank for any costs and
expenses (including Attorney Costs) reasonably incurred by such Bank in the
preparation or delivery of such forms or other documentation.
(i) If the Company is required to pay additional amounts to any Bank or the
Agent pursuant to subsection 3.1(d), then such Bank shall use its reasonable
best efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to 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.
(j) The agreements and obligations of the Company contained in this Section
3.1 shall survive the payment in full of all other Obligations.
(k) Each Bank and the Agent agree that (i) it will take all reasonable
actions by all usual means to maintain all exemptions, if any, available to it
from the United States withholding taxes (whether available by treaty, existing
administrative waiver or otherwise) and (ii) otherwise cooperate with the
Company to minimize amounts payable by the Company under this Section 3.1;
provided, however, that, the Agent and any Bank shall not be obligated by reason
- -----------------
of this subsection 3.1(j) to disclose any information regarding its tax affairs
or tax computations or to reorder its tax or other affairs or tax or other
planning, or to undertake any action that the Agent or such Bank deems to
involve incurring any risk of liability or cost to itself or which requires any
expenditure of effort that such Agent or Bank deems unreasonable under the
circumstances.
<PAGE>
(l) Each Bank (or, if applicable, the Agent) which is organized under the
laws of the United States or any State thereof, shall provide the Company and
the Agent with two duplicates of statements conforming to the requirements of
Treasury Regulation 1.1441-5(b) or any successor thereto.
3.2 Illegality.
----------
(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 Eurodollar Rate Loans,
then, on notice thereof by the Bank to the Company through the Agent, any
obligation of that Bank to make Eurodollar 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 Eurodollar Rate
Loan, upon notice to such effect by such Bank to the Company, all Eurodollar
Rate Loans of the Bank then outstanding will immediately and automatically
convert to a Base Rate Loan and the Company shall pay to such Bank all amounts
required to be paid under Section 3.4 on the day that is three (3) Business Days
after the date of such notice.
(c) If the obligation of any Bank to make Eurodollar 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
Eurodollar Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent pursuant to this Section 3.2, the
affected Bank shall designate a different Lending Office with respect to its
Eurodollar 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.
3.3 Increased Costs and Reduction of Return.
---------------------------------------
(a) If any Bank determines that, due to either (i) the introduction of or
any change in or in the interpretation of any law or regulation after the
Closing Date 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) promulgated or becoming effective after the Closing Date, there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Eurodollar Rate Loans (other than an increase in
Taxes or Other Taxes), then the Company shall be liable for, and shall from time
to time, upon demand therefor by such Bank (with a copy of such demand to be
<PAGE>
sent to the Agent), pay to 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.
3.4 Funding Losses. The Company shall reimburse each Bank and hold each
--------------
Bank harmless from any actual loss or actual 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 Eurodollar Rate Loan (including payments made after any
acceleration thereof);
(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 2.6;
(d) the prepayment (including pursuant to Section 2.7) or other payment
(including after any acceleration thereof) of a Eurodollar Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the conversion of a Eurodollar Rate Loan to a Base Rate Loan on a
day which is not the last day of the Interest Period with respect thereto,
provided, however, the Company shall not be required to compensate the Banks
-------- -------
for lost profits under this clause (e) of this Section 3.4;
<PAGE>
including, in each case, any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its Eurodollar Rate Loans
hereunder 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 3.3(a), each Eurodollar 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 LIBOR used
in determining the Eurodollar Rate for such Eurodollar 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 Eurodollar Rate Loan is
in fact so funded.
This covenant shall survive the payment in full of all other Obligations.
3.5 Inability to Determine Rates. If the Majority Banks determine that for
----------------------------
any reason adequate and reasonable means do not exist for determining the
Eurodollar Rate for any requested Interest Period with respect to a proposed
Eurodollar Rate Loan or that the Eurodollar Rate applicable pursuant to
subsection 2.9(a) for any requested Interest Period with respect to a proposed
Eurodollar 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
Eurodollar Rate Loans, as the case may be, hereunder shall be suspended until
the Agent 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
Eurodollar Rate Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or compensation
---------------------
pursuant to this Article III 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 (including a description in reasonable detail of the way in
which such amount was determined) and such certificate shall be conclusive and
binding on the Company in the absence of manifest error; provided, however, that
the Company shall not be liable for any such amount attributable to any period
prior to the date one hundred eighty (180) days prior to the date of such
certificate.
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1 Conditions of Commitments. The Commitment of each Bank hereunder is
-------------------------
subject to the condition that the Agent shall have received on or before the
Closing Date all of the following, in form and substance satisfactory to the
Agent and its counsel and to the Banks and in sufficient copies for each Bank:
(a) Credit Agreement. This Agreement executed by the Company, the Agent
----------------
and each of the Banks;
(b) Resolutions; Incumbency.
-----------------------
(i) Copies of the resolutions of the board of directors of the Company
approving and authorizing the execution, delivery and performance by the
Company of this Agreement, the other Loan Documents to be delivered hereunder
and authorizing the borrowing of the Loans, certified as of the Closing Date
by the Secretary or an Assistant Secretary of the Company; and
(ii) 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 and deliver, as applicable, this Agreement, and
all other Loan Documents to be delivered hereunder;
(c) Articles of Incorporation; By-laws and Good Standing. Each of the
----------------------------------------------------
following documents:
(i) the articles of incorporation of the Company as in effect on the
Closing Date, certified by the Secretary of State of the State of
incorporation of the Company as of a recent date and by the Secretary or
Assistant Secretary of the Company as of the Closing Date and the bylaws of
the Company as in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of the Company as of the Closing Date; and
(ii) a good standing certificate for the Company from the Secretary of
State of the State of Delaware and each state where the Company is qualified
to do business as a foreign corporation as of a recent date, and a bring-down
certificate by telex or facsimile, dated the Closing Date from the Secretary
of State of the State of Delaware;
(d) Legal Opinions. Opinions of Wilson, Sonsini, Goodrich & Rosati, special
--------------
counsel to the Company, and Marla Stark, Esquire, general counsel to the
Company, and addressed to the Agent and the Banks, collectively substantially in
the form of Exhibit 4.1(d)(i);
-----------------
<PAGE>
(e) Payment of Fees. The Company shall have paid all costs, accrued and
---------------
unpaid fees and expenses (including, without limitation, Attorney Costs) to the
extent invoiced prior to or otherwise then due and payable on the Closing Date,
including any arising under subsection 2.10(a) and (c) and Sections 3.1, 10.4
and 10.10;
(f) Certificate. A certificate signed by a Responsible Officer, dated as of
-----------
the Closing Date, stating that:
(i) the representations and warranties contained in Article V are true
and correct on and as of such date, as though made on and as of such date;
(ii) no Default or Event of Default exists as of such date; and
(iii) no Material Adverse Compliance Effect has occurred since
September 30, 1993;
(g) Financial Statements. A certified copy of financial statements of the
--------------------
Company and its Subsidiaries referred to in Section 5.11;
(h) Certified Documents. Certified copies of the 1991 Indenture, 1992
-------------------
Indenture, Note Agreement and Note Purchase Agreement, each as supplemented
through the date hereof.
(i) Other Documents. Such other approvals, opinions or documents as any
---------------
Bank may reasonably request.
4.2 Conditions to all Borrowings. The obligation of each Bank to make any
----------------------------
Loan to be made by it hereunder (including its initial Loan) is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date:
(a) Notice of Borrowing. The Agent shall have received, with a
-------------------
counterpart for each Bank, a Notice of Borrowing;
(b) Continuation of Representations and Warranties. The
----------------------------------------------
representations and warranties made by the Company contained in Article V
shall be true and correct on and as of such Borrowing Date, with the same
effect as if made on and as of such date (except to the extent such
representations or warranties specifically relate to an earlier date, in
which case they shall be true and correct as of such date);
(c) No Existing Default. No Default or Event of Default shall exist or
-------------------
shall result from such Borrowing; and
<PAGE>
(d) No Material Adverse Change. No Material Adverse Compliance Effect
--------------------------
shall have occurred since September 30, 1993.
Each Borrowing by the Company hereunder shall constitute a representation and
warranty by the Company hereunder as of each such Borrowing Date that the
conditions in this Section 4.2 have been satisfied.
The representations, warranties and conditions set forth in this Article IV
are solely for the benefit of Agent and the Banks, and the Agent with the
written consent of each of the Banks may waive any or all of such conditions in
whole or in part; provided that no such waiver of a condition shall constitute
a waiver by the Agent or Banks of any of their other respective rights or
remedies under this Agreement or otherwise at law or in equity if the Company
should be in default of any of its covenants, agreements, representations or
warranties under this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
5.1 Corporate Existence and Power. The Company and each of its Material
-----------------------------
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 (i) to own its assets and carry on its
business and other activities as currently conducted and (ii) 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 subclause (b)(i), clause (c) or clause (d),
to the extent that the failure to do so could not reasonably be expected to have
a Material Adverse Compliance Effect.
<PAGE>
5.2 Corporate Authorization; No Contravention. The execution, delivery and
-----------------------------------------
performance by the Company of this Agreement and any other Loan Document to
which it is a party, have been duly authorized by all necessary corporate action
and do not and will not:
(a) contravene the terms of the Company's certificate of incorporation,
bylaws or other organization document;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any indenture, agreement, lease, instrument,
Contractual Obligation, injunction, order, decree or undertaking to which the
Company or any of its Subsidiaries is a party; or
(c) violate any Requirement of Law including the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Fund Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South African
Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold
Coin Regulations or the Panamanian Transactions Regulations of the United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or
Executive Orders 12722 and 12724 (transactions with Iraq and Executive Orders
12723 and 12725 (transactions with Kuwait).
5.3 Governmental 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, payment or repayment by the Company of the Obligations, or
enforcement against the Company, of this Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan Agreement 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.
5.5 Litigation. Except as set forth in Schedule 5.5 to the Disclosure
---------- ------------
Letter,
(a) 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
<PAGE>
any of their respective properties, which purport to affect or pertain to
this Agreement or any other Loan Document, or any of the transactions
contemplated hereby or thereby; and
(b) there are no actions, suits, proceedings, claims or disputes
pending, or to the best knowledge of the Company as of the Closing Date,
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, if determined adversely to the Company,
or its Subsidiaries, could reasonably be expected to have a Material Adverse
Compliance Effect; provided, however, that for purposes of making any such
-----------------
determination, at all times prior to the earlier of (i) the time that such
damages have been awarded at trial by a judge, jury or other determiner of
fact, and (ii) the time as of which accrual of such damage amounts would be
recognized for purposes of the Company's consolidated financial statements in
accordance with GAAP, the Company may disregard the effect of punitive
damages claimed by any opposing party, other than treble damages asserted in
connection with antitrust litigation.
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.
5.6 No Default. No Default or Event of Default exists or would result from
----------
the incurring of obligations by the Company under this Agreement or any other
Loan Agreement. Neither the Company, nor any of its Subsidiaries, 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 Compliance Effect.
5.7 ERISA Compliance. No accumulated funding deficiency (as defined in
----------------
section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Qualified Plan or to any Plan that would be a Qualified Plan
if the term "Controlled Group" were defined to include Persons under common
control with the Company or any of its Subsidiaries pursuant to section 414(m)
or (o) of the Code. No liability to the PBGC (other than for required premium
payments) has been incurred or could reasonably be expected to be incurred by
the Company or any other ERISA Affiliate with respect to any Qualified Plan that
could reasonably be expected to have a Material Adverse Payment Effect. Neither
the Company nor any ERISA Affiliates have incurred or could reasonably expect to
incur any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan that could reasonably be expected to have a
<PAGE>
Material Adverse Payment Effect. To the best knowledge of the Company, the
execution and delivery of this Agreement 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 of the Code.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans shall be
-----------------------------------
used solely for the purposes permitted by Section 6.11. No portion of the Loans
will be used, directly or indirectly, (a) to purchase or carry Margin Stock or
(b) to repay or otherwise refinance indebtedness of the Company or others
incurred to purchase or carry Margin Stock, (c) to extend credit for the purpose
of purchasing or carrying any Margin Stock, or (d) to make payments of principal
or interest on Ineligible Securities underwritten by any Section 20 Subsidiary
and issued by or for the benefit of the Company or any Affiliate of the Company.
No proceeds of any Loans will be used to acquire any security in any transaction
which is subject to Section 13 or 14 of the Exchange Act.
5.9 Title to Properties; Liens. The Company and each of its Subsidiaries
--------------------------
has good record and marketable title in fee simple to or valid leasehold
interests in all its real Property, except for such defects in title as could
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Payment Effect. As of the Closing Date, the property of the Company and
its Subsidiaries is subject to no Liens, other than Permitted Liens.
5.10 Taxes. The Company and each of its Subsidiaries have filed all
-----
Federal, state, foreign 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
in accordance with such returns and reports except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP and no Notice of Lien has
been filed or recorded. The Company has received no notice from any
Governmental Authority of any deficiency in respect of any such return or report
in an amount which, if assessed or required to be paid, would have a Material
Adverse Compliance Effect.
5.11 Financial Condition.
-------------------
(a) The Company's consolidated balance sheet dated September 30, 1993, and
related consolidated statements of income and cash flows for the quarter ended
on that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; and (ii) accurately and fairly present in all material respects, in
accordance with GAAP, the consolidated financial condition of the Company and
its Consolidated Subsidiaries as of the date thereof and results of operations
for the period covered
<PAGE>
thereby, subject only to normal year end adjustments and the absence of complete
footnotes.
(b) The audited consolidated balance sheet of the Company and its
Consolidated Subsidiaries dated December 31, 1992, and the related consolidated
statements of operations, shareholders equity and cash flows for the fiscal year
ending on such date (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as expressly noted
therein; and (ii) in accordance with GAAP, are complete and accurate and fairly
present in all material respects, the financial condition of the Company and its
Consolidated Subsidiaries as of the date thereof and the results of operations
for the period covered thereby.
(c) Since September 30, 1993 there has been no Material Adverse Compliance
Effect.
5.12 Environmental Matters.
---------------------
(a) The operations of the Company and each of its Subsidiaries comply in
all respects with all Environmental Laws, except where non-compliance could not
reasonably be expected to have a Material Adverse Compliance Effect.
(b) Each of the Company and its Subsidiaries has obtained all Environmental
Permits necessary for its respective operations, and all such Environmental
Permits are in good standing, and the Company and each of its Subsidiaries is in
compliance with all terms and conditions of such Environmental Permits, except
where failure to obtain such Environmental Permits, maintain such Environmental
Permits in good standing or be in compliance with such Environmental Permits
could not reasonably be expected to have a Material Adverse Compliance Effect.
(c) The Company and its Subsidiaries have received no notice that any of
their present Property or operations is subject to any outstanding written order
from or agreement with any Governmental Authority or other Person, nor subject
to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material that could
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Compliance Effect.
(d) There are no conditions or circumstances which may give rise to any
Environmental Claim arising from the operations of the Company or its
Subsidiaries, including Environmental Claims associated with any operations of
the Company or its Subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Compliance Effect.
5.13 Regulatory Entities. None of the Company, any Person controlling the
-------------------
Company, or any Subsidiary of the Company, is (a) an "Investment Company" within
the meaning of the Investment Company Act of 1940; or (b) subject to regulation
under the
<PAGE>
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.
5.14 No Burdensome Restrictions. Neither the Company, nor any of its
--------------------------
Subsidiaries is a party to or bound by any Contractual Obligation or subject to
any charter or corporate restriction or any Requirement of Law which could
reasonably be expected to have a Material Adverse Compliance Effect.
5.15 Solvency. The Company is Solvent. The Company and its Consolidated
--------
Subsidiaries, on a consolidated basis, are Solvent.
5.16 Labor Relations. As of the Closing Date there are no strikes, lockouts
---------------
or other labor disputes against the Company or any of its Subsidiaries, or, to
the best of the Company's knowledge, threatened against or affecting the
Company or any of its Subsidiaries, and no significant unfair labor practice
complaint is pending against the Company or any of its Subsidiaries or, to the
best knowledge of the Company, threatened against any of them before any
Governmental Authority. After the Closing Date, except as could not be
reasonably expected to have a Material Adverse Compliance Effect individually or
in the aggregate, there are no strikes, lockouts or other labor disputes against
the Company or any of its Subsidiaries, or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of its
Subsidiaries, and no significant unfair labor practice complaint is pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against any of them before any Governmental Authority.
5.17 Intellectual Property Matters. Except as set forth in Schedule 5.17 to
----------------------------- -------------
the Disclosure Letter, the Company or any of its Subsidiaries own or are
licensed or otherwise have the right to use (or could obtain ownership of
licenses or rights on terms not materially adverse to such Person and under
circumstances that could not reasonably be expected to have a Material Adverse
Compliance Effect) all of the patents, trademarks, service marks, trade names,
copyrights, other intellectual property rights and licenses to any of the
foregoing, that are reasonably necessary for the operation of their respective
businesses, without conflict with the rights of any other Person except where
such conflict could not be reasonably expected to have a Material Adverse
Compliance Effect. To the best of the Company's knowledge, except as set forth
on Schedule 5.17 to the Disclosure Letter, as of the Closing Date there is no
-------------
claim or litigation regarding any of the foregoing pending or threatened, and no
patent, invention, device, application or principle is pending or proposed,
which, in either case, could reasonably be expected to result in a Material
Adverse Compliance Effect.
<PAGE>
5.18 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries
------------
other than those listed on Schedule 5.18(a) to the Disclosure Letter and has no
----------------
equity investments or minority interests in any other corporation or entity in
excess of 5% thereof other than those listed on Schedule 5.18(b) to the Dis-
----------------
closure Letter. As of the Closing Date, the Material Subsidiaries are as
listed on Schedule 5.18(c) to the Disclosure Letter.
----------------
5.19 Broker's; Transaction Fees. Neither the Company nor any of its
--------------------------
Subsidiaries has any obligation to any Person in respect of any finder's,
broker's or investment banker's fee in connection with the transactions
contemplated hereby.
5.20 Insurance. The properties of the Company and its Subsidiaries are
---------
insured with financially sound and reputable insurance companies, in such
amounts, with such deductibles and covering such risks as is customarily carried
by companies engaged in similar businesses and owning similar properties in
localities where the Company or such Subsidiary operates.
5.21 Internal Control. The Company has established and maintains reasonable
----------------
internal controls and reporting systems designed to insure that Responsible
Officers will be promptly informed of all material financial, operational and
compliance matters relevant to compliance with the provisions of the Loan
Agreements.
5.22 Full Disclosure. The documents, certificates and written statements
---------------
(including the Loan Documents) furnished by the Company to the Agent or any Bank
pursuant to any provision of any Loan Agreement, or for use in connection with
the transactions contemplated by any Loan Agreement, taken together with all
such documents, certificates and written statements, do not contain any untrue
statement of a material fact or omit 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; provided, however, that
-------- -------
(a) it is recognized by the Agent and the Banks that projections and forecasts
provided by the Company, while reflecting the Company's good faith projections
or forecasts based upon methods and data the Company believes to be reasonable
and accurate, are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results and (b) nothing contained in this Section
5.22 shall in any way impair the Agent's and the Banks' right to declare and
enforce an Event of Default under subsection 8.1(c) if any representation or
warranty by the Company in any Loan Document shall prove to be incorrect in any
material respect on or as of the date made or deemed made.
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan,
interest, fee or Miscellaneous Payment Amount owing shall remain unpaid, unless
the Majority Banks waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent, with
--------------------
copies for each Bank:
(a) as soon as available, but not later than 95 days after the end of
each fiscal year of the Company, a copy of the audited consolidated balance
sheet of the Company as at the end of such year and the related consolidated
statements of operations, shareholders' equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, and accompanied by the unqualified opinion of Price Waterhouse
or another nationally recognized independent public accounting firm which
report shall state that such consolidated financial statements present
fairly, in all material respects, the financial position for the periods
indicated in conformity with GAAP;
(b) as soon as available, but not later than 95 days after the end of
each fiscal year of the Company, an unaudited consolidating balance sheet of
the Company and each of its Subsidiaries as at the end of such fiscal year
and the related consolidating statement of operations, shareholders' equity
and cash flows for such fiscal year, all in reasonable detail, together with
a certificate by an appropriate Responsible Officer in the form of Exhibit
-------
6.1(b); and
------
(c) as soon as available, but not later than 50 days after the end of
each of the first three fiscal quarters of each year a copy of the unaudited
consolidated balance sheet of the Company as of the end of such quarter and
the related consolidated statements of income, and cash flows for the period
commencing on the first day and ending on the last day of such quarter, and
certified by an appropriate Responsible Officer as being, in all material
respects, complete and correct and fairly presenting, in accordance with
GAAP, the consolidated financial position and the results of operations of
the Company and the Company's Consolidated Subsidiaries, subject only to
normal year end adjustments and the absence of footnotes.
<PAGE>
6.2 Certificates; Other Information. The Company shall furnish to the Agent
-------------------------------
with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (c) above, a compliance certificate of
a Responsible Officer in the form of Exhibit 6.2(a) hereto;
--------------
(b) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as the Company sends to its
public stockholders generally, copies of all final registration statements on
Form S-1 or Form S-3 (without exhibits) or their successor forms relating to
offerings of debt or equity securities on behalf of the Company, and copies
of all Form 10-K's, Form 10-Q's, and Form 8-K's or their successor forms, and
all amendments to such forms, that the Company files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(c) promptly upon receipt thereof by the Company, a copy of the final
management letter, if any, submitted by the Company's independent accountants
in connection with any annual audit made by them of the books of the Company
and its Subsidiaries; and
(d) promptly, such additional financial and other information as the
Agent, at the request of any Bank, may from time to time reasonably request,
including any changes in accounting practices or procedures, subject to the
second proviso of Section 6.9 hereof.
6.3 Notices. The Company shall notify the Agent and each Bank:
-------
(a) promptly of the occurrence of any Default or Event of Default or
of any event or circumstance that forseeably will result in a Default or
Event of Default;
(b) promptly after any Responsible Officer becomes aware thereof, of
any (i) breach or non-performance of, or any default under any Contractual
Obligation of the Company or any of its Material Subsidiaries which could
reasonably be expected to result in a Material Adverse Compliance Effect; or
(ii) dispute, litigation, investigation, proceeding or suspension which may
exist at any time between the Company or any of its Subsidiaries and any
Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Compliance Effect;
<PAGE>
(c) promptly after any Responsible Officer becomes aware thereof, of
the commencement of, or any material and adverse pre-trial judicial or
administrative determination in, any litigation or proceeding affecting the
Company or any of its Subsidiaries (i) in which the amount of damages claimed
is $5,000,000 (or its equivalent in another currency or currencies) or more,
(ii) in which injunctive or similar relief is sought and which, if adversely
determined, could reasonably be expected to have a Material Adverse
Compliance Effect, or (iii) in which the relief sought is an injunction or
other stay of the performance of this Agreement or any Loan Document or the
operations of the Company or any of its Subsidiaries;
(d) promptly upon, but in no event later than ten days after, a
Responsible Officer becomes aware thereof of any of the following which if
adversely determined could have a Material Adverse Compliance Effect, of (i)
any and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against the Company or any
Subsidiary of the Company or any of their properties pursuant to any
applicable Environmental Laws, (ii) all other Environmental Claims, and (iii)
any environmental or similar condition on any real Property adjoining or in
the vicinity of the Property of the Company or any Subsidiary of the Company
that could reasonably be anticipated to cause such Property or any part
thereof to be subject to any restrictions on the ownership, occupancy,
transferability or use of such Property under any Environmental Laws;
(e) promptly of any other litigation or proceeding affecting the
Company or any of its Subsidiaries which the Company would be required to
report to the Securities and Exchange Commission pursuant to the Exchange
Act, within four days after reporting the same to the Securities and Exchange
Commission;
(f) promptly of any ERISA Event affecting the Company or any member of
its Controlled Group (but in no event more than 20 days after such ERISA
Event) and (i) a copy of any notice with respect to such ERISA Event that may
be required to be filed with the PBGC (within 20 days following the required
filing date) and (ii) any notice delivered by the PBGC to the Company or any
member or its Controlled Group with respect to such ERISA Event (within 20
days after receipt of such notice);
(g) promptly after any Responsible Officer becomes aware thereof, of
any Material Adverse Compliance Effect subsequent to the date of the most
recent audited financial statements of the Company delivered to the Banks
pursuant to subsection 6.1(a);
<PAGE>
(h) promptly of (including, where applicable, a description of) (i) the
placement of any Multiemployer Plan in reorganization status under Title IV
of ERISA; or (ii) any Multiemployer Plan becoming "insolvent" (as such term
is defined in Section 4245 of ERISA under Title IV of ERISA);
(i) promptly after any Responsible Officer becomes aware thereof, of
any labor controversy including any strike, work stoppage, boycott, shutdown
or other labor disruption against or involving the Company or any of its
Subsidiaries which has continued for more than 15 days;
(j) promptly after any Responsible Officer becomes aware thereof, of
the giving or receiving of any notices of prepayment, redemption, repurchase
or default under the Note Agreement, the 1991 Indenture, the 1992 Indenture,
the Note Purchase Agreement, or any agreement entered into by the Company or
its Subsidiaries after the date hereof pursuant to which the Company is
obligated in respect of debt for borrowed money aggregating in excess of
$15,000,000 (in the case of any one such agreement);
(k) promptly upon obtaining knowledge of any actual Change in Control
or the execution by the Company of an agreement providing for a Change in
Control; and
(l) promptly after any Responsible Officer becomes aware thereof, of
any transaction described in Section 7.3(b) hereof.
Each notice pursuant to this Section shall be accompanied by a written
certificate by a Responsible Officer of the Company setting forth details of the
occurrence referred to therein and stating what action the Company or the
affected Subsidiary proposes to take with respect thereto.
6.4 Preservation of Corporate Existence, Etc. Except as otherwise permitted
----------------------------------------
by Section 7.2 or 7.3 hereof, the Company shall and shall cause each of its
Material Subsidiaries 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 rights,
privileges, qualifications, permits, licenses and franchises necessary or
material to the normal conduct of its business, except where the failure to
do so could not individually or in the aggregate be reasonably expected to
have a Material Adverse Payment Effect;
<PAGE>
(c) use its reasonable efforts, in the ordinary course and consistent
with past practice, to preserve its business and the goodwill of its
business; and
(d) preserve or renew all of its registered trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Payment Effect.
6.5 Maintenance of Property. Except as otherwise permitted by Section 7.2
-----------------------
or 7.3 hereof, the Company shall maintain, and shall cause each of its
Subsidiaries to maintain in good working order and condition, all its Property
which are material to the conduct of business by the Company or the Company and
its Subsidiaries taken as a whole.
6.6 Insurance. The Company shall maintain, and shall cause each of its
---------
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to its properties and business against loss or damage
(including workers' compensation insurance, public liability and Property and
casualty insurance and business interruption insurance) 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
(other than the Company's financial circumstances) by such other Persons. Upon
request of the Agent, the Company shall furnish the Agent, with copies for each
Bank, at reasonable intervals (but not more than once per calendar year) a
certificate of a Responsible Officer of the Company (and, if requested by the
Agent, any insurance broker of the Company) setting forth the nature and extent
of all insurance maintained by the Company and its Subsidiaries in accordance
with this Section 6.6 (and which, in the case of a certificate of a broker, were
placed through such broker).
6.7 Payment of Obligations. The Company shall, and shall cause each of its
----------------------
Subsidiaries to, (a) timely prepare and file all reports and returns in respect
of Federal, state, foreign and other income and franchise taxes and timely pay
all amounts in accordance therewith, together with all additional amounts
assessed by the applicable Governmental Authority in respect thereof, and (b)
pay before they become delinquent, all other material taxes, assessments and
governmental charges or levies imposed upon it or its Property; provided that
--------
items of the foregoing description need not be paid while being contested in
good faith and by appropriate proceedings as long as adequate reserves, to the
extent required by GAAP, have been established and maintained and exist with
respect thereto and, provided, further, that the contesting Person's right to
-----------------
use any material Property is not materially adversely affected thereby.
6.8 Compliance with Laws. The Company shall comply, and shall cause each of
--------------------
its Subsidiaries to comply, in all material respects with all Requirements of
Law of any Governmental Authority having jurisdiction over it or its business
(including
<PAGE>
the Federal Fair Labor Standards Act), except such as may be contested in good
faith, as to which a bona fide dispute may exist, or where the failure to so
comply could not (a) impair or adversely affect the validity, binding effect or
enforceability of any Loan Agreement, including any remedy set forth therein;
(b) result, directly or indirectly, in any liability to the Agent or any Bank or
cause the Agent or any Bank to violate any Requirement of Law; or (c) reasonably
be expected to result in 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.
6.9 Inspection of Property and Books and Records. The Company shall
--------------------------------------------
maintain and shall cause each of its Subsidiaries to maintain sound accounting
policies and an adequate and effective system of accounts and internal
accounting control that will safeguard assets, properly record income, expenses
and liabilities, and assure the timely production of proper financial
statements in accordance with GAAP consistently applied in all material
respects. The Company shall permit, and shall cause each of its Subsidiaries to
permit, any employee of, or any financial, legal, environmental or other
professional consultant or advisor to, the Agent or any Bank, at the Agent's or
such Bank's expense, to visit and inspect any of their respective properties, to
examine all their respective corporate, financial and operating books and
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, that when an Event of Default
-------- -------
exists, the Agent or any Bank may visit, inspect, examine, make copies or
abstracts of and discuss, at the expense of the Company such properties at any
time during business hours and without advance notice; provided, further,
-------- -------
however, that the Company and its Subsidiaries will not be required to disclose,
- -------
permit the inspection, examination, copying or making extracts of, or discuss,
any portion of, any document, or any information, in respect of which and to the
extent that disclosure to the Agent or such Bank is then prohibited by law or
by agreement binding on the Company or any Subsidiary of the Company and entered
into between the Company or any such Subsidiary and any Person not an Affiliate
of the Company and that was not entered into by the Company or such Subsidiary
for the purpose of concealing information from the Agent, the Banks or other
creditors having contract provisions similar to this Section in particular, and
in respect of which (in the case of any such agreement) a Responsible Officer
has provided the Agent with a certificate setting forth a brief description of
the agreement (including, without limitation, the nature and purpose of the
agreement, the parties to the agreement, and the provision of the agreement that
prohibits such disclosure), provided, however, that if disclosure of the
-----------------
existence of any agreement is prohibited by the provisions thereof, such
certificate may state generally, with respect to
<PAGE>
such agreement, that there are agreements pertaining to the matter as to which
information was requested which are binding on the Company or a Subsidiary and
which prohibit disclosure of the existence thereof. The Company and its
Subsidiaries shall use their reasonable efforts to obtain a waiver of any
contractual prohibition provided the Banks execute a confidentiality agreement;
provided, however, in no event shall the Company be required to disclose
- -----------------
personnel records. Nothing set forth in this Section 6.9 shall in any way
relieve the Company of its obligations to deliver documents pursuant to Section
6.1, 6.2(a) through (c) or 6.3 hereof.
6.10 Environmental Laws.
------------------
(a) The Company shall, and shall cause each of its Subsidiaries to, conduct
its operations and keep and maintain its Property in compliance with all
Environmental Laws, except where the failure to do so could not reasonably be
expected to, in the aggregate, have a Material Adverse Payment Effect.
(b) At any time as there exists an Event of Default, upon the written
request of the Majority Banks, the Company shall prepare and submit and cause
each of its Subsidiaries to prepare and submit, to the Agent, with copies for
each Bank, at the Company's sole cost and expense at reasonable intervals, an
audit report in form and detail satisfactory to the Majority Banks, providing an
update of the status of any environmental, health or safety compliance, hazard
or liability issue identified in any disclosure required or made pursuant to
subsection 6.3(d) or Section 5.12 and any other environmental, health or safety
compliance obligation, remedial obligation or liability.
6.11 Use of Proceeds. The Company shall use the proceeds of the Loans solely
---------------
to repay in full the Existing Facility and for working capital and other general
corporate purposes not in contravention of any Requirement of Law; provided,
--------
however, that the Company shall not directly or indirectly use the proceeds of
- -------
the Loans for any purchase or other acquisition of voting stock or equity of any
Person if (a) the purpose of such purchase or other acquisition is to effect a
material change in the business, corporate or capital structure of such Person,
or the Company intends to acquire in excess of 50% of the combined voting power
of all then issued and outstanding voting stock of such Person or otherwise to
acquire the power to elect, appoint, or cause the election or appointment of at
least a majority of the members of the board of directors of such Person, and
(b) such purchase or other acquisition has not been approved by the board of
directors (or other body exercising similar authority) of such Person.
6.12 Internal Controls. The Company will maintain reason-able internal
-----------------
controls and reporting systems designed to insure that a Responsible Officer
will be promptly informed of all material financial, operational and compliance
matters relevant to compliance with the provisions of the Loan Agreements.
<PAGE>
6.13 Subordinated Debt Notices. Promptly after the initial Borrowing
-------------------------
hereunder, the Company shall send a written notice to the trustee under each of
the 1991 Indenture, the 1992 Indenture, and any and all other trustees or
creditors in respect of Subordinated Debt then outstanding, informing each such
Person that the Company has incurred "Senior Indebtedness" (or equivalent term,
as defined in such Indentures) pursuant to this Agreement. At any time as there
exists an Event of Default hereunder, the Company shall immediately upon the
receipt of a notice of default from the Agent, together with the request by the
Agent at the request of Banks holding in the aggregate the amount of "Senior
Indebtedness" (or equivalent term) as is necessary under the applicable
Subordinated Debt documentation to issue such notices, send by the most
expeditious means available written notices in the form specified by, and in
accordance with, Section 4.05 of the 1991 Indenture and the 1992 Indenture (or
other, equivalent, section under other applicable documentation) to such trustee
or other Person, and to all other Persons entitled to such notice pursuant to
the terms of such indenture, with a copy to the Agent. If the Company shall
fail to deliver any of the foregoing notices required by this Section 6.13, the
Company irrevocably authorizes the Agent to prepare, execute and deliver a
notice substantially in the form of Exhibit 6.13 (or in such other form as may
------------
be appropriate to such indenture).
ARTICLE VII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan,
interest, fee or Miscellaneous Payment Amount owing shall remain unpaid, unless
the Majority Banks waive compliance in writing:
7.1 Limitation on Liens. The Company shall not, nor shall it suffer or
-------------------
permit any of its Subsidiaries to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien (including any Lien granted pursuant to
paragraph 5C of the Note Agreement) 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 (i) identified on Schedule 7.1, provided, that to the
------------ --------
extent such Lien shall attach to receivables of the Company or a Subsidiary
(other than as proceeds of other collateral), such Lien shall be subject to
subsection 7.1(q), (ii) arising in connection with the Agreement dated as of
September 1991 between the Company and Olivetti Finfactoring SpA, providing
for the factoring by Olivetti of receivables of the Company and its
Subsidiaries, provided, that the aggregate principal amount secured by any
--------
such Lien shall not at any time exceed the Italian Lire equivalent of
$5,000,000 plus accrued interest, and (iii) (A) arising under paragraph
<PAGE>
5C of the Note Agreement (as in effect on the date hereof, without regard for
any future amendments thereof) securing the notes issued pursuant thereto and
(B) arising under paragraph 4C of the Note Purchase Agreement (as in effect
on the date hereof, without regard for any future amendments thereof)
securing the notes issued pursuant thereto;
(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 6.7, provided that no Notice
of Lien has been filed or recorded;
(d) Liens incurred or deposits made in the ordinary course of business,
(i) in respect of leases, statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons that are not yet due or that are being actively
contested in good faith by appropriate proceedings, and in respect of
which adequate reserves are carried on the books of the Person liable
therefor to the extent required by GAAP,
(ii) in connection with workers' compensation, unemployment
insurance, social security and other like laws (other than ERISA),
(iii) to secure the performance of letters of credit used in place
of performance bonds, bids, leases, tenders, sales contracts, statutory
obligations, government contracts, surety and performance bonds 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,
(iv) incidental to the conduct of the Company's business or
ownership of its Property, provided that,
--------
(A) such obligations shall not have arisen in connection
with the borrowing of money, the obtaining of advances or credit,
the sale of accounts receivable or the payment of the deferred
purchase price of Property, and
(B) such Liens shall not in the aggregate materially
detract from the value of the Property encumbered thereby or
materially
<PAGE>
interfere with the use of such Property in the ordinary conduct of
the owning Person's business.
(v) which constitute purchase money security interests with
respect to advances or the payment of deferred purchase price in
connection with the purchase of goods and services in the ordinary
course of business, provided that, at the time any such security
--------
interest is created, the Company or the Company's Subsidiary intends to
pay the amount secured thereby within 180 days after such creation,
provided, further, that any such security interest runs in favor of the
-------- -------
provider of such goods or services and is not part of a floor plan
financing arrangement or any other arrangement with any Person that is
primarily in the business of making loans or extending other financial
accommodations, or
(vi) which constitute Liens with respect to conditional sale or
other title retention agreements and any lease in the nature thereof,
provided that any such Lien with respect to conditional sales or other
--------
title retention agreements encumbers only Property and accretions
thereto (and proceeds arising from the disposition thereof) which are
subject to such conditional sale or other title retention agreement or
lease in the nature thereof and, provided, further, that the aggregate
-----------------
amount secured by all such conditional sale or other title retention
agreements and leases in the nature thereof shall not be more than
$5,000,000 (it being understood that additional amounts may be so
secured if permissible under any other provision of this Section 7.1);
(e) reservations, exceptions, encroachments, ease-ments, rights-of-way,
covenants, conditions, restrictions and other similar title exceptions or
encumbrances affecting real Property, provided such Liens do not interfere
--------
with the use of such Property in the ordinary conduct of the business of the
Company and its Subsidiaries, taken as a whole;
(f) Liens on Property of a Subsidiary of the Company to secure
obligations of such Subsidiary to the Company or another Subsidiary of the
Company;
(g) Liens with respect to Capitalized Lease Obligations and financing
leases (together with any related interest), provided that such Liens
--------
encumber only Property and accretions thereto (and proceeds arising from the
disposition thereof) acquired with the proceeds of the indebtedness secured
thereby;
<PAGE>
(h) leases and subleases of, and licenses and sublicenses with respect
to, Property where the Company or a Subsidiary of the Company is the lessor
or licensor (or sublessor or sublicensor), provided that such leases,
--------
subleases, licenses and sublicenses do not in the aggregate materially
interfere with the business of the Company and its Subsidiaries taken as a
whole;
(i) (i) Liens to secure appeal bonds, supersedeas bonds and other
similar Liens 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 the aggregate amount
--------
so secured, together with the aggregate amount secured pursuant to
clause (ii) below, shall not at any time exceed $5,000,000 (it being
understood that additional amounts may be so secured if permissible
under any provision of this Section 7.1),
(ii) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution or other
--------
enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings and, provided, further, that the aggregate amount so
-----------------
secured, together with the aggregate amount secured pursuant to clause
(i) above, shall not exceed $5,000,000 (it being understood that
additional amounts may be so secured if permissible under any other
provision of this Section 7.1);
(j) Liens on the Property of any corporation at the time such
corporation becomes a Subsidiary of the Company, or such corporation is
acquired by, consolidated with or merged into the Company or a Subsidiary of
the Company, and Liens on any Property at the time acquired by the Company or
a Subsidiary of the Company, provided, in each case, that such Lien was not
--------
incurred in contemplation of such transaction;
(k) any Lien permitted by this Section 7.1 securing Debt that is being
renewed, extended or refunded, provided that the principal amount of such
--------
Debt outstanding at the time of such renewal, extension or refunding is not
increased and such Lien is not extended to any other Property (other than
pursuant to its original terms);
(l) Purchase Money Mortgages, provided that each such Purchase Money
--------
Mortgage secures an amount not exceeding 100% of the lesser of the cost
(including liabilities assumed) or the fair market value at the time of
acquisition or construction of the Property to which
<PAGE>
it relates (as determined in good faith by the Board of Directors);
(m) Liens consisting of an agreement to file or give a financing
statement set forth in operating leases (it being understood that, upon the
filing of any such financing statement, the Lien created thereby must be
permissible under another provision of this Section 7.1);
(n) Liens which constitute rights of set-off of a customary nature or
bankers' Liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with working capital
facilities, lines of credit, term loans, or other credit facilities and
similar arrangements entered into with banks in the ordinary course of
business;
(o) Liens on inventory, if any, arising in connection with any
arrangement pursuant to which the Company or a Subsidiary agrees to
repurchase inventory from a customer or a third party providing financing to
a customer, with respect to an aggregate amount of Debt of up to $30,000,000
at any time;
(p) Liens with respect to shares of capital stock of Arcada Holding
such as restrictions on transfer, rights of first refusal and similar
restrictions as contemplated by the Arcada Letter of Intent; and
(q) Liens not otherwise permitted by this Section 7.1 on Property of
the Company or any Subsidiary of the Company; provided that, as of each
--------
Determination Date, the amount of
(i) all Debt secured by Liens permitted only by this subsection
7.1(q), plus
----
(ii) all Debt of Subsidiaries of the Company (other than Debt owed
by a Subsidiary of the Company to the Company or another Subsidiary of
the Company) and all Preferred Stock of the Company's Subsidiaries
(other than such Preferred Stock owned by the Company or another
Subsidiary of the Company), plus
----
(iii) the Sale/Leaseback Transaction Amount,
(without duplication) does not exceed 20% of Tangible Net Worth, in each case
determined as of such Determination Date; and further provided that such
------- --------
Liens do not secure indebtedness for borrowed money loans or advances (which
should not be deemed to include receivables factoring).
<PAGE>
7.2 Dispositions of Assets. The Company shall not, nor shall it permit any
----------------------
of its Subsidiaries to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
(collectively, "Transfers") any of its assets, business or Property (including
---------
accounts and notes receivable (with or without recourse) and equipment sale-
leaseback transactions) or enter into any agreement to do any of the foregoing
except:
(a) Transfers of inventory, or used, worn-out or surplus Property, all
in the ordinary course of business;
(b) Transfers 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) Transfers in the ordinary course of business;
(d) Transfers to the Company or any of its Subsidiaries;
(e) Transfers which (i) constitute dispositions of cash or Cash
Equivalents not prohibited by this Agreement, (ii) constitute Investments
which are permitted under Section 7.4 hereof, or (iii) constitute the
liquidation of any Permitted Investment; and
(f) any other Transfers if all of the following conditions shall have
been satisfied:
(i) the sum (without duplication) of
(A) the net book value of such Property on the date of the
transfer (the "Asset Disposition Date"), expressed as a percentage of
----------------------
Consolidated Assets on the Determination Date most recently preceding
the Asset Disposition Date, plus
(B) the net book value of each other item of Property of the
Company and its Subsidiaries that was Transferred pursuant to this
subsection 7.2(f) (including, without limitation, a Transfer by merger
or consolidation) ("Transferred Property"), during the period ending on
--------------------
the Asset Disposition Date and commencing on the first day of the period
of 12 consecutive calendar months most recently ended as of the Asset
Disposition Date (the "Annual Disposition Measurement Period") (stock of
-------------------------------------
the Company's Subsidiaries being deemed to have a net book value equal
to the net book value of all assets of the issuer of stock in such Sub-
<PAGE>
sidiary at such time, or the appropriate portion thereof if less than
all stock of such Subsidiary is the subject of such Transfer), expressed
in each case as a percentage of Consolidated Assets on the Determination
Date most recently preceding the date of each such Transfer, minus
(C) the aggregate net book value of all Property transferred
pursuant to this subsection 7.2(f) during the Annual Disposition
Measurement Period to the extent that the net proceeds arising therefrom
have been either reinvested in the business of the Company and the
Company's Subsidiaries or applied to, or irrevocably committed to make,
prepayments of Senior Debt within the period of 12 consecutive months
after the respective Transfers of such Property pursuant to this
subsection 7.2(f), such aggregate net book value (or the portion thereof
corresponding to the portion of such net proceeds so applied or to be so
applied) being expressed as a percentage of Consolidated Assets
determined on the Determination Date most recently preceding the date of
each such Transfer; provided, that any such net proceeds spent for
operating expenses or principal, premium or interest in respect of Debt
or held in deposit accounts or otherwise as short term investments shall
not be deemed to have been reinvested in the business of the Company and
the Company's Subsidiaries; provided, further, that such percentage
shall not, in any event, exceed 10%;
will not exceed 15%;
(ii) the sum (without duplication) of
(A) the Cash Flow Contribution of such Property during the period
of four consecutive fiscal quarters of the Company most recently ended
prior to the Asset Disposition Date (the "Four Quarter Period"), plus
-------------------
(B) the Cash Flow Contribution of each other item of Transferred
Property during the Annual Disposition Measurement Period, such Cash
Flow Contribution for any particular Property being measured for the
period of four consecutive fiscal quarters of the Company most recently
ended prior to the transfer of such Property, minus
<PAGE>
(C) the Cash Flow Contribution of all Property transferred by the
Company and the Company's Subsidiaries during the Annual Disposition
Measurement Period to the extent that the net proceeds arising therefrom
have been either reinvested in the business of the Company and the
Company's Subsidiaries or applied to, or irrevocably committed to make
prepayments of Senior Debt within the period of 12 consecutive months
after the respective transfers of such Property pursuant to this
subsection 7.2(f), such Cash Flow Contribution (or the portion thereof
corresponding to the portion of such net proceeds so applied or to be so
applied) for any particular Property being measured for the period of
four consecutive fiscal quarters of the Company most recently ended
prior to the disposition of such Property, provided, that any such net
proceeds spent for operating expenses or principal, premium or interest
in respect of debt or held in deposit accounts or otherwise as short
term investments shall not be deemed to have been reinvested in the
business of the Company or the Company's Subsidiaries; provided,
further, that the Cash Flow Contribution of all such Property shall not,
in any event, exceed 10% of Consolidated Operating Cash Flow during the
Four Quarter Period,
will not exceed 15%;
(iii) the sum (without duplication) of
(A) the net book value of such Property on the Asset Disposition
Date, expressed as a percentage of Consolidated Assets on the
Determination Date most recently preceding the Asset Disposition Date,
plus
(B) the net book value of each other item of Property of the
Company and the Company's Subsidiaries that was transferred pursuant to
this subsection 7.2(f) (including, without limitation, a transfer by
merger or consolidation), during the period ending on the Asset
Disposition Date and commencing on the first day of the period of 36
consecutive calendar months most recently ended as of the Asset
Disposition Date (the "Three Year Disposition Measurement Period")
-----------------------------------------
(stock of a Subsidiary of the Company being deemed to have a net book
value equal to the net book value of all assets of the issuer of such
stock, or the appropriate portion thereof if less than all
<PAGE>
stock of such Subsidiary is the subject of such Transfer), expressed in
each case as a percentage of Consolidated Assets on the Determination
Date most recently preceding the date of each such transfer,
will not exceed 40%;
(iv) the sum (without duplication) of
(A) the Cash Flow Contribution of such Property during the Four
Quarter Period, plus
(B) the Cash Flow Contribution of all other Property of the
Company and the Company's Subsidiaries that was transferred pursuant to
this subsection 7.2(f) (including, without limitation, a Transfer by
merger or consolidation) during such Three Year Disposition Measurement
Period, such Cash Flow Contribution for any particular Property being
measured for the period of four consecutive fiscal quarters of the
Company most recently ended prior to the disposition of such Property,
will not exceed 40%;
(v) with respect to any Transfer, or series of related Transfers,
of Property pursuant to this subsection 7.2(f) for consideration in an
amount which is at least equal to the sum of $25,000,000 plus 5% of the
amount, if any, by which Consolidated Assets, determined as of the most
recent Determination Date at the time of such transfer, exceeds
Consolidated Assets, determined as of December 31, 1992, in the opinion
of the Board of Directors, the sale is for fair market value and is in
the best interests of the Company and the Company's Subsidiaries; and
(vi) 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 under any provision of this
Agreement.
If the Company shall make any Transfer which would be prohibited by this
Section 7.2 but for the deduction provided for in subclause (C) of clause (i)
or (ii) of subsection (f), the Company shall be deemed to have covenanted that
the net proceeds from such Transfer shall be reinvested in the business of the
Company and the Company's Subsidiaries (subject to the limitations of the first
proviso to such subclause) or applied to, or irrevocably
<PAGE>
committed to make prepayments of Senior Debt within the period of 12 consecutive
months after such Transfer.
7.3 Consolidations and Mergers.
--------------------------
(a) The Company shall not, and shall not suffer or permit any of its
Subsidiaries to, merge, consolidate with or into, nor shall the Company 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 any Person except (i) any Subsidiary of the
Company (other than a Subsidiary created for such purpose) may merge,
consolidate or combine with or into, the Company (provided that the Company
shall be the continuing or surviving corporation) or with any one or more
Subsidiaries of the Company (provided that if any transaction shall be between a
--------
Subsidiary of the Company and a Wholly-Owned Subsidiary of the Company, the
Wholly-Owned Subsidiary shall be the continuing or surviving corporation) and
(ii) as expressly permitted in subsection 7.3(b).
(b) The Company shall not, and shall not permit its Subsidiaries to, do any
of the following, or enter into any agreement or make any offer to do any of
the following: (i) merge or consolidate with or into any Person other than the
Company or a Subsidiary of the Company, or (ii) purchase or otherwise acquire,
directly or indirectly, all or substantially all of the assets of any Person,
business or division other than of or from the Company or a Subsidiary of the
Company, or (iii) purchase or otherwise acquire, directly or indirectly, in
excess of 50% of the voting stock or equity of any Person other than a
Subsidiary of the Company; provided that the Company and its Subsidiaries may so
--------
merge (provided, in the case of the Company, that the Company is the surviving
corporation), and may enter into agreements, make offers and engage in the
transactions described in clauses (ii) and (iii) of this subsection if:
(A) the amount of all cash consideration payable by the Company or
any such Subsidiary (other than to the Company or a Wholly-Owned
Subsidiary of the Company), when added to the amount of all cash
consideration paid by the Company and all of its Subsidiaries for all
prior transactions undertaken after the Closing Date which would not be
permitted under this subsection 7.3(b) but for this proviso, is not
greater than the greater of $25,000,000 and fifteen percent (15%) of the
Company's Tangible Net Worth as of the end of the fiscal quarter
immediately preceding the closing of any such transaction,
(B) the amount of all consideration payable (including by
assumption of liabilities and the fair market value of Property other
than cash paid, including any consideration paid in the form of equity)
by the Company or any such Subsidiary (other than to the
<PAGE>
Company or a Wholly-Owned Subsidiary of the Company), when added to the
amount of all consideration paid or assumed by the Company and all of
its Subsidiaries for all prior transactions undertaken after the Closing
Date which would not be permitted under this subsection 7.3(b) but for
this proviso, is not greater than $100,000,000,
(C) such other Person is in the same line of business as the
Company and its Subsidiaries or provides vertical integration for such
line of business, and
(D) at such time and immediately after giving effect thereto, no
Default or Event of Default would exist.
7.4 Loans and Investments. The Company will not and will not permit any of
---------------------
its Subsidiaries to purchase or make investments in, purchase stock or
securities of, or make loans or advances to, or make other investments in, or
guarantee the obligations of, any other Person (including investments in or
loans or advances to any corporation proposed to be acquired or created as a
Subsidiary) (all of the foregoing referred to as "Investments", and all of the
-----------
below-listed investments referred to as "Permitted Investments") except:
---------------------
(a) obligations of, or obligations guaranteed by (or insured by), the
United States government, its agencies, or any public instrumentality thereof
with maturities not to exceed (or an unconditional right to compel purchase
within) seven years from the date of acquisition;
(b) Investments in or to the Company or its Subsidiaries and
Investments in or to companies which simultaneously with such Investments
become Subsidiaries of the Company, and guarantees by the Company of the
obligations of its Subsidiaries and guarantees by Subsidiaries of the Company
of obligations of the Company or other Subsidiaries of the Company;
(c) commercial paper or loan participations maturing within seven years
of the date of acquisition issued by or granting participations in
obligations of a Person organized under the laws of the United States,
Canada, a country that is a member of the European Community, Singapore,
Taiwan, Malaysia or Japan, rated at the time of acquisition (or issued by or
granting participations in obligations of Persons organized under the laws of
such jurisdiction with other outstanding unsecured and unsupported debt
securities ranking pari passu with such commercial paper or loan
participations and rated at the time of acquisition) in the top rating
classification by Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff & Phelps Inc. or any
<PAGE>
other rating agency nationally recognized in the United States, Japan or any
country which is a member of the European Community at the time of
acquisition thereof;
(d) Investments arising from transactions by the Company or its
Subsidiaries with customers or suppliers (including Investments received in
settlement of trade receivables which trade receivables are fully reserved
against on the books of the Company or such Subsidiary or are less than one
year overdue) in the ordinary course of business;
(e) Investments consisting of:
(i) travel advances, employee relocation loans, and other employee
loans and advances in the ordinary course of business,
(ii) loans to employees, officers or directors relating to the
purchase of equity securities of the Company or its Subsidiaries, or
(iii) other loans to officers and employees approved by the Board
of Directors in an aggregate amount not in excess of $10,000,000
outstanding at any time;
(f) operating deposit accounts maintained in the ordinary course of
business for operating fund purposes;
(g) securities issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
with maturities not to exceed (or an unconditional right to compel purchase
within) seven years of the date of acquisition, that are rated in one of the
highest two rating classifications by Moody's Investors Service, Inc.,
Standard & Poor's Corporation, Duff & Phelps Inc. or any other rating agency
nationally recognized in the United States;
(h) demand and time deposits with, Eurodollar deposits with,
certificates of deposit issued by, or obligations or securities fully backed
by letters of credit issued by
(i) any bank organized under the laws of the United States, any
state thereof, the District of Columbia or Canada having combined
capital and surplus aggregating at least $100,000,000, and outstanding
unsecured and unsupported debt rated "A" or better at the time of
acquisition thereof by Standard and Poor's Corporation, Moody's Investor
Service, Inc., Duff & Phelps Inc. or any other rating
<PAGE>
agency nationally recognized in the United States, Japan or any country
which is a member of the European Community,
(ii) the banks listed in Schedule 7.4(h), or
---------------
(iii) any other bank organized under the laws of a country that is
a member of the European Community (or any political subdivision of any
such country), Japan, Singapore, Taiwan, Malaysia, the Cayman Islands,
the British West Indies or the Bahamas, having combined capital and
surplus of not less than $500,000,000 or the equivalent thereof in a
currency other than United States dollars.
(the banks described in the foregoing subclauses (i) to (iii), inclusive,
being referred to in this Agreement as "Permitted Banks");
---------------
(i) bankers' acceptances accepted by a Permitted Bank and eligible for
rediscount under the requirements of the Board of Governors of the Federal
Reserve System;
(j) repurchase agreements with any of:
(i) the Permitted Banks,
(ii) Alex. Brown & Sons Incorporated, Bear, Stearns & Co., Dean
Witter Reynolds Inc., The First Boston Corporation, Goldman Sachs & Co.,
J.P. Morgan Securities, Inc., Kidder, Peabody & Co., Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Paine Webber Incorporated, Salomon Brothers, Inc.,
Shearson Lehman Hutton, Inc., Smith Barney, Harris Upham & Co.,
Incorporated, or their successors, or
(iii) any other bank or securities dealer of a similar quality
approved by a Responsible Officer, or
(iv) any Affiliate of the foregoing,
such repurchase agreements to be (at the time entered into) fully
collateralized by securities of a type described in subsection (a), (c), (g)
or (h) above, in each case made in accordance with the Company's internal
investment policy in effect at such time;
<PAGE>
(k) Investments in money market programs that would be classified on
the balance sheet of the investing Person as a current asset in accordance
with generally accepted accounting principles, which money market programs
have total invested assets in excess of $1,000,000,000;
(l) Investments in money market preferred stocks or other equivalent
Dutch-auction preferred stock of any corporation maturing within one year of
the date of acquisition thereof and with a credit rating at the time of
acquisition thereof of "AA+" or "aa1" or better (or a comparable rating) by
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
Inc. or any other rating agency nationally recognized in the United States,
Japan or any country which is a member of the European Community;
(m) notes receivable of, or prepaid royalties and other credit
extensions to, customers and suppliers in the ordinary course of business so
long as such notes, prepaid royalties or other credit extensions are due
within one year of the date of acquisition thereof or cover no more than a
reasonable estimate of one year's obligations to such customers or suppliers,
as the case may be;
(n) Rate Contracts entered into in the ordinary course of business so
long as, at the time any such transaction shall be entered into, the
counterparty in such transaction is one of the Banks or has outstanding debt
securities rated "A2" or better, or "A" or better (or a comparable rating),
by Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff &
Phelps Inc. or any other rating agency nationally recognized in the United
States, Japan or any country which is a member of the European Community;
(o) guarantees by the Company and its Subsidiaries of the obligations
of Subsidiaries of the Company and of vendors and suppliers of such
Subsidiaries or the Company, in each case in respect of transactions of such
Subsidiaries entered into in the ordinary course of business of such
Subsidiaries and such vendors and suppliers and directly related to the
business conducted by such vendors and suppliers with such Subsidiaries or
the Company, as the case may be;
(p) Investments existing on the Closing Date listed on Schedule 7.4(p);
---------------
and other Investments existing on the Closing Date not in excess, in the
aggregate, of $20,000,000; and
<PAGE>
(q) Investments not otherwise permitted by the other provisions of this
Section 7.4, if, on the date of the making of any such Investment, and after
giving effect to such Investment, the sum of (i) the difference between (A)
the aggregate cost of all Investments outstanding on such date made pursuant
to this subsection 7.4(q), minus (B) the net return of capital received by
the Company and its Subsidiaries on or prior to such date from all
Investments made pursuant to this subsection 7.4(q) during the period
commencing on the Closing Date and ending on such date, plus (ii) the
aggregate amount of Restricted Payments made pursuant to clause (iv) of
subsection 7.8(a) (and not otherwise permitted under subsection 7.8(a))
during the period commencing on the Closing Date and ending on such date,
does not exceed 15% of Tangible Net Worth on such date.
No Investments can be made pursuant to the provisions of subsection 7.4(q) of
this Agreement during any period when a Default or Event of Default has
occurred and is then continuing. Notwithstanding any provision in this
Section 7.4 to the contrary, none of the following shall constitute
"Investments" for purposes of this Section 7.4:
(i) Any distributions paid or made in respect of the stock of the
Company or any Subsidiary of the Company (whether in cash, Property or
stock of the Company or any such Subsidiary), or
(ii) Any payments (whether in cash, Property or stock of the
Company or any Subsidiary) to redeem, purchase or otherwise acquire any
stock of the Company or any Subsidiary of the Company;
provided, in each case, (A) that any such distribution or payment is
otherwise permitted under the terms of this Agreement or consented to in
writing by the Majority Banks, and (B) if any such distribution or payment is
changed from the form in which it was received, it must comply with the
provisions of this Section 7.4 or otherwise be consented to in writing by the
Majority Banks. For purposes of the preceding sentence, the term "stock"
shall include warrants, options and other rights to purchase stock.
For purposes of calculating compliance with this covenant, with respect to any
Investment denominated other than in Dollars, the equivalent in Dollars of any
such other Investment on the last day of each fiscal quarter of the Company
shall be deemed the amount of such Investment.
<PAGE>
7.5 Limitation on Subsidiary Debt. The Company shall not, at any time,
-----------------------------
suffer or permit any Subsidiary to create, incur or assume any Debt, or to issue
any Preferred Stock unless, immediately after the creation, incurrence or
assumption of such Debt, or the issuance of such Preferred Stock, and after
giving effect thereto, the sum of (i) the Sale/Leaseback Transaction Amount,
plus (ii) the amount of all Debt secured by Liens permitted only by subsection
7.1(q), plus (iii) all Debt of Subsidiaries of the Company (other than Debt owed
by a Subsidiary to the Company or to another Subsidiary of the Company) and all
Preferred Stock of the Subsidiaries of the Company (other than Preferred Stock
of a Subsidiary owned by the Company or another Subsidiary of the Company)
(without duplication) does not exceed 20% of Tangible Net Worth, in each case
determined as of such time.
7.6 Transactions with Affiliates. The Company shall not and shall not
----------------------------
permit any of its Subsidiaries to enter into any transaction with any Affiliate
of the Company or of any such Subsidiary except (a) in the ordinary course of
business and pursuant to the reasonable requirements of the business of the
Company or such Subsidiary and 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;
(b) if (i) such transaction relates to the compensation of an Affiliate who is
an officer, director or employee of the Company or any Subsidiary of the
Company, then (ii) such transaction is in the best interests of the Company and
its Subsidiaries, taken as a whole, (iii) such transaction has been approved by
the board of directors of the Company or the Subsidiary, as applicable, and (iv)
at the time of such transaction, the Company is required to file reports
pursuant to Section 13 of the Exchange Act; or (c) transactions between the
Company and a Subsidiary of the Company or between Subsidiaries of the Company.
This Section 7.6 shall not apply to the transactions contemplated by the Arcada
Letter of Intent. Purchases by the Company or any of its Subsidiaries of shares
of outstanding capital of the Company's Subsidiary formed under the laws of
China shall be deemed to comply with this Section 7.9 so long as the Company or
such Subsidiary pays fair value for such shares, as determined by the Board of
Directors of the Company.
7.7 Compliance with ERISA. The Company shall not directly or indirectly and
---------------------
shall not permit any ERISA Affiliate directly or indirectly to, (i) terminate
any Plan subject to Title IV of ERISA so as to result in any material (in the
opinion of the Majority Banks) liability to the Company or any ERISA Affiliate,
(ii) permit to exist any ERISA Event or any other event or condition, which
presents the risk of a material (in the opinion of the Majority Banks) liability
of the Company or any ERISA Affiliate, or (iii) make a complete or partial
withdrawal (within the meaning of ERISA Section 4201) from any Multiemployer
Plan so as to result in any material (in the opinion of the Majority Banks)
liability to the Company or any ERISA Affiliate, (iv) enter into any new Plan or
modify any existing Plan (except in
<PAGE>
the ordinary course of business consistent with past practice) which could
create Unfunded Pension Liabilities with respect to such Plan in an amount which
exceeds $30,000,000, or (v) permit the Unfunded Pension Liabilities under any
Plan to exceed $30,000,000.
7.8 Restricted Payments.
-------------------
(a) The Company shall not declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock or purchase, redeem or
otherwise acquire for value (or permit any of its Subsidiaries to do so) any
shares of its capital stock or any warrants, rights or options to acquire such
shares, now or hereafter outstanding (collectively, Restricted Payments");
-------------------
except that (i) the Company may declare and make dividend payments or other
- -----------
distributions payable solely in its capital stock, provided that immediately
--------
after giving effect to any such proposed action, no Default or Event of Default
would exist; (ii) any Subsidiary of the Company may declare and make dividend
payments or other distributions of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock or
redeem or otherwise acquire for value any shares of its capital stock or any
warrants, rights or options to acquire such shares, to or from the Company or to
or from a Wholly-Owned Subsidiary of the Company; (iii) the Company or any of
its Subsidiaries may purchase shares of preferred stock of Arcada Holdings at a
cost not exceeding $6,000,000, plus accrued and unpaid dividends thereon,
provided that immediately after giving effect to any such proposed action, no
- --------
Default or Event of Default would exist; and (iv) the Company and its
Subsidiaries may make such other Restricted Payments (other than the declaration
or making by the Company of any dividend payment on account of any shares of any
class of its capital stock) if, on the date of making such Restricted Payment,
and after giving effect to such Restricted Payment, the sum of (A) the
difference between (I) the aggregate cost of all Investments outstanding on the
date of such Restricted Payment made pursuant to subsection 7.4(q), minus (II)
the net return of capital received by the Company and its Subsidiaries on or
prior to such date from all Investments made pursuant to subsection 7.4(q)
during the period commencing on the Closing Date and ending on such date, plus
(B) the aggregate amount of Restricted Payments made pursuant to this clause
(iv) of subsection 7.8(a) (and not otherwise permitted under this subsection
7.8(a)) during the period commencing on the Closing Date and ending on such
date, does not exceed 15% of Tangible Net Worth on such date, provided that
--------
immediately after giving effect to any such proposed action, no Default or Event
of Default would exist.
(b) The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment of principal or redemption of Subordinated Debt, other than
mandatory prepayments or mandatory redemptions scheduled at the time of issuance
of such
<PAGE>
Subordinated Debt, or otherwise purchase or acquire any Subordinated Debt,
directly or indirectly, or give any notice that irrevocably binds it to take any
such action; provided, however, that as long as no Default or Event of Default
-------- -------
shall exist immediately prior to, or immediately after, the consummation of any
such action, the Company may refinance Subordinated Debt by issuing additional
Subordinated Debt (the terms, conditions and provisions of which shall be
approved by the Majority Banks in writing in advance) in an amount equal to or
exceeding the amount required to redeem any Subordinated Debt.
(c) The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment of principal or redemption of any notes issued under the Note
Agreement or the Note Purchase Agreement, other than mandatory prepayments or
mandatory redemptions scheduled at the time of issuance of such notes, or
otherwise purchase or acquire any of such notes, directly or indirectly, or give
any notice that irrevocably binds it to take any such action; provided, however,
that as long as no Default or Event of Default shall exist immediately prior to,
or immediately after, the consummation of any such action, the Company may
refinance the indebtedness outstanding under the Note Agreement or the Note
Purchase Agreement by issuing additional notes (the terms, conditions and
provisions of which shall be approved by the Majority Banks in writing in
advance) in an amount equal to or exceeding the amount required to redeem any
such notes.
7.9 Modified Quick Ratio. The Company shall not at any time suffer or
--------------------
permit its ratio (determined on a consolidated basis) of (a) cash plus the value
of all Cash Equivalents (valued in accordance with GAAP), plus the amount of
Eligible Receivables, net of any allowance for doubtful accounts, to (b) without
duplication, (i) Consolidated Current Liabilities, plus (ii) Consolidated Senior
Debt, plus (iii) Contingent Obligations of the Company and its Subsidiaries to
the extent such obligations in the aggregate from time to time exceed
$10,000,000, to be less than 1.20 to 1.00 during the period from the Closing
Date through March 31, 1994, or to be less than 1.25 to 1:00 at any time
thereafter.
7.10 Leverage Ratio. The Company shall not at any time suffer or permit the
--------------
ratio of (a) Total Liabilities, less the aggregate principal amount outstanding
under the 1991 Indenture and the 1992 Indenture as of the date of determination,
to (b) Tangible Net Worth, plus the aggregate principal amount outstanding under
the 1991 Indenture and the 1992 Indenture as of the date of determination, to be
greater than 1.10 to 1.00.
7.11 Minimum Tangible Net Worth. The Company shall not suffer or permit its
--------------------------
Tangible Net Worth as of the end of any fiscal quarter to be less than
$115,000,000 plus (i) 75% of Consolidated Net Income from October 1, 1993
through the end of each fiscal quarter thereafter, determined quarterly on a
consolidated basis and not reduced by any quarterly loss, plus (ii) 100% of the
Net Proceeds of any sale of capital stock of the
<PAGE>
Company by or for the account of the Company, occurring on or after October 1,
1993, plus (iii) (without duplication) the amount by which the consolidated
Tangible Net Worth of the Company is increased, in accordance with GAAP, due to
conversions of Debt to equity occurring on or after October 1, 1993.
7.12 Losses in One Quarter. The Company, on a consolidated basis, shall not
---------------------
incur or suffer or permit to be incurred in any fiscal quarter, beginning after
September 30, 1993 (with the first computation being made as of December 31,
1993), an operating loss in excess of $40,000,000 or a net loss in excess of
$40,000,000, all as determined in accordance with GAAP.
7.13 Losses in Two Consecutive Quarters. The Company, on a consolidated
----------------------------------
basis, shall not incur or suffer or permit to be incurred in any two consecutive
fiscal quarters, beginning after September 30, 1993 (with the first computation
being made as of March 31, 1994), treated as one fiscal period, an operating
loss in excess of $25,000,000 or a net loss in excess of $25,000,000, all as
determined in accordance with GAAP.
7.14 Change in Business. The Company shall not, and shall not suffer or
------------------
permit any of its Subsidiaries to, engage in any material respect in any
business other than the development, manufacturing, distribution and sale of
computer peripherals and computer peripheral components.
7.15 Accounting Changes. The Company shall not, and shall not suffer or
------------------
permit any of its Subsidiaries to, make any significant change in accounting
treatment and reporting practices, except as required by GAAP, or change, suffer
or permit to be changed the fiscal year of the Company or any of its
Subsidiaries.
7.16 Indenture/Note Amendment. The Company shall not amend or agree to amend
------------------------
the Note Agreement or the Note Purchase Agreement, or the notes issued in
connection with a refinancing of the Note Agreement or the Note Purchase
Agreement pursuant to Section 7.8(c), to amend the repayment schedule with
respect thereto so as to cause any principal amount thereof to be payable
earlier than is provided on the date hereof. The Company shall not amend or
agree to amend the 1991 Indenture or the 1992 Indenture, or any other
documentation relating to Subordinated Debt, to amend the subordination
provisions thereof, to amend the repayment schedule with respect thereto so as
to cause any principal amount thereof to be payable earlier than is provided on
the date hereof, or to amend any other provision in any manner adverse to the
Banks.
7.17 Cessation of Business. The Company shall not voluntarily cease to
---------------------
conduct its business, except short-term cessations in the ordinary course of
business.
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
8.1 Event of Default. Any of the following events shall constitute an
----------------
"Event of Default":
----------------
(a) Non-Payment. The Company fails to pay when due any amount of
-----------
principal of any Loan, or fails to pay within three Business Days of the date
when due, any interest on any Loan or any amount required by Section 2.10
hereof;
(b) Non-Payment of Other Amounts. The Company fails to pay within
----------------------------
thirty (30) days of the date any Miscellaneous Payment Notice is given, any
Miscellaneous Payment Amount;
(c) Representation or Warranty. Any representation or warranty by the
--------------------------
Company herein, or in any Loan Document, shall prove to have been incorrect
in any material respect on or as of the date made or deemed made; or
(d) Specific Defaults. The Company fails to perform or observe any
-----------------
term, covenant or agreement contained in Section 6.13 or Article VII hereof;
or
(e) Other Defaults. The Company fails to perform or observe any other
--------------
term or covenant contained in this Agreement or any Loan Agreement, and such
default shall continue unremedied for a period of 30 days after the earlier
of (i) the date upon which a Responsible Officer of the Company knew or
should have known of such failure or (ii) the date upon which written notice
thereof has been given to the Company by the Agent or any Bank; or
(f) Cross-Default. The Company or any of its Subsidiaries (i) fails to
-------------
make any payment in respect of any Debt or Indebtedness having an aggregate
principal amount (including amounts owing to all creditors under any combined
or syndicated credit arrangement) of more than $10,000,000 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 document relating thereto; or (ii) 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 Debt or Indebtedness (in such aggregate principal amount), and such
failure continues after the applicable grace or notice period, if any,
specified in the document relating thereto if the effect of such event or
condition is to cause, or to permit the holder or holders of such Debt or
Indebtedness or
<PAGE>
beneficiary or beneficiaries of such Debt or Indebtedness (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause such Debt or Indebtedness to be declared to be due and payable prior to
its stated maturity, or to be paid upon demand, or require the repurchase of
such Debt or Indebtedness, or if in respect of an obligation that is
contingent or unmatured, to compel the Company or such Subsidiary to deliver
cash collateral (including in the form of Cash Equivalents) in an amount
exceeding $10,000,000; provided, however, that no Event of Default shall
-----------------
exist under this subsection 8.1(f) solely as a result of (A) the voluntary
prepayment or redemptions of Debt or Indebtedness by the Company or any
Subsidiary of the Company in the absence of any event of default thereunder,
(B) reimbursement payments made in respect of any draws under letters of
credit issued for the account of the Company or any such Subsidiary or
payments made in satisfaction of guaranty obligations owing by the Company or
any such Subsidiary, or (C) the acceleration of the Italian Debt; or
(g) Cross-Acceleration. The Company fails to perform or observe any
------------------
payment obligation under any agreement or instrument of Indebtedness in favor
of any Bank and such failure continues for a period of five Business Days
after a written notice is delivered by such Bank (with a copy to the Agent)
under this subsection 8.1(g), and in connection therewith: (i) such Bank has
caused such agreement or instrument to be declared due and payable prior to
its stated maturity; or (ii) if such agreement or instrument is an obligation
specified in subclause (i) of the definition of "Indebtedness," such Bank
shall have issued a notice of default due to non-payment of such obligation;
or (iii) if such agreement or instrument is an obligation specified in
subclause (c) of the definition of "Indebtedness," such Bank shall have
issued a demand for cash collateralization in the case where such obligation
has been drawn or the Company shall not have reimbursed such Bank in
accordance with the terms of such obligation in the case where such
obligation has been drawn; or (iv) if such agreement or instrument is a Rate
Contract, following an event of default thereunder such Bank shall have
issued a demand for payment of net obligations and the Company has not
satisfied such demand on a timely basis; provided, however, that no Event of
-----------------
Default shall exist under this subsection 8.1(g) solely as a result of the
acceleration of the Italian Debt; or
(h) Bankruptcy or Insolvency. (i) The Company is or becomes not
------------------------
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; or (ii) the
<PAGE>
Company or any of its Subsidiaries (A) commences any Insolvency Proceeding or
files any petition or answer in any Insolvency Proceeding; (B) acquiesces in
the appointment of a receiver, trustee, custodian or liquidator for itself or
a substantial portion of its Property, assets or business or effects a plan
or other arrangement with its creditors; (C) admits the material allegations
of a petition filed against it in any Insolvency Proceeding, or (D) takes any
action to effectuate any of the foregoing; or (iii) the Company and its
Subsidiaries on a consolidated basis are or become not Solvent; or
(i) Involuntary Proceedings. Any involuntary Insolvency Proceeding is
-----------------------
commenced or filed against the Company or any Subsidiary of the Company 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 of its
Subsidiaries' assets and any such proceedings 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
consecutive days after commencement, filing or levy; or
(j) ERISA. (i) The Company or an 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 a
Multiemployer Plan which could reasonably be expected to have a Material
Adverse Payment Effect; (ii) the Company or an ERISA Affiliate shall fail to
satisfy its contribution requirements under section 412(c)(11) of the Code,
whether or not it has sought a waiver under Section 412(d) of the Code; (iii)
in the case of an ERISA Event involving the withdrawal from a Plan of a
"substantial employer" (as defined in section 4001(a)(2) or section 4062(e)
of ERISA), the withdrawing employer's proportionate share of that Plan's
Unfunded Pension Liabilities is more than $40,000,000; (iv) in the case of an
ERISA Event involving the complete or partial withdrawal from a Multiemployer
Plan by the Company or an ERISA Affiliate, there is incurred a withdrawal
liability in an aggregate amount for the Company and all ERISA Affiliates of
the Company exceeding $60,000,000; (v) in the case of an ERISA Event
described in clause (d) or (f) of the definition of "ERISA Event," the
Unfunded Pension Liabilities of the relevant Plan or Plans exceed
$30,000,000; (vi) a Plan that is intended to be qualified under section
401(a) of the Code shall lose its qualification, and the loss could
reasonably be expected to impose on the Company or an ERISA Affiliate
liability (for additional taxes, to Plan participants, or otherwise) in the
aggregate amount of $20,000,000 or more; (vii) the commencement or increase
of contributions
<PAGE>
to, the adoption of, or the amendment of a Plan (excluding any amendment
required to be made by ERISA, the Code or other applicable law) by, the
Company or an ERISA Affiliate shall result in a net increase in Unfunded
Pension Liabilities to the Company or an ERISA Affiliate in excess of
$20,000,000; or (viii) the occurrence of any combination of events listed in
clauses (iii) through (vii) that involves a net increase in aggregate
Unfunded Pension Liabilities and unfunded liabilities in excess of
$30,000,000; or
(k) Monetary Judgments. One or more final judgments, orders or decrees
------------------
shall be entered against the Company or any of its Subsidiaries involving in
the aggregate a liability of $50,000,000 or more (excluding amounts covered
by insurance provided by a Person not an Affiliate of the Company under a
policy to the extent to which such insurer has not contested coverage) and
the same shall remain unvacated, undischarged (other than by payment
thereof), and unstayed pending appeal, for a period of 45 consecutive days
after the entry thereof; or
(l) Non-Monetary Judgments. Any final non-monetary judgment, order or
----------------------
decree shall be rendered against the Company or any of its Subsidiaries which
does or is likely to have a Material Adverse Payment Effect, and there shall
be any period of 45 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, unless such judgment, order or decree shall, within such 45-day
period, be vacated or discharged (other than by satisfaction thereof); or
(m) Invalidity of Subordination Provisions. The subordination
--------------------------------------
provisions of the 1991 Indenture, the 1992 Indenture, or any agreement or
instrument governing any other Subordinated Debt are for any reason revoked
or invalidated, or otherwise cease to be in full force and effect.
8.2 Remedies. 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
Commitments of each Bank to make Loans to be terminated, whereupon such
Commitments shall forthwith be terminated; (b) declare the unpaid principal
amount of all outstanding Loans, all interest accrued and unpaid thereon and all
other amounts payable hereunder to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company; and (c) exercise all rights and remedies
available to it under the Loan Agreements or applicable law; or any one or more
of the foregoing; provided, however, that upon the occurrence of any event
-------- -------
specified in clause (h) or (i) above (in the case of such clause (i) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans
<PAGE>
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 or any Bank.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and the
--------------------
other Loan Agreements 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.
8.4 Certain Financial Covenant Defaults. In the event that after the end of
-----------------------------------
any fiscal period of the Company, after taking into account any extraordinary
charge to earnings taken or to be taken as of the end of such fiscal period (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 7.9, 7.10, 7.11, 7.12 or 7.13 as of
such fiscal period end date, such Event of Default shall be deemed to arise upon
the earlier of (a) the date the Company announces publicly it is taking or has
taken such Charge (including an announcement in the form of a statement in a
report filed with the SEC) 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 IX
THE AGENT
---------
9.1 Appointment and Authorization. Each Bank hereby irrevocably 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, or 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.
9.2 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 shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
<PAGE>
9.3 Liability of Agent. None of the Agent-Related Persons shall (a) 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 (b) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary 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 its Subsidiaries.
9.4 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, or to the extent expressly required herein, of all the Banks
as it deems appropriate and, if it so requests, it shall first be indemnified to
its reasonable satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The 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 4.1, each Bank shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Bank unless an officer of the Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice
<PAGE>
from the Bank on or prior to the Closing Date specifying its objection thereto
and either such objection shall not have been withdrawn by notice to the Agent
to that effect or the Bank shall not have made available to the Agent the Bank's
ratable portion of such Borrowing. This subsection 9.4(b) is intended solely
for the benefit of the Agent, and the Company shall not have any right or remedy
as a result of this subsection.
9.5 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 payable 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
VIII; 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 in the best interests of the Banks.
9.6 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 made its own decision to enter into this Agreement and
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 required to be furnished to the Banks by the Agent
hereunder, 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.
<PAGE>
9.7 Indemnification. 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; provided, however, each Bank shall only be required to reimburse
-------- -------
the Agent for costs and out-of-pocket expenses with respect to accountants or
outside consultants to the extent such Bank approved the hiring of such
accountants or consultants. The undertaking in this Section shall survive the
payment of all the Loans hereunder and the resignation or replacement of the
Agent.
9.8 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 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, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the Majority
---------------
Banks shall, resign as Agent upon thirty (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 which successor agent shall be
approved by the Company. 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
<PAGE>
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 IX and Sections 10.4 and 10.5 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.
ARTICLE X
MISCELLANEOUS
-------------
10.1 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 and the Company and acknowledged by
the Agent, and then such waiver 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 subsection 8.2(a));
(b) postpone or delay any date fixed for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them) under any
Loan Agreement;
(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 or number of Banks which is required for the
Banks or any of them to take any action hereunder; or
(e) amend this Section 10.1, subsection 2.1(b) 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 Agent in addition to the Majority Banks, affect the
rights or duties of the Agent
<PAGE>
under this Agreement or any other Loan Document, and (ii) the fees contained in
the commitment letter referred to in subsection 2.10(a) may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.2 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 the applicable signature page hereof, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed,
telecopied or delivered, to the address or facsimile number specified for
notices on the applicable signature page hereof; 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 telecopied, 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 or IX shall not be effective until actually
received by the Agent.
(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 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.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
------------------------------
exercising, on the part of any 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.
<PAGE>
10.4 Costs and Expenses. The Company shall, whether or not the transactions
------------------
contemplated hereby shall be consummated:
(a) pay or reimburse the Agent on demand for all costs and expenses
incurred in connection with the development, preparation, negotiation,
syndication, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to, 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
the Attorney Costs with respect thereto;
(b) pay or reimburse each Bank and the Agent on demand for all costs
and expenses incurred by them in connection with the enforcement or
preservation of any rights (including in connection with any "workout" or
restructuring regarding the Loans) under this Agreement, any Loan Document,
and any such other documents, including Attorney Costs to the Agent and to
each of the Banks; and
(c) pay or reimburse the Agent on demand for all appraisal, audit,
search and filing fees, incurred or sustained by the Agent in connection with
the matters referred to under paragraphs (a) and (b) above.
10.5 Indemnity. The Company shall pay, indemnify, and hold each Bank, the
---------
Agent and each of their 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 or disbursements (including
Attorney Costs) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents or the transactions contemplated herein, and with respect
to any investigation, litigation or proceeding related to this Agreement or the
Loans 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 arising from the
gross negligence or willful misconduct of such Indemnified Person. The
agreements in this section shall survive payment of all other Obligations.
10.6 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
<PAGE>
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.
10.7 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 permitted assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement (other than by
operation of law pursuant to any merger or consolidation permitted by Section
7.3) without the prior written consent of each Bank.
10.8 Assignments, Participations, etc.
---------------------------------
(a) Any Bank may, with the written consent of the Company and the Agent,
which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Transferees and, with notice to the Agent but
without the consent of the Company or the Agent, may assign to any of its
wholly-owned Affiliates (each an "Assignee") all or any ratable part of all of
--------
the Loans, the Commitments, and any other rights or obligations of such Bank
hereunder, in a minimum amount of $10,000,000, provided, however, that the
-------- -------
Company and the Agent may continue to deal solely and directly with such Bank in
connection with the interests 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 and (ii) such Bank and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit 10.8(a) ("Assignment and Acceptance"); and
--------------- -------------------------
(iii) the processing fees of $2,500 shall have been paid to the Agent.
(b) From and after the date that the Agent notifies the assignor Bank that
it has received (and provided its consent to, if applicable) the 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 have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents.
<PAGE>
(c) Immediately upon each Assignee's making its 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 Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Bank
pro tanto.
- --- -----
(d) Any Bank may at any time sell to one or more Eligible Transferees (a
"Participant") participating interests in any Loans, the Commitment of that Bank
- ------------
or any other interest of that Bank hereunder; provided, however, that (i) the
-------- -------
Bank's obligations under this Agreement shall remain unchanged, (ii) the Bank
shall remain solely responsible for the performance of such obligations, (iii)
the Company and the Agent shall continue to deal solely and directly with the
Bank in connection with the Bank's rights and obligations under this Agreement,
and (iv) no Bank shall transfer or grant any participating interest under which
the Participant shall have rights to approve any amendment to, or any consent or
waiver with respect to this Agreement except to the extent such amendment,
consent or waiver would require unanimous consent of the Banks as described in
the first proviso to Section 10.1. In the case of any such participation, the
----- -------
Participant shall not have any rights under this Agreement, or any of the other
Loan Documents, and all amounts payable by the Company hereunder shall be
determined as if such Bank had not sold such participation, except that 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) Each Bank agrees to take normal and reasonable precautions and exercise
due care to maintain the confidentiality of all non-public information provided
to it by the Company or any Subsidiary of the Company or by the Agent on such
Company's or Subsidiary's behalf in connection with this Agreement and neither
it nor any of its Affiliates shall use any such information for any purpose or
in any manner other than pursuant to the terms contemplated by this Agreement,
except to the extent such information (i) was or becomes generally available to
the public other than as a result of a 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 further, however, that any Bank may
---------------- -------
disclose such information (A) at the request of any Bank regulatory authority 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 law; (D) at the express
direction of any other agency of any State of the United States of America or of
any
<PAGE>
other jurisdiction in which such Bank conducts its business; and (E) to such
Bank's independent auditors and other professional advisors. Notwithstanding
the foregoing, the Company authorizes the Agent and each Bank to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
such financial and other information in such Bank's possession concerning the
Company or its Subsidiaries which has been delivered to the Banks pursuant to
this Agreement or which has been delivered to the Banks by the Company in
connection with the Banks' credit evaluation of the Company prior to entering
into this Agreement; provided that such Transferee agrees in writing to such
--------
Bank to keep such information confidential to the same extent required of the
Banks hereunder.
(f) Any Bank may hypothecate and pledge all or any part of the Obligations
owing to it, together with its interest in the Loan Documents, to the FRB or any
Federal Reserve Bank.
10.9 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 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 of the Company now or hereafter existing under
this Agreement or any other Loan Document and any Loan held by such Bank
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. The rights of each Bank under this Section 10.9
are in addition to the other rights and remedies (including without limitation,
other rights of set-off) which the Bank may have.
10.10 Termination of the Commitments under Existing Facility. Pursuant to
------------------------------------------------------
Section 2.5 of the Existing Facility, the Company hereby terminates the
Aggregate Commitments under, and as that term is defined in, the Existing
Agreement as of the date hereof, and the Banks hereby waive the three Business
Days' prior notice requirement in Section 2.5 for such notice. The Company
agrees to pay, on the date hereof, all accrued commitment fees under the
Existing Facility to, but not including, the date hereof.
10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
-----------------------------------------------
notify the Agent and the Company in writing of any changes in the address to
which notices to the Bank should be directed, of addresses of its Eurodollar
Lending Office and its Domestic Lending Office, of payment instructions in
respect of
<PAGE>
all payments to be made to it hereunder and of such other administrative
information as the Agent shall reasonably request.
10.12 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.
10.13 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.
10.14 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.
10.15 Governing Law and Jurisdiction.
------------------------------
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE
LOAN DOCUMENTS 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.
10.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT 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 BOUGHT 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 AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL
<PAGE>
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.
10.17 Entire Agreement. This Agreement, together with the other Loan
----------------
Documents, embodies the entire agreement and understanding among the Company,
the Banks 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 except, to the extent it related to the payment of
fees, for the commitment letter referenced in subsection 2.10(a).
<PAGE>
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.
CONNER PERIPHERALS, INC.
By: /s/ Conner Peripherals Inc.
---------------------------------
Title:
------------------------------
Address for notices:
3081 Zanker Road
San Jose, Ca 95134
Attn: P. Jackson Bell
Facsimile: (408) 456-3770
Telephone: (408) 456-3841
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent
By: /s/ Bank of America NT & SA
---------------------------------
Vice President
Address for notices:
Global Agency #5596
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Judith L. Kramer
Facsimile: (415) 622-4894
Telephone: (415) 953-2506
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Bank
By: /s/ Bank of America NT & SA
---------------------------------
Vice President
Address for notices:
Credit Products-High Technology #3697
555 California Street
San Francisco, CA 94104
Attn: Michael A. Drevno
Facsimile: (415) 622-2514
Telephone: (415) 622-8088
Domestic and Eurodollar Lending Offices:
1850 Gateway Boulevard
Concord, CA 94520
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ The First National Bank of Boston
--------------------------------------
Title:
-----------------------------------
Address for notices:
435 Tasso Street
Suite 250
Palo Alto, CA 94301
Attn: Alfred Artis & Lee Merkle
Facsimile: (415) 853-1425
Telephone: (415) 853-0947
Domestic Lending Office:
100 Federal Street
Boston, MA 02110
Eurodollar Lending Office:
100 Federal Street
Boston, MA 02110
<PAGE>
BARCLAYS BANK PLC
/s/ Barclays Bank PLC
By: _____________________________
Title: __________________________
Address for notices:
388 Market Street
Suite 1700
San Francisco, CA 94111
Attn: Dean Chu
Facsimile: (415) 765-4760
Telephone: (415) 765-4703
Domestic Lending Office:
75 Wall Street
New York, NY 10265
Eurodollar Lending Office:
Nassau Bahamas Branch
c/o 75 Wall Street
New York, NY 10265
<PAGE>
SCHEDULE 2.1(a)
Commitments
-----------
<TABLE>
<CAPTION>
Commitment
Banks Commitment Percentage
----- ------------ -----------
<S> <C> <C>
Bank of America National Trust
and Savings Association $ 35,000,000 35%
The First National Bank of Boston $ 34,000,000 34%
Barclays Bank PLC $ 31,000,000 31%
Total $100,000,000 100%
============ ===
</TABLE>
<PAGE>
SCHEDULE 2.3(c)
Payment Offices
---------------
Bank of America National Trust
and Savings Association
ABA No. 121-000-358
Attn: Global Agency #5596
1850 Gateway Boulevard
Concord, CA 94250
For credit to: Account No. 1233-3-15329
Reference: Conner Peripherals, Inc.
The First National Bank of Boston
ABA No. 011-000-390
Commercial Loan Services
Mail Stop 7402-041
100 Rustcraft Road
Dedham, MA 02026
Reference: ADM 50 High Tech,
Conner Peripherals, Inc.
Barclays Bank PLC
ABA No. 026-002-574
75 Wall Street
New York, NY 10265
Account No. 050-019104
Benf: CLAD
Reference: Conner Peripherals, Inc.
<PAGE>
EXHIBIT 2.3
Notice of Borrowing
-------------------
Date: ____________________
To: Bank of America National Trust and Savings Association as Agent for the
several financial institutions from time to time party to the Credit
Agreement dated as of December 23, 1993 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among Conner
----------------
Peripherals, Inc., the several financial institutions from time to time
party thereto and Bank of America National Trust and Savings Association, as
Agent
Ladies and Gentlemen:
The undersigned, Conner Peripherals, 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 2.3 of the
Credit Agreement, of the Borrowing specified herein:
1. The Business Day of the proposed Borrowing is ______
_____________________________, 19___.
2. The aggregate amount of the proposed Borrowing is
$_________________.
3. The Borrowing is to be comprised of $___________ of
[Eurodollar Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the
Eurodollar Rate Loans included in the Borrowing shall be
[_______ days] [_______ 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 V of the Credit Agreement are true and correct as though made on and
as of the date hereof (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and correct
as of such date);
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing; and
<PAGE>
(c) no Material Adverse Compliance Effect has occurred since September
30, 1993.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
date first set forth above.
CONNER PERIPHERALS, INC.
By: _________________________
Title: ______________________
<PAGE>
EXHIBIT 2.4
Notice of Conversion/Continuation
---------------------------------
Date: ____________________
To: Bank of America National Trust and Savings Association as Agent for the
several financial institutions from time to time party to the Credit
Agreement dated as of December 23, 1993 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") among Conner
----------------
Peripherals, Inc., the several financial institutions from time to time
party thereto and Bank of America National Trust and Savings Association, as
Agent
Ladies and Gentlemen:
The undersigned, Conner Peripherals, 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 2.4 of the
Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The date of the [conversion] [continuation] is
______________________, 19__.
2. The aggregate amount of the Loans to be [converted]
[continued] is $______________.
3. The Loans are to be [converted into] [continued
as] [Eurodollar Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period
for the Loans included in the [conversion] [continuation]
shall be [______ months].
The undersigned hereby certifies that as of the date hereof, and as of the
date of the proposed [conversion][continuation], before and after giving effect
thereto and to the application of the proceeds therefrom, no Default or Event of
Default has occurred and is continuing, or would result from such proposed
[conversion] [continuation].
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
date first set forth above.
CONNER PERIPHERALS, INC.
By: _________________________
Title: ______________________
<PAGE>
EXHIBIT 4.1(d)(i)
Opinion of Company's Counsel
----------------------------
[Letterhead of Wilson, Sonsini, Goodrich & Rosati]
December 23, 1993
Bank of America National Trust and
Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Global Agency #5596
and
The financial institutions listed
on Schedule 1 hereto (the "Banks")
-----
Re: Credit Agreement, dated as of December 23, 1993, among Conner
Peripherals, Inc., the Banks named therein and Bank of America
National Trust and Savings Association, as Agent for the Banks
--------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Conner Peripherals, Inc., a California
corporation (the "Company"), in connection with the negotiation, execution and
-------
delivery of that certain Credit Agreement, dated as of December 23, 1993,
including the exhibits and Schedules thereto and the Disclosure Letter (the
"Credit Agreement"), among the Company, the Banks named therein and Bank of
- -----------------
America National Trust and Savings Association, as Agent for the Banks.
Capitalized terms used herein which are defined in the Credit Agreement shall
have the respective meanings set forth in the Credit Agreement, unless otherwise
defined herein. This opinion is rendered to you pursuant to Section 4.1(d)(i)
of the Credit Agreement.
In acting as such counsel, we have examined:
(a) the Credit Agreement;
(b) a letter agreement, dated as of the date hereof, by and between the
Company and the Agent with respect to
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 2
certain fees payable in connection with the Credit Agreement (the "Fee
---
Letter");
------
(c) a Certificate of certain officers of the Company, dated as of the date
hereof, executed and delivered to you by the Company pursuant to Section
4.1(f) of the Credit Agreement;
(d) a Certificate of the Treasurer of the Company, dated as of the date
hereof, with respect to certain financial statements of the Company,
executed and delivered to you by the Company pursuant to Section 4.1 of
the Credit Agreement;
(e) a Certificate of the Assistant Secretary of the Company, dated as of the
date hereof, executed and delivered to you pursuant to Sections 4.1(b)
and 4.1(c) of the Credit Agreement, as to, among other things: (i) the
incumbency and signature of certain officers of the Company); (ii) the
Restated Articles of Incorporation of the Company; (iii) the bylaws of
the Company; and (iv) the adoption of certain resolutions by the
directors of the Company.
(f) a copy of the Restated Articles of Incorporation of the Company,
certified as of December __, 1993, by the Secretary of State of the
State of California;
(g) (i) a certificate of the Secretary of State of the State of California,
dated December __, 1993, with respect to the status of the Company as a
corporation incorporated under the laws of the State of California, and
a tax status certificate of the Franchise Tax Board of the State of
California, dated December __, 1993, with respect to the tax status of
the Company; (ii) a certificate of the Secretary of State of the State
of Colorado, dated December __, 1993, with respect to the standing of
the Company as a foreign corporation qualified to do business in the
State of Colorado; (iii) a certificate of the Secretary of State of the
State of Massachusetts, dated December __, 1993, with respect to the
standing of the Company as a foreign corporation qualified to do
business in the State of Massachusetts; (iv) a certificate of the
Secretary of State of the State of Minnesota, dated December __, 1993,
with respect to the standing of the Company as a foreign corporation
qualified to do business in the State of Minnesota; and (v) a
certificate of the Secretary of
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 3
State of the State of Texas, dated December __, 1993, with respect to
the standing of the Company as a foreign corporation qualified to do
business in the State of Texas, and a certificate of the Controller of
the State of Texas with respect to the tax status of the Company, dated
December __, 1993; and
(h) the documents and agreements listed on Schedule 2 hereto (the "Reviewed
--------
Agreements") which the Company has certified to us constitute (i) all of
----------
the written indentures, debentures, loan agreements, lines of credit and
guarantees as to which the Company or one of its Subsidiaries is a
party, pursuant to which such party, as of December 23, 1993, is
borrowing or guaranteeing (pursuant to such agreement and not in the
aggregate) $5,000,000 or more, (ii) all of the documents listed as
exhibits to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, included therein pursuant to the requirements of
clauses (2), (4), (9) or (10) of Item 601(b) of Regulation S-K (other
than those which have expired, terminated or are otherwise no longer in
effect), and (iii) all of the documents required to be listed as
exhibits to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (if such Annual Report were filed as of the date
hereof), required to be included therein pursuant to the requirements of
clauses (2), (4), (9) or (10) of Item 601(b) of Regulation S-K (other
than those which have expired, terminated or are otherwise no longer in
effect).
The Credit Agreement, together with the Fee Letter incorporated therein by
reference, is referred to herein as the Agreement. The Certificates referenced
in paragraphs (c), (d) and (e) above are referred to herein collectively as the
"Other Loan Documents".
--------------------
With respect to any documents submitted for our review we have assumed that
all signatures (other than those on behalf of the Company on the documents
referred to in paragraphs (a), (b), (c), (d) and (e) above) are genuine, all
documents submitted as originals are authentic, all documents submitted as
copies conform to the original documents and that all documents, books and
records made available to us by the Company are accurate and complete.
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 4
We have also relied upon and obtained from public officials and officers and
representatives of the Company such other certificates and assurances as we
consider necessary for the purposes of rendering this opinion. With respect to
certain matters of fact we have relied upon, with your permission, the
Certificate of the Assistant Secretary of the Company referenced in paragraph
(e) above, an Officers' Certificate in the form attached to this opinion and the
certificates of public officials referenced in paragraph (g) above.
As used in this opinion, the expression "to our knowledge" or "known to us"
with reference to matters of fact means that during the course of our
representation of the Company in connection with the Agreement no information
has come to the attention of the attorneys of our firm involved in this
engagement which would give them actual knowledge of the existence or absence of
such facts; however, except to the extent expressly set forth herein, we have
made no independent investigation to determine the existence or absence of such
facts, and any limited inquiry undertaken by us during the preparation of this
opinion should not be regarded as such an investigation. No inference as to our
knowledge of the existence or absence of such facts should be drawn from the
fact of our representation of the Company. In rendering the opinion set forth
in paragraph 7 below, we have not made any independent investigation of court or
other governmental records to determine whether any actions have been filed.
On the basis of the foregoing and in reliance thereon, and based upon
examination of questions of law as we have deemed appropriate, and subject to
the assumptions, exceptions, qualifications and limitations set forth herein, we
advise you that in our opinion:
1. The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of California. The Company is
duly qualified to do business and is in good standing in the States of
Colorado, Massachusetts, Minnesota and Texas.
2. The Company has the requisite corporate power and authority to enter
into and perform the Agreement, to execute and deliver the Other Loan
Documents, to own its properties and assets and to carry on its business
as presently conducted.
3. The Agreement, the borrowings proposed to be made under the Agreement
and the execution and delivery of the
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 5
Other Loan Documents have been duly authorized by all necessary
corporate action on the part of the Company. The Agreement and the
Other Loan Documents have been duly executed and delivered by the
Company. The Agreement constitutes a legally valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
4. The execution and delivery of the Agreement, the execution and delivery
of the Other Loan Documents, the borrowings of Loans in accordance with
the Agreement, repayment of any such Loans by the Company and the
undertaking of the covenants set forth in the Agreement do not (a)
contravene the Company's Restated Articles of Incorporation or Bylaws,
(b) contravene any order, writ, judgment, decree, determination or award
of any court or arbitrator, known to us, to which the Company is a party
or subject, (c) conflict with or constitute a breach of the terms,
conditions or provisions of or constitute a default under any Reviewed
Agreement, (d) result in, or require the creation or imposition of any
lien, security interest or other encumbrance on any of the properties or
revenues of the Company or any of its Subsidiaries pursuant to any
Reviewed Agreement, or (e) contravene any provision of law, statute,
rule or regulation having applicability to the Company.
5. No governmental consents, approvals, authorizations, registrations,
declarations or filings are required to be made or obtained by the
Company (or on its behalf) for the due authorization, execution and
delivery by the Company of the Agreement and the Other Loan Documents,
the borrowing of Loans in accordance with the Agreement or the repayment
of any such Loans by the Company.
6. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
7. To our knowledge, no litigation, investigation or proceeding of or
before any court, arbitrator or other governmental authority is pending
or threatened against the Company or any Subsidiary of the Company or
any of the properties or revenues of the Company or any Subsidiary
thereof with respect to the Agreement or any of the borrowings proposed
to be made under the Agreement.
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 6
8. The Loans under the Agreement constitute "Senior Indebtedness" as such
term is defined in the 1991 Indenture and the 1992 Indenture.
The foregoing opinions are subject to the following exceptions,
qualifications, limitations and assumptions:
A. We are admitted to practice law only in the State of California. Except
for the limited purpose of rendering the opinions set forth in clauses
(c) and (d) of paragraph 4 in accordance with the assumption set forth
in the next sentence, we express no opinion as to any matter relating to
laws of any jurisdiction other than the laws of the State of California
and the federal laws of the United States, as such are in effect on the
date hereof. For purposes of our review of the Reviewed Agreements,
except in the case of any such Reviewed Agreements, governed by the
federal laws of the United States, where such Reviewed Agreements
purport to be governed by laws other than those of the State of
California, we have, with your consent, assumed that the laws governing
such Reviewed Agreements (including the effect thereof and the
appropriate interpretation thereof) are no different from the laws of
the State of California.
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar
laws relating to or affecting the rights of creditors generally
including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or conveyances or preferential transfers,
or (ii) the effect of general principles of equity, including without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance,
injunctive relief or other equitable relief, whether considered in a
proceeding in equity or at law.
C. We express no opinion (i) regarding the enforceability of any provision
which may be deemed to be "unconscionable" within the meaning of Section
1670.5 of the California Civil Code, or (ii) as to the effect of the
exercise of judicial discretion, whether in a proceeding in equity or at
law.
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 7
D. We express no opinion as to the legality, validity, binding nature or
enforceability of (i) provisions in the Agreement providing for the
payment or reimbursement of costs or expenses or indemnifying a party,
to the extent such provisions may be held unenforceable as contrary to
public policy, (ii) any provision of the Agreement insofar as it
provides for the payment or reimbursement of costs and expenses or
indemnification for claims, losses or liabilities in excess of a
reasonable amount determined by any court or other tribunal, (iii)
provisions regarding a Bank's or the Agent's ability to collect
attorneys' fees and costs in an action involving the Agreement, if the
Bank or Agent is not the prevailing party in such action (we call your
attention to the effect of Section 1717 of the California Civil Code,
which provides that, where a contract permits one party thereto to
recover attorneys' fees, the prevailing party in any action to enforce
any provision of the contract shall be entitled to recover its
reasonable attorneys' fees), (iv) provisions of any Agreement imposing
penalties or forfeitures, late payment charges or any increase in
interest rate, upon delinquency in payment or the occurrence of a
default to the extent they constitute a penalty or forfeiture or are
otherwise contrary to public policy, or (v) any provision of the
Agreement to the effect that a statement, certificate or determination
shall be deemed conclusive absent manifest error.
E. We express no opinion with respect to the legality, validity, binding
nature or enforceability of (i) any vague or broadly stated waivers
including, without limitation, the waivers of diligence, presentment,
demand, protest or notice, (ii) any waivers or consents (whether or not
characterized as a waiver or consent in the Agreement) relating to the
rights of the Company or duties owing to it existing as a matter of law,
including, without limitation, waivers of the benefits of statutory or
constitutional provisions, to the extent such waivers or consents are
found by California courts to be against public policy or which are
ineffective pursuant to California statutes and judicial decisions, or
(iii) any waivers of any statute of limitations to the extent such
waivers are in excess of four years beyond the statutory period.
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 8
F. We express no opinion with respect to the legality, validity, binding
nature or enforceability of any provision of the Agreement to the effect
that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or
remedy, that the election of some particular remedy or remedies does not
preclude recourse to one or more other remedies or that failure to
exercise or delay in exercising rights or remedies will not operate as a
waiver of any such right or remedy.
G. We express no opinion as to any provision of the Agreement requiring
written amendments or waivers of such documents insofar as it suggests
that oral or other modifications, amendments or waivers could not be
effectively agreed upon by the parties or that the doctrine of
promissory estoppel might not apply.
H. We have assumed that there are no agreements or understandings between
or among the Company, a Bank, the Agent or third parties which would
expand, modify or otherwise affect the terms of the Agreement or the
respective rights or obligations of the parties thereunder and that the
Agreement correctly and completely set forth the intent of all parties
thereto.
I. We have assumed that all parties to the Agreement other than the Company
have filed all required franchise tax returns, if any, and paid all
required taxes, if any, under the California Revenue & Taxation Code.
J. We have assumed that the Agreement has been duly authorized, executed
and delivered by the Agent and each of the Banks and that the Agent and
each of the Banks have full power, authority and legal right to enter
into and perform the terms and conditions of the Agreement on their
parts to be performed and that the Agreement constitutes legal, valid
and binding obligations of the Agent and each of the Banks, enforceable
against them in accordance with its terms.
K. We express no opinion as to the applicability or effect of compliance or
non-compliance by the Agent or the Banks with any state, federal or
other laws applicable to the Agent or the Banks or to the transactions
contemplated by the Agreement because of the nature of
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 9
their business, including their legal or regulatory status.
L. We have assumed that each Bank is either (i) a "Bank" as defined in and
operating under that certain act known as the "Bank Act" approved March
1, 1909, as amended, (ii) a bank created and operating under and
pursuant to the laws of the State of California or of the United States
or (iii) a foreign bank complying with the criteria set forth in Section
1716 of the California Financial Code, as amended, and that the Banks
are therefore exempt from the restrictions of Section 1 of Article XV of
the California Constitution and related statutes relating to rates of
interest upon the loan of money.
M. We express no opinion regarding compliance or non-compliance (or the
effect thereof) with anti-fraud provisions of federal or state
securities laws, if any of such provisions were to be applicable, or
with respect to the "Blue Sky" laws of any state other than the State of
California.
N. Our opinion in clause (e) of paragraph 4 above is based solely upon a
review of statutes, rules and regulations which, in our experience, are
normally applicable to transactions of the type contemplated by the
Agreement.
O. This opinion speaks only at and as of its date and is based solely on
the facts and circumstances existing on such date. We express no
opinion as to the effect on the Banks' or the Agent's rights under the
Agreement of any statute, rule, regulation or other law which is enacted
or becomes effective after, or of any court decision which changes the
law relevant to such rights which is rendered after, the date of this
opinion or the conduct of the parties following the closing of the
contemplated transaction. In addition, in rendering this opinion, we
assume no obligation to revise or supplement this opinion should the
present laws of the jurisdictions mentioned herein be changed by
legislative action, judicial decision or otherwise.
P. Our opinion set forth in paragraph 1 as to good standing in the State of
California and as due qualification and good standing in other states is
based solely on the certificates referenced in paragraph (g) above
(copies of which have been furnished to you), and, to the extent
<PAGE>
Bank of America National Trust and
Savings Association, as Agent
December 23, 1993
Page 10
available, telephonic confirmation as of the date of this opinion of the
legal existence and good standing of the Company in the State of
California from the Office of the Secretary of State of the State of
California and the due qualification and good standing as a foreign
corporation qualified to do business from the Office of the Secretary of
State of the States of Colorado, Massachusetts, Minnesota and Texas.
This opinion is made with the knowledge and understanding that you (but no
other person) may rely thereon in entering into the Agreement and is solely for
your benefit. This opinion may not be quoted to or relied upon by any person
other than you, except that (i) this opinion may be disclosed to bank regulatory
and other governmental authorities having jurisdiction over you requesting (or
requiring) such disclosure and (ii) this opinion may be disclosed to and relied
upon by assignees of the Loans if such assignments are permitted under and made
in accordance with the Agreement; provided that in no event does this opinion
--------
extend to any issue or matter related to any such assignment or arising from or
out of any such assignment (as distinct from the subject transaction).
Very truly yours,
WILSON, SONSINI, GOODRICH &
ROSATI, Professional Corporation
<PAGE>
SCHEDULE 1
----------
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Barclays Bank PLC
75 Wall Street
New York, NY 10265
<PAGE>
SCHEDULE 2
----------
[To be provided by the Company's counsel]
<PAGE>
EXHIBIT 6.1(b)
Consolidating Statement Certificate
-----------------------------------
Pursuant to that certain Credit Agreement dated as of December 23, 1993 (as
amended from time to time, the "Credit Agreement") among Conner Peripherals
----------------
Inc., a California corporation (the "Company"), the several financial
-------
institutions from time to time party thereto and Bank of America National Trust
and Savings Association, as Agent, the undersigned ______________, certifies
that he is the __________ of the Company, and that, as such, he is authorized to
execute and deliver this Certificate in the name and on behalf of the Company,
and that:
1. Attached hereto as Schedule 1 is a true, correct and complete copy of
----------
the unaudited consolidating balance sheets and related consolidating
statements of operations, shareholders' equity and cash flow for the
year ended _________, 199_ of the Company and each of its Subsidiaries.
2. Schedule 1 was used in connection with the preparation of the Company's
----------
audited consolidated balance sheet and related consolidated statements
of operations, shareholders' equity and cash flows for such year.
3. Schedule 1 was derived from the financial records of the Company.
----------
IN WITNESS WHEREOF, the undersigned has executed this Certificate in the name
and on behalf of the Company as of __________, 199_.
CONNER PERIPHERALS, INC.
By: _________________________
Title: ______________________
<PAGE>
EXHIBIT 6.2(a)
Compliance Certificate
----------------------
Pursuant to that certain Credit Agreement dated as of December 23, 1993 (as
amended from time to time, the "Credit Agreement") among Conner Peripherals,
----------------
Inc., a California corporation (the "Company"), the several financial
-------
institutions from time to time party thereto and Bank of America National Trust
and Savings Associations, as Agent, the undersigned ________________, certifies
that he is the ________________ of the Company, and that, as such, he is
authorized to execute and deliver this Certificate in the name and on behalf of
the Company, and that:
1. Attached as Schedule 1 hereto are true and correct copies of the
----------
Company's audited financial statements for the year ended ____________________,
199__.
or
1. Attached as Schedule 1 hereto are true and correct copies of the
----------
Company's unaudited financial statements for the quarter ended _______________,
199__.
2. The attached financial statements accurately and fairly present in all
material respects, in accordance with GAAP, the consolidated financial position
and results of operations of the Company and the Company's Subsidiaries, subject
only to normal year-end adjustments [and the absence of footnotes].
3. The Company has reviewed the terms of the Credit Agreement and the
undersigned has made, or has caused to be made under his supervision, a review
of the transactions entered into by the Company and its Subsidiaries (as defined
in the Credit Agreement) during the accounting period covered by the attached
financial statements which could affect the Company's compliance with such
terms.
4. To the best of the undersigned's knowledge, the Company, during such
period, has observed, performed or satisfied all of the covenants and other
agreements contained in the Credit Agreement to be observed, performed or
satisfied by the Company.
5. The examinations described in paragraph 3 above did not disclose, and
the undersigned has obtained no knowledge of any Default or Event of Default
(both as defined in the Credit Agreement) and attached as Schedule 2 hereto are
----------
the calculations used to make such determination with respect to Sections 7.9
through 7.13 of the Credit Agreement as of the end of the accounting period
covered by the financial statements attached as Schedule 1 hereto.
----------
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this certificate in the name
and on behalf of the Company as of ______________, 199_.
CONNER PERIPHERALS, INC.
By: ________________________
Title: _____________________
<PAGE>
SCHEDULE 2
TO COMPLIANCE CERTIFICATE
-------------------------
($ in 000's)
Date: ______________, 199__
For the fiscal [quarter/year]
ended ______________, 199__
<TABLE>
<CAPTION>
=========================================================================================================
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1. Section 7.9 Modified Quick
--------------------------
Ratio.
------
- ---------------------------------------------------------------------------------------------------------
The ratio/1/ of:
- ---------------------------------------------------------------------------------------------------------
A. the sum of:
(i) cash _______
(ii) Cash Equivalents/2/ _______
(iii) Eligible
Receivables (net
of allowance for
doubtful
accounts) _______
- -------------------------------------------------------------------------------
= (i) + (ii) + (iii) = _______
- -------------------------------------------------------------------------------
B. the sum/3/ of:
(i) Consolidated
Current
Liabilities _______
(ii) Consolidated
Senior Debt -------
(iii) Contingent Obli-
gations in excess
of $10,000,000
_______
= (i) + (ii) + (iii) =
Test Period Ratio not
A ----------- ---------
- less than:
---------
= B = ======= Closing Date -
March 31, 1994 1.20:1.00
April 1, 1994 -
and thereafter 1.25:1.00
- --------------------------------------------------------------------------------
2. Section 7.10 Leverage Ratio.
---------------------------
=========================================================================================================
</TABLE>
------------------------
1 Determined on a consolidated basis.
2 Valued in accordance with GAAP.
3 Without duplication.
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
The ratio of:
A. the difference of:
(i) Total Liabilities _______
minus
-----
(ii) aggregate
principal amount
outstanding minus
the 1991
Indenture and the _______
1992 Indenture
- ---------------------------------------------------------------------------------------------------------
= (i) - (ii) = _______
- ---------------------------------------------------------------------------------------------------------
B. the sum of:
(i) Tangible Net
Worth _______
plus
----
(ii) aggregate
principal amount
outstanding under
the 1991
Indenture and the
1992 Indenture _______
= (i) + (ii) = _______
- ---------------------------------------------------------------------------------------------------------
= A
- =
B ------- Ratio not greater than 1.10 to 1.00
- ---------------------------------------------------------------------------------------------------------
3. Section 7.11 Minimum Tangible Net Worth.
- ---------------------------------------------------------------------------------------------------------
Tangible Net Worth = ========
- ---------------------------------------------------------------------------------------------------------
Not to be less than the sum
of:
- ---------------------------------------------------------------------------------------------------------
A. $115,000,000
plus
----
- ---------------------------------------------------------------------------------------------------------
B. 75% of Consolidated Net
Income, commencing with
the fiscal quarter
beginning 10/1/93 and
thereafter (not reduced
by any quarterly loss) --------
plus
----
=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
Actual Required/Permitted
------ ------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
C. 100% of Net Proceeds
arising from the sale of
capital stock occurring
on or after 10/1/93 --------
plus
----
---------------------------------------------------------------------------------------------------------
D. any increase in
consolidated Tangible
Net Worth due to
conversions of debt to
equity occurring on or
after 10/1/93/4/
---------------------------------------------------------------------------------------------------------
= A + B + C + D = ========
---------------------------------------------------------------------------------------------------------
4. Section 7.12 Losses in One
--------------------------
Quarter
-------
---------------------------------------------------------------------------------------------------------
Aggregate operating loss for
the fiscal quarter just
ended Not to exceed $40,000,000
---------------------------------------------------------------------------------------------------------
Aggregate net loss for the
fiscal quarter just ended --------- Not to exceed $40,000,000
---------------------------------------------------------------------------------------------------------
5. Section 7.13 Losses in Two
--------------------------
Consecutive Quarters
--------------------
---------------------------------------------------------------------------------------------------------
Aggregate operating loss for
the fiscal quarter just
ended and the immediately
preceding fiscal quarter --------- Not to exceed $25,000,000
---------------------------------------------------------------------------------------------------------
Aggregate net loss for the
fiscal quarter just ended
and the immediately
preceding fiscal quarter --------- Not to exceed $25,000,000
=========================================================================================================
</TABLE>
------------------------
/4/ Without duplication.
<PAGE>
EXHIBIT 6.13
Notice to Trustee
-----------------
The First National Bank of Boston
Blue Hill Office Park
Mail Stop 45-02-15
150 Royall Street
Canton, MA 02021
Attention: Corporate Trust Division
Re: 1991 Conner Peripherals, Inc. Indenture
Ladies and Gentlemen:
Reference is made to that certain Indenture dated as of March 1, 1991 (as
amended from time to time, the "Indenture") between Conner Peripherals, Inc.
---------
(the "Company") and you, pursuant to irrevocable authorization granted to us by
-------
the Company, we hereby notify you that
[the Company has incurred Senior Indebtedness (as such term is defined in the
Indenture) pursuant to that certain Credit Agreement dated as of December 23,
1993 among the Company, Bank of America National Trust and Savings
Association, as Agent, and the several financial institutions from time to
time party thereto.]
or
[(i) the Company has defaulted pursuant to that certain Credit Agreement dated
as of December 23, 1993 (as amended from time to time, the Credit Agreement)
among the Company, Bank of America National Trust and Savings Association, as
Agent, and the several financial institutions from time to time party thereto;
(ii) the Credit Agreement constitutes Senior Indebtedness (as defined in the
Indenture); and (iii) the default has accelerated the maturity of such
Indebtedness.]
<PAGE>
This notice is given pursuant to Section 4.05 of the Indenture.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: __________________________
Title: _______________________
cc: Conner Peripherals, Inc.
2
<PAGE>
EXHIBIT 10.8(a)
Assignment and Acceptance
-------------------------
ASSIGNMENT AND ACCEPTANCE dated ______________, 199__ between ________________
(the "Assignor") and ___________________ (the "Assignee").
-------- --------
PRELIMINARY STATEMENTS
A. Reference is made to the Credit Agreement dated as of December 23, 1993
(as amended from time to time, the "Credit Agreement"), among Conner
----------------
Peripherals, Inc. (the "Company"), the several financial institutions from time
-------
to time party thereto (the "Banks") and Bank of America National Trust and
-----
Savings Association as agent for the Banks (in such capacity, the "Agent").
-----
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms as set forth in the Credit Agreement.
B. The Assignor is a Bank under and as defined in the Credit Agreement and,
as such, presently has outstanding the following Commitment and Loans under the
Credit Agreement:
Commitment $__________
Base Rate Loans $__________
Eurodollar Rate Loans $__________
C. On the terms and conditions set forth below, the Assignor desires to sell
and assign to the Assignee, and the Assignee desires to purchase and assume from
the Assignor, a ______ %/5/ interest (the "Assigned Percentage") in and to all
-------------------
of the Assignor's rights and obligations as of the Effective Date (as defined
below).
D. After giving effect to such assignment, the respective Commitments and
outstanding Loans of the Assignor and Assignee under the Credit Agreement will
be:
Assignor
--------
Commitment $_________
Base Rate Loans $_________
Eurodollar Rate Loans $_________
- ----------------------
/5/ Specify percentage of Assignor's interest only in total facility in no more
------------------------
than 4 decimal points.
<PAGE>
Assignee
--------
Commitment $_________
Base Rate Loans $_________
Eurodollar Rate Loans $_________
NOW, THEREFORE, the Assignor and the Assignee hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee WITHOUT RECOURSE,
and the Assignee hereby purchases and assumes from the Assignor, the Assigned
Percentage of the Assignor's rights and obligations under the Credit Agreement
as of the Effective Date.
2. The Assignor (i) represents and warrants that as of the date hereof its
Commitments and outstanding Loans (without giving effect to assignments thereof
which have not yet become effective) are as follows:
Commitment $_________
Base Rate Loans $_________
Eurodollar Rate Loans $_________
(ii) represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any adverse claim; (iii) makes no representations 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 Loan Document furnished pursuant thereto; and (iv) makes
no representations or warranty and assumes no responsibility with respect to the
financial condition of the Company or any of its Subsidiaries or the performance
or observance by the Company or any of its Subsidiaries of any of their
obligations under the Credit Agreement or any other Loan Document furnished
pursuant thereto.
3. The Assignee (i) represents and warrants that it is an Eligible
Transferee, (ii) confirms that it has received a copy of the Credit Agreement,
together with copies of such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter this
Assignment and Acceptance; (iii) agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement
and any other Loan
2
<PAGE>
Documents; (iv) appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement and the other
Loan Documents as are delegated to Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; and (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement and the other Loan Documents are required to be
performed by a Bank thereunder.
4. Following the execution of this Assignment and Acceptance by the Assignor
and the Assignee, it will be delivered to Agent for acceptance and recording by
Agent and acceptance by the Company. The effective date for this Assignment and
Acceptance shall be ____________ (the "Effective Date"), subject to acceptance
--------------
by the Agent and the Company; provided, however, this Assignment and Acceptance
shall not be effective until accepted by the Agent and the Company.
5. Subject to and upon such acceptance and recording as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and shall be
entitled to the rights and benefits of the Loan Documents and, to the extent of
the percentage assigned in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent of
the percentage assigned in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement and the other
Loan Documents.
6. Subject to and upon such acceptance and recording, from and after the
Effective Date, Agent shall make all payments under the Credit Agreement which
are payable to Agent for the account of the appropriate Bank to the appropriate
Banks severally in proportion to their respective percentages determined after
giving effect to this assignment, when payment is due. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the other Loan Documents for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of California.
3
<PAGE>
8. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: ________________
Address: _____________________
_____________________
_____________________
Attention: ____________________
Telephone: ( ) ______________
Facsimile: ( ) ______________
(B) Address for Payments:
Account No.: __________________
At: __________________
__________________
__________________
Reference: __________________
Attention: __________________
(C) Eurodollar Lending Office:
Assignee name: __________________
Address: ______________________
______________________
______________________
Attention: ____________________
Telephone: ( ) ______________
Facsimile: ( ) ______________
(C) Domestic Lending Office:
Assignee name: ________________
Address: ______________________
________________________________
Attention: ____________________
Telephone: ( ) ______________
Facsimile: ( ) ______________
9. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of California.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned as executed this Certificate as of the
date first set forth above.
[NAME OF ASSIGNOR]
By: __________________________
Title: _______________________
[NAME OF ASSIGNEE]
By: _________________________
Title: ______________________
ACCEPTED this ___ day
of ___________, 199__
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: ____________________________
Title: Vice President
ACCEPTED this ___ day
of ___________, 199__
CONNER PERIPHERALS, INC.
By: ____________________________
Title: _________________________
5
<PAGE>
CONNER PERIPHERALS, INC.
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twelve months ended December 31,
---------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding 49,339 53,983 57,531
Net effect of dilutive
stock options -- 1,259 1,332
-------- -------- -------
Total 49,339 55,242 58,863
-------- -------- -------
Net income (loss) ($445,314) $121,072 $92,492
======== ======== =======
Earnings/(loss) per share ($9.03) $2.19 $1.57
======== ======== =======
Fully diluted:
Weighted average shares outstanding 49,339 53,983 57,531
Net effect of dilutive
stock options -- 1,349 1,332
Assumed conversion of
Subordinated Convertible Debentures -- 19,391 6,389
-------- -------- --------
Total 49,339 74,723 65,252
-------- -------- --------
Net income/(loss) ($445,314) $121,072 $92,492
Add Subordinated Convertible
Debenture interest, net of income taxes -- 20,376 7,629
-------- -------- --------
Total ($445,314) $141,448 $100,121
======== ======== ========
Earnings/(loss) per share ($9.03) $1.89 $1.54
======== ======== ========
</TABLE>
<PAGE>
Financial Contents
<TABLE>
<S> <C>
Selected Financial Data 8
Management's Discussion and Analysis 9
Consolidated Balance Sheets 15
Consolidated Statements of Operations 16
Consolidated Statements of Cash Flows 17
Consolidated Statements of Stockholders' Equity 18
Notes to Consolidated Financial Statements 19
Report of Independent Accountants 29
Report of Management 30
</TABLE>
CONNER PERIPHERALS, INC.7
<PAGE>
Consolidated Statement of Operations Data
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net sales $ 2,151,672 $ 2,238,423 $ 1,598,984 $ 1,337,593 $ 704,908
Gross profit 237,954 458,464 316,257 328,211 148,814
Income/(loss) from operations/1/ (446,430) 153,530 130,211 172,732 63,159
Net income/(loss) (445,314) 121,072 92,492 130,052 41,449
Net income/(loss) per share:
Primary $ (9.03) $ 2.19 $ 1.57 $ 2.51 $ 1.09
Fully diluted $ (9.03) $ 1.89 $ 1.54 $ 2.41 $ 1.00
Weighted average shares:
Primary 49,339 55,242 58,863 51,727 37,949
Fully diluted 49,339 74,723 65,252 54,527 45,484
</TABLE>
Consolidated Balance Sheet Data
<TABLE>
<CAPTION>
December 31, 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Assets:
Total current assets $ 1,167,115 $ 1,388,343 $ 1,123,665 $ 720,137 $ 366,114
Total assets 1,464,051 1,904,707 1,334,538 880,468 468,095
Liabilities and stockholders' equity:
Current liabilities 489,893 435,581 168,887 183,022 123,621
Long-term debt 660,606 704,845 367,916 36,731 122,893
Stockholders' equity 208,851 626,036 712,825 603,862 200,836
</TABLE>
Summary Quarterly Data
<TABLE>
<CAPTION>
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
Quarter ended 1993 1993 1993 1993 1992 1992 1992 1992
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per
share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $574,449 $ 528,358 $ 490,575 $ 558,290 $ 620,466 $ 625,477 $551,347 $ 441,133
Gross profit 87,872 20,981 38,581 90,520 127,180 120,937 126,240 84,107
Income/(loss) from
operations/2/ 15,510 (381,608) (51,765) (28,567) (765) 55,039 63,254 36,002
Net income/(loss) 8,455 (372,400) (58,825) (22,544) 8,490 41,905 46,024 24,653
Net income/(loss) per share:
Primary $ 0.17 $ (7.54) $ (1.19) $ (0.46) $ 0.17 $ 0.79 $ 0.77 $ 0.42
Fully diluted $ 0.17 $ (7.54) $ (1.19) $ (0.46) $ 0.17 $ 0.64 $ 0.63 $ 0.40
Weighted average shares:
Primary 50,733 49,410 49,303 48,554 48,928 52,800 59,885 59,261
Fully diluted 51,116 49,410 49,303 48,554 49,068 75,106 82,191 69,979
</TABLE>
1 Income/(loss) from operations includes unusual charges (credits) of
$378,702,000, $57,611,000 and ($3,389,000) in 1993, 1992 and 1991,
respectively (see Note 3).
2 Income/(loss) from operations includes unusual charges of $330,019,000,
$12,300,000, $36,383,000 and $57,611,000 for the quarters ended September 30,
1993, June 30, 1993, March 31, 1993 and December 31, 1992, respectively
(see Note 3).
8 CONNER PERIPHERALS, INC.
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth items in the Company's Consolidated Statements of
Operations for each of the last three years ended December 31, 1993, as a
percent of net sales.
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 88.9 79.5 80.2
---------------------------
Gross profit 11.1 20.5 19.8
Selling, general and administrative 8.7 6.8 6.5
Research and development 6.4 4.2 5.3
Amortization of goodwill and other
intangibles 1.0 -- --
Unusual items 15.7 2.6 (0.2)
--------------------------
Income/(loss) from operations (20.7) 6.9 8.2
Other income/(expense), net (1.2) 0.1 (0.3)
--------------------------
Income/(loss) before income taxes (21.9) 7.0 7.9
Benefit/(provision) for income taxes 1.2 (1.6) (2.1)
--------------------------
Net income/(loss) (20.7) 5.4 5.8
</TABLE>
OVERVIEW
The Company had a net loss of $445.3 million in 1993 due primarily to two
principal causes. First, the margin the Company earned on sales of products,
primarily disk drives, came under tremendous pressure during 1993 and fell to
11.1% from 20.5% in 1992. The Company believes this deterioration of margins
resulted from pricing pressures caused by a combination of: (1) industry-wide
overcapacity, particularly for drives under 200 megabytes, and a rapid shift in
customer demand toward drives with capacities greater than 200 megabytes, and
(2) cost pressures caused by aging inventories with higher unit costs resulting
from distribution problems in Europe and delays in time-to-market (see
discussion below). The second, and more significant cause, was the revaluation
of goodwill and other intangibles necessitated by the occurrence in 1993 of
fundamental changes in the storage business and the Company's decision to take
various restructuring actions designed to put the Company on a more competitive
footing and return it to profitability. The combination of these actions
resulted in charges to income in 1993 of $378.7 million. Each of these charges
is described in more detail below under Gross Profit and Unusual Items.
SALES
The Company's net sales totaled $2.2 billion in 1993, the same as 1992. Included
in the 1993 results are the operations of Archive Corporation ("Archive"), which
was acquired by the Company at the end of the fourth quarter of 1992. Operations
of Archive, which include the sale of tape drive and data storage hardware and
software related products, are not included in the 1992 results, although the
results of the fourth quarter of 1992 include a charge of $57.6 million
associated with the write-off of in-process research and development of Archive.
Excluding Archive, net sales of disk drives in 1993 declined substantially as
compared to 1992. This resulted from significant declines in average unit
selling prices coupled with a decrease in the unit volume of shipments. The
Company believes that severe price erosion was experienced throughout the disk
drive industry, particularly for drives with capacities under 200 megabytes, due
to industry-wide overcapacity exacerbated by an unexpected rapid shift in
customer demand toward drives with capacities greater than 200 megabytes. This
shift in demand toward higher capacity drives, which is expected to continue in
the foreseeable future, is due to the higher storage capacity requirements of
new and more sophisticated software products. Individual price declines of the
Company's disk drives ranged from approximately 20% to 60% in 1993. These price
declines were offset to some extent by a favorable shift in product mix towards
the Company's newer, higher capacity disk drives. The unit volume of shipments
declined by approximately 6% in 1993. This decline was due to a disruption in
sales to European distributors resulting from the termination of the Company's
exclusive distribution relationship with its European master
CONNER PERIPHERALS, INC. 9
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
distributor, which adversely affected sales in the first and second quarters of
1993, and disruptions in sales associated with the timing of certain new product
introductions during the first three quarters of 1993 which had a negative
impact on sales to OEM customers.
Similar to the disk drive product lines, tape product lines were negatively
impacted by price competition, although to a lesser extent, which resulted in
lower average unit selling prices. Revenue was also negatively impacted by
product availability of certain newer DAT products.
In 1993, international sales were approximately 54% of total sales compared to
61% in 1992 and 64% in 1991. Sales to distributors in 1993 were approximately
29% of total sales compared to 31% and 16% in 1992 and 1991, respectively. The
decrease in international sales and distributor sales in 1993 is primarily due
to the inclusion of Archive's tape operations, which carry a higher percentage
of sales to domestic and OEM customers as compared to disk drive operations and
the termination of the Company's exclusive distribution relationship with its
European master distributor.
In 1993, sales to Compaq Computer represented 13% of net sales as compared
with 15% in 1992 and 12% in 1991. One other customer accounted for more than 10%
of net sales in 1992, with 12%. In 1993 and 1991, no customer except for Compaq
accounted for 10% or more of net sales.
In 1992, the Company's net sales of disk drives totaled $2.2 billion,
representing a 40% increase over 1991. The annual growth in net sales of disk
drives was driven by a 62% increase in unit volume shipments and an improved
product mix, offset somewhat by a decrease in average unit selling prices. Unit
volumes increased due in large part to growth in unit shipments of 3.5-inch
products and an expanded OEM customer base.
As is common in the microcomputer industry, the Company's shipment patterns
during a quarter are frequently characterized by a significantly higher shipment
volume in the third month of the quarter than that experienced in the first two
months of the quarter. This pattern often causes quarterly results to be
difficult to predict. During the fourth quarter of 1993, demand for certain of
the Company's disk drives exceeded the Company's product availability and, as
such, were available to customers on an allocation basis. This trend appears to
be continuing into the Company's first quarter of 1994. However, there can be no
assurance that this trend will continue into future periods. In addition,
certain of the Company's customers have reduced their order lead-times which has
further reduced the Company's visibility to future orders. The Company's sales
and results of operations in future quarters will continue to be difficult to
predict as a result of these factors. Furthermore, the demand for the Company's
products depends principally on demand for high performance microcomputers
manufactured by its customers. A slowdown in demand for such computers or
continued price erosion may have an exaggerated effect on the demand for the
Company's products and/or profitability in any given period. In addition, the
market for disk drive products is transitioning towards more of a commodity-type
business with limited technological differentiation between the productsof the
Company and its competitors. As a result, pricing on the Company's newer
products is considerably more aggressive than in prior periods, as pricing has
become the key competitive point of product differentiation in the disk drive
industry.
GROSS PROFIT
The Company's gross margin decreased to 11.1% of net sales in 1993 from 20.5%
in 1992. The lower gross margin was due to a significant decline in average unit
selling prices, lower shipments into the distribution channel and special
inventory related charges included in cost of sales, offset partially by lower
average unit production costs and the inclusion in 1993 of sales of Archive's
tape products which carry higher gross margins. The price declines experienced
were driven by overcapacity in the disk drive industry, particularly for disk
drives with capacities under 200 megabytes. The Company believes this resulted
from increases in industry capacity during 1993 coupled with an unexpected rapid
shift in customer demand for disk drives with storage capacities exceeding 200
megabytes. Cost reductions achieved in 1993 were not sufficient to offset the
impact of declining selling prices. Shipments of disk drives into the
distribution channel were adversely affected, during principally the first and
second quarters, due to the Company's decision at the end of the first quarter
of 1993 to terminate the Company's exclusive distribution relationship with its
master European distributor. The Company believes that it has substantially
recovered from this action and now directly controls its relationships with its
distributors in Europe, Africa and the Middle East.
10 CONNER PERIPHERALS, INC
<PAGE>
During the first, second and third quarters, the Company recorded as cost of
sales special charges totaling $40.3 million resulting from the Company's
decisions to accelerate the end-of-life of certain products.
Gross margins for tape products were adversely affected by a higher percentage
of sales of lower margin products, particularly the minicartridge product line.
The Company's gross margin increased to 20.5% of net sales in 1992, up from
19.8% in 1991. The increase in gross margin reflects improved product mix and
reductions in unit product costs that more than offset decreases in average unit
selling prices of disk drives. Unit product cost reductions were achieved
primarily through greater utilization of production capacity in Asia and reduced
component costs. Improved product mix resulted from a shift in customer demand
toward higher capacity, higher performance products and away from older, lower
capacity disk drives.
The Company anticipates the introduction of several new products during 1994.
The failure of the Company to successfully launch or achieve required production
volumes at anticipated costs for one or more of the new products could have a
material adverse effect on the Company's revenues and profitability. Costs and
disruptions associated with the launch of two new disk drive products during
1993 did have a material negative impact on the Company's quarterly revenues and
profitability. In addition, new products generally have lower initial
manufacturing yields and higher component costs than more mature products which
place additional pressure on gross margins. The Company believes it
significantly improved the efficiency and effectiveness of its new product
launch operations during 1993 as indicated by the successful launch of the
Filepro 210 megabyte disk drive in the quarter ended December 31, 1993. However,
there can be no assurance that the launch of new products in future periods will
be successful.
SELLING
GENERAL AND
ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses increased to $186.3
million in 1993 from $152.7 million in 1992 and $104.4 million in 1991. These
expenses represented 8.7%, 6.8% and 6.5% of net sales in 1993, 1992 and 1991,
respectively. The increase in SG&A in absolute dollars and as a percentage of
net sales in 1993 as compared to 1992 was primarily due to the inclusion of
Archive tapeoperations during 1993. Archive operations were consolidated with
the Company's disk drive operations commencing in the first quart er of 1993.
SG&A expenses increased to a lesser extent due to higher advertising and legal
costs. The increase in SG&A expenses was partially offset by lower profit
sharing and provisions for bad debt .
The increase in SG&A expenses in absolute dollars and as a percentage of net
sales in 1992 as compared to 1991 is primarily a result of increases in bad
debts expense and employee profit sharing. The increase in the Company's reserve
for doubtful accounts was consistent with the Company's growth in sales volume
and the additional credit risk associated with an expanded customer base.
In 1994, the Company expects lower SG&A expenses as a percentage of net sales
due to ongoing cost reduction programs and benefits received from its
restructuring actions. During the fourth quarter of 1993, SG&A declined to
approximately 7% of net sales from 9% in the third quarter as a result of such
actions.
RESEARCH AND
DEVELOPMENT
The Company's investment in research and development ("R&D") increased to $137.5
million in 1993 from $94.7 million in 1992 and $85.0 million in 1991. These
expenses represented 6.4%, 4.2%and 5.3% of net sales in 1993, 1992 and 1991,
respectively. The year-over-year increase in R&D expenses in absolute dollars
and as a percentage of net sales in 1993 as compared to 1992 is primarily a
result of the inclusion of the Archive tape operations in 1993. In addition, R&D
expenses increased in 1993 as a result of the acceleration of new product
introductions concurrent with the Company's decision to end-of-life certain
older products. Due to the timing of new R&D programs and the release of new
products to production, the level of R&D spending may vary from year to year in
absolute dollars and as a percentage of sales.
The increase in R&D expenses in absolute dollars in 1992 as compared to 1991
is primarily the result of the transitioning of new products from engineering to
product launch and volume production.
As product life cycles have shortened and the need to rapidly introduce new
products has become essential, the Company has increased its focus on new
productlaunch activities. The Company believes this investment has significantly
improved the efficiency and effectiveness of its new product
CONNER PERIPHERALS 11
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
launch operations. During 1994, this emphasis is planned to continue and R&D
expenditures are expected to increase modestly in absolute dollars in support of
new product introductions. The level of R&D spending reflects management's
belief that such spending is essential for the Company to remain competitive by
quickly and regularly introducing new products.
AMORTIZATION
OF GOODWILL
AND OTHER
INTANGIBLES
Amortization of goodwill and other intangibles totaling $22.2 million consisted
primarily of Archive related intangibles associated with the acquisition of
Archive in the fourth quarter of fiscal 1992. Commencing in the first quarter of
1993, goodwill was being amortized on a straight-line basis over a period of 12
years, and other intangibles were being amortized on a straight-line basis over
their estimated useful lives ranging from 3 to 10 years. At the end of the third
quarter of 1993, the remaining goodwill balance was written-off and other
intangibles were written-down to their estimated fair values. These special
charges are more fully described under Unusual Items. The remaining balance of
other intangibles is being amortized on a straight-line basis over their
estimated useful lives ranging from 2 to 10 years.
UNUSUAL ITEMS
During 1993, the Company recorded unusual charges totaling $378.7 million, of
which $40.3 million was included in cost of sales and $338.4 million was charged
to unusual items.
At the end of the third quarter of 1993, the Company recorded a charge of $330
million, of which $20 million was charged to cost of sales and $310 million was
charged to unusual items. The $20 million charge to cost of sales reflected the
cost of the Company's actions to accelerate the end-of-life of certain disk
drive products. The $310 million charge included a write-down of goodwill and
other intangibles of $213 million; a restructuring charge of $78 million for the
reduction of excess manufacturing capacity and the streamlining of operations;
and, a charge of $19 million for certain contingencies.
The write-down of intangible assets totaling $213 million consisted of $180
million of goodwill and $33 million of identified intangibles. The write-off
included all of the remaining goodwill associated with the Company's acquisition
of Archive as of the end of the third quarter. Identified intangibles include
certain patents, licenses, trademarks, technology and market data acquired
either directly or in connection with the acquisition of Archive. The Company
believes that the write-down of these assets was necessitated due to the
emergence during 1993 of fundamental changes in the storage business,
particularly the tape business. These changes had led to lower expectations for
revenue growth and gross margins. Both these factors have a direct bearing on
the value of intangibles and caused the value of these assets to be permanently
impaired, based on the related discounted cash flows.
The restructuring charge of $78 million resulted from the Company's decision
to reduce excess manufacturing capacity to a level more consistent with
sustainable demand and to streamline operations and administrative processes to
reduce the Company's cost structure. This charge also included costs to further
integrate and reduce SG&A and R&D activities of both the disk and tape drive
operations. The $78 million was comprised of approximately $27.5 million for
facilities related expenses, $17.5 million for write-off of certain assets and
$33 million for employee headcount reductions and other miscellaneous items.
As a result of the above actions and other cost saving programs, total
operating expenses decreased by approximately $20 million to 12.6% of net sales
for the fourth quarter of 1993 from 17.5% for the third quarter of 1993.
During the first and second quarters of 1993, the Company recorded special
charges totaling $48.7 million, of which $20.3 million was charged to cost of
sales and $28.4 million was charged to unusual items. These charges reflected
the cost of the Company's actions to accelerate the phase-out of certain disk
drive products, consolidate headcount and facilities in response to increased
productivity and lower short-term production levels and to further integrate the
tape drive operations. The $28.4 million charge included in unusual items was
comprised of approximately $17.4 million for property, plant and equipment
related expenses and $11 million for employee headcount reductions and other
miscellaneous items.
In December 1992, in connection with the acquisition of Archive, the Company
recorded a nonrecurring charge of $57.6 million ($35.7 million net of tax)
representing the fair value of acquired R&D projects in-process at the date of
the acquisition .
12 CONNER PERIPHERALS, INC.
<PAGE>
During 1991, the Company sold the head-stack portion of it's Malaysian
operation to Read-Rite Corporation ("Read-Rite"). The net assets associated
with this operation were sold in exchange for approximately 1.7 million shares
of Read-Rite common stock that resulted in a gain of $11.3 million. The
Company also reduced its world-wide work force by 8%, repositioned some of its
manufacturing capacity from Singapore to Malaysia and relocated some of its
new product engineering launch activities from San Jose, California to
Longmont, Colorado. These actions resulted in charges to income that
substantially offset the gain which resulted from the transaction with Read-
Rite.
Interest expense increased to $51.2 million in 1993 from $46.9 million in 1992
and $23.3 million in 1991. The increase in interest expense in 1993 and 1992
in relation to the preceding year results from the Company's 6.5% subordinated
debentures totaling $345 million issued in March of 1992. Average outstanding
long-term borrowings have remained relatively constant since March of 1992.
Other income/expense reflects the net of, principally, interest income,
realized gains on sale of investments, royalty income and minority interest
associated with the Company's Italian subsidiary. In 1993, this resulted in
net other income of $26.7 million compared to $49.1 million in 1992 and $18.9
million in 1991. Net other income in 1993 decreased as compared to 1992
primarily as a result of a nonrecurring gain of $22.5 million recorded in 1992
for the sale of the Company's equity interest in Read-Rite, and lower interest
income resulting from lower invested funds and declining interest rates. The
decrease was partially offset by royalty income.
The year-over-year change in 1992 from 1991 resulted from the $22.5 million
gain on the sale of the Company's equity interest in Read-Rite and increased
interest income of approximately $7.5 million resulting from higher average
balances of cash and short-term investments.
TAXES
The Company's effective tax rate was a benefit of 5.4% in 1993 as compared to
provisions of 22.3% in 1992 and 26.5% in 1991. The decrease in the 1993
effective tax rate resulted primarily from the impact of goodwill and
intangible asset amortization and write-offs during 1993 which are not
deductible for income tax purposes. In addition, a significant amount of the
Company's losses were generated by operations in foreign tax jurisdictions
where the Company enjoys tax holidays or where losses can only be carried
forward. As a result, there was less direct tax benefit to the Company in the
current year for the foreign losses.
The Company's effective tax rate differs from the federal
statutory rate primarily as a result of differences between United States and
foreign tax rates and the impact of goodwill. The Company enjoys tax holidays in
Singapore and Malaysia with respect to disk drive operations which expire in
1997 and 1995, respectively, subject to certain extensions and post-holiday
benefits. However, the Company provides for United States taxes on that portion
of income from these jurisdictions that is not considered to be indefinitely
reinvested.
During 1993, the U.S. federal statutory tax rate increased from 34%
to 35%. The effect of the increase in the tax rate was not material to the
Company's financial position or results of operations.
The decrease in the 1992 effective tax rate of 22.3% from 26.5% in 1991
resulted from the tax benefit recognized upon the write-off of in-process R&D
in connection with the acquisition of Archive Corporation. Excluding this one-
time charge, the Company's effective tax rate was 26.5%.
During 1992, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes" which superseded SFAS No. 96,
"Accounting for Income Taxes", under which the Company previously reported.
Both statements require the liability method for accounting for income taxes.
The effect of adopting SFAS No. 109 was not material to the Company's
financial position or results of operations.
The Company anticipates that its effective income tax rate will be
approximately 35% in fiscal 1994. The expected increase from the effective tax
rates in prior years is primarily due to the anticipation of a higher
percentage of total income being generated in taxable jurisdictions.
LIQUIDITY
AND CAPITAL
RESOURCES
At December 31, 1993, the Company's principal sources of liquidity consisted
of $517.5 million in cash and short-term investments and a combined $100
million revolving credit facility with several financial institutions. At
December 31, 1993, the Company had no borrowings under the revolving credit
facility. Availability of this line of credit is subject to the Company's
continued maintenance of certain financial covenants. At December 31, 1993,
the Company had outstanding letters of credit of approximately $40.3 million.
CONNER PERIPHERALS, INC. 13
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Cash generated from operating activities was approximately $20.2 million in
1993 compared with $269.8 million in 1992 and $83.7 million in 1991. The
decrease in cash generated from operating activities in 1993 was primarily due
to the Company's net loss of $445.3 million, offset to some extent by an
increase in adjustments for non-cash items, including non-cash charges for
unusual items totaling $230.4 million. This decrease was partially offset by
reductions in accounts receivable and inventory levels and increases in
accounts payable and accrued expenses. Accrued expenses at December 31, 1993
include accruals for potential future cash outlays primarily associated with
the restructuring actions taken at the end of the third quarter.
Other significant uses of cash in 1993 included $16 million for the purchase
of the 49% minority interest in Conner Peripherals Europe S.p.A. held by the
Company's joint venture partner. As of December 31, 1993, Conner Peripherals
Europe S.p.A. is a wholly-owned subsidiary of the Company.
The increase in operating cash flow in 1992 from 1991 was primarily due to
an increase in net income adjusted for non-cash expenses and revenues,
reduction in inventory levels and growth in accounts payable and accrued
expenses, offset to some extent by an increase in accounts receivable.
In December 1992, the Company acquired Archive, a manufacturer and supplier
of removable tape back-up and data storage products, to complement the
Company's existing products and markets. Total cash used in connection with
the acquisition of Archive was approximately $288 million, net of cash
acquired, including cash used to retire Archive debt of approximately $14
million and $90 million in 1993 and 1992, respectively.
The Company's capital expenditures during 1993 were approximately $102
million compared with $70 million in 1992 and $88 million in 1991. The
increase in capital expenditures in 1993 as compared to 1992 and 1991 reflects
increased spending on manufacturing assets, in particular, the expansion of
the Company's disk media manufacturing facility in California. The Company
currently expects to make capital expenditures of approximately $75 million
during 1994. These expenditures will be used primarily for manufacturing
equipment in support of new product lines and realignment of manufacturing
capacity between manufacturing locations. The Company believes that current
capital resources and cash generated from operating activities will be
sufficient to meet its liquidity and capital expenditure requirements for the
foreseeable future.
LITIGATION
The Company and certain officers and directors are defendants in a securities
class action lawsuit which purports to represent a class of investors who
purchased or otherwise acquired the Company's common stock between January
1992 and May 1993. Certain officers and directors are also defendants in a
related shareholders derivative suit. Both complaints seek unspecified damages
and other relief. the Company believes there are meritorious defenses to the
matters raised and intends to defend the actions vigorously.
In August 1993, the Company was served with a patent infringement complaint
filed by IBM in the United States District Court for the Northern District of
California. The complaint alleges that products manufactured by the Company
infringe nine patents owned by IBM. In addition, the complaint seeks
declaratory relief to the effect that disk drives produced by IBM do not
infringe five patents held by the Company and seeks to have such patents
declared invalid. The Company answered the complaint, denying all material
allegations and counter claiming that IBM disk drives infringesix patents
owned by Conner, including the five contained in the IBM complaint. The
Company expects that it may engage in cross-licensing negotiations with IBM
with a view towards resolving this matter; however, the Company believes that
it has meritorious defenses against these allegations and will defend this
action vigorously. The Company is unable to predict the outcome of the
litigation or ultimate effect, if any, on its operations or financial
condition.
14 CONNER PERIPHERALS, INC.
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1993 1992
- --------------------------------------------------------------------------------------
(in thousands, except par value and share data)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 517,547 $ 614,527
Accounts receivable, net 333,416 401,128
Inventory 173,860 264,995
Deferred income taxes 54,944 39,351
Other 87,348 68,342
------------------------
Total current assets 1,167,115 1,388,343
Property, plant and equipment, net 231,337 231,396
Goodwill and other intangibles, net 42,944 259,843
Other 22,655 25,125
------------------------
$ 1,464,051 $ 1,904,707
LIABILITIES And ------------------------
STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 229,721 $ 250,103
Accrued expenses 217,060 180,397
Current portion of long-term debt 43,112 5,081
-------------------------
Total current liabilities 489,893 435,581
Long-term debt, less current portion 660,606 704,845
Deferred income taxes 98,162 115,314
Other 4,009 5,861
Minority interest 2,530 17,070
Commitments and contingencies (Notes 9 and 13)
Stockholders' equity:
Preferred stock, $0.001 par value; 20,000,000 shares
authorized, none outstanding -- --
Common stock and paid-in-capital in excess of
$0.001 par value; 100,000,000 shares authorized,
50,565,083 and 48,317,172 shares issued and
outstanding 242,454 214,325
Retained earnings/(accumulated deficit) (33,603) 411,711
-------------------------
Total stockholders' equity 208,851 626,036
-------------------------
$ 1,464,051 $ 1,904,707
-------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONNER PERIPHERALS, INC. 15
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net sales $ 2,151,672 $ 2,238,423 $ 1,598,984
Cost of sales 1,913,718 1,779,959 1,282,727
---------------------------------------
Gross profit 237,954 458,464 316,257
---------------------------------------
Selling, general and administrative 186,269 152,671 104,428
Research and development 137,465 94,652 85,007
Amortization of goodwill and other intangibles 22,248 -- --
Unusual items, (income)/expense, net 338,402 57,611 (3,389)
---------------------------------------
Total operating expenses 684,384 304,934 186,046
---------------------------------------
Income/(loss) from operations (446,430) 153,530 130,211
Interest expense (51,213) (46,866) (23,290)
Other income, net 26,667 49,056 18,920
---------------------------------------
Income/(loss) before income taxes (470,976) 155,720 125,841
Benefit/(provision) for income taxes 25,662 (34,648) (33,349)
---------------------------------------
Net income/(loss) $ (445,314) $ 121,072 $ 92,492
---------------------------------------
Net income/(loss) per share:
Primary $ (9.03) $ 2.19 $ 1.57
---------------------------------------
Fully diluted $ (9.03) $ 1.89 $ 1.54
---------------------------------------
Weighted average shares:
Primary 49,339 55,242 58,863
---------------------------------------
Fully diluted 49,339 74,723 65,252
---------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16 CONNER PERIPHERALS, INC.
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (445,314) $ 121,072 $ 92,492
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Depreciation and amortization 104,747 77,463 51,138
Deferred income taxes (32,745) (13,067) 19,435
Non-cash unusual items 230,417 57,611 (11,283)
Gain on sale of Read-Rite Corporation
common stock -- (22,540) --
Loss on asset dispositions 11,468 5,595 5,238
Minority interest and other 720 9,330 7,687
Changes in assets and liabilities, net of effect
of Archive Corporation acquisition:
Accounts receivable, net 67,712 (132,401) 29,445
Inventory 91,135 39,362 (60,581)
Other current assets (19,006) (19,193) (23,855)
Other non-current assets (20,907) (18,108) 1,070
Accounts payable and accrued expenses 31,994 164,654 (27,049)
-------------------------------------
Total cash provided by operating activities 20,221 269,778 83,737
Cash flows from investing activities:
Capital expenditures (102,111) (69,744) (87,720)
Purchases of short-term investments (1,429,492) (1,013,148) (552,932)
Sales and maturities of short-term investments 1,464,986 795,839 414,699
Purchase of minority interest (16,000) -- --
Acquisition of Archive Corporation, net
of cash acquired -- (181,537) --
Acquisition of technology rights (2,078) (28,061) (14,000)
Proceeds from sale of Read-Rite Corporation
common stock -- 39,189 --
Acquisition of equity interest, net -- -- (4,262)
-------------------------------------
Cash used in investing activities (84,695) (457,462) (244,215)
Cash flows from financing activities:
Proceeds from long-term debt 2,782 345,672 348,335
Repayments of long-term debt (10,990) (24,752) (4,388)
Repayments of Archive Corporation
long-term debt (13,713) (90,239) --
Issuance of common stock 24,909 17,322 11,325
Repurchase of common stock -- (241,505) --
Contribution by minority stockholder -- 8,000 --
-------------------------------------
Cash provided by financing activities 2,988 14,498 355,272
Net increase (decrease) in cash and cash equivalents (61,486) (173,186) 194,794
Cash and cash equivalents at beginning of the year 258,985 432,171 237,377
-------------------------------------
Cash and cash equivalents at end of the year 197,499 258,985 432,171
Short-term investments 320,048 355,542 138,233
-------------------------------------
Total cash, cash equivalents and short-term
investments $ 517,547 $ 614,527 $ 570,404
-------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
CONNER PERIPHERALS, INC. 17
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
---------------------------- Retained Total
Par Value and Earnings Stock-
Paid-in-Capital (Accumulated holders'
Shares in excess of par Deficit) Equity
- --------------------------------------------------------------------------------------------------------
(in thousands, except share data)
<S> <C> <C> <C> <C>
Balance at December 31, 1990 56,773,669 $ 405,715 $ 198,147 $ 603,862
Issuance of common stock
under various employee
stock plans 1,315,628 11,325 -- 11,325
Income tax benefit of
disqualifying dispositions
of employee stock -- 5,146 -- 5,146
Net income -- -- 92,492 92,492
-------------------------------------------------------------------
Balance at December 31, 1991 58,089,297 422,186 290,639 712,825
Issuance of common stock
under various employee
stock plans 1,866,677 31,008 -- 31,008
Repurchase of common stock,
at cost (11,638,802) (241,505) -- (241,505)
Income tax benefit of
disqualifying dispositions
of employee stock -- 2,636 -- 2,636
Net income -- -- 121,072 121,072
-------------------------------------------------------------------
Balance at December 31, 1992 48,317,172 214,325 411,711 626,036
Issuance of common stock
under various employee
stock plans 2,247,911 24,909 -- 24,909
Income tax benefit of
disqualifying dispositions
of employee stock -- 3,220 -- 3,220
Net loss -- -- (445,314) (445,314)
-------------------------------------------------------------------
Balance at December 31, 1993 50,565,083 $ 242,454 $ (33,603) $ 208,851
-------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18 CONNER PERIPHERALS, INC.
<PAGE>
Notes to Consolidated Financial Statements
NOTE 1
THE COMPANY
Conner Peripherals, Inc. ("Company") was incorporated in California in June
1985, and reincorporated in Delaware in September 1992. The Company sells,
designs and builds a comprehensive line of information storage solutions
products, including disk drives, tape drives, storage management software and
storage systems, for a wide range of computer applications.
During 1993, sales to one customer accounted for approximately 13% of net
sales. During 1992, sales to two customers accounted for approximately 15% and
12% of net sales, respectively. During 1991, sales to one customer accounted for
approximately 12% of net sales.
The Company's fiscal year ends on the Saturday nearest to December 31. Results
of operations for the year ended in 1993 include 52 weeks. Results of operations
for the years ended 1992 and 1991 include 53 weeks and 52 weeks, respectively.
The Company reports quarterly results on thirteen-week quarterly periods each
ending on the Saturday closest to month-end. For purposes of presentation, the
Company has indicated its accounting year as ending on December 31 or the month-
end for interim quarterly periods.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Conner Peripherals, Inc. and its majority owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Revenue Recognition: Revenue from product sales to customers is recognized upon
shipment. Revenue from sales to certain distributors is subject to agreements
allowing certain rights of return and price protection on unsold merchandise
held by those distributors. Accordingly, reserves for estimated future returns,
exchanges and credits for price protection are also provided upon shipment.
Warranty Expense: The Company provides for the estimated cost which may be
incurred under its various product warranties upon product shipment.
Cash, Cash Equivalents and Short-term Investments: The Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents. Short-term investments consist primarily of certificates
of deposit, bankers acceptances, commercial paper, corporate debt, municipal
debt and U.S. Government agency debt securities. These investments generally
mature within 12 months and are carried at cost, which approximates market.
During May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("FAS 115"), which requires a change in the method
used to account for certain investments. FAS 115 will be effective for the
Company's fiscal year ending December 31, 1994. The Company has evaluated the
implications of the Statement and does not expect it to have a material impact
on the Company's financial condition or results of operations.
Concentration of Credit Risk: Financial instruments that potentially subject the
Company to significant concentrations of credit risk consist principally of
cash, cash equivalents and short-term investments and trade accounts receivable.
The Company places its cash, cash equivalents and short-term investments in a
variety of financial instruments such as certificates of deposit, bankers
acceptances, commercial paper, corporate debt, municipal debt and U.S.
Government agency debt. The Company, by policy, limits the amount of credit
exposure to any one financial institution or commercial issuer.
The Company sells its products to original equipment manufacturers and
distributors throughout the world. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company maintains an allowance for
uncollectible accounts receivable based upon the expected collectibility of all
accounts receivable.
Inventory: Inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out basis.
Property, Plant and Equipment: Property, plant and equipment are stated at cost.
Equipment and furniture are depreciated using the straight-line method based
upon the estimated useful lives of the related assets which range from 2 to 10
years. Leasehold improvements are amortized using the straight-line method based
upon the shorter of the estimated useful lives or the lease term of the
respective assets. Buildings are depreciated using the straight-line method over
the estimated useful life of 25 years.
CONNER PERIPHERALS, INC. 19
<PAGE>
Notes to Consolidated Financial Statements
Goodwill and Other Intangibles: Goodwill represents the excess of the purchase
price over the fair market value of net assets acquired in connection with the
1992 acquisition of Archive Corporation (see Note 4). At the end of the quarter
ended September 30, 1993, all remaining goodwill pertaining to the acquisition
of Archive was written-off (see Note 3). Previous to the write-off, goodwill was
being amortized on a straight-line basis over 12 years. Other intangibles
primarily include patents and acquired technology, which are being amortized
over their estimated useful lives ranging from 2 to 10 years.
The Company evaluates the recoverability of intangible assets based on future
discounted cash flows. Charges for impairment of intangible assets are recorded
to the extent unamortized book value of such assets exceed the related future
discounted cash flows.
Income Taxes: Effective at the beginning of 1992, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
superseded Statement of Financial Accounting Standards No. 96, "Accounting for
Income Taxes," under which the Company previously reported. Both statements
require the liability method for accounting for income taxes. The current and
cumulative effect of adopting this statement were not material to the Company's
financial position or results of operations.
No U.S. federal income taxes are provided on the portion of unremitted
earnings of the foreign subsidiaries which are intended to be indefinitely
reinvested.
Net Income (Loss) Per Share: Primary and fully diluted net loss per share is
computed using the weighted average number of common shares outstanding. Primary
net income per share is computed using the weighted average number of common and
dilutive common equivalent shares outstanding. Common equivalent shares consist
of stock options (using the treasury stock method). Fully diluted net income per
share is computed using the weighted average number of common and dilutive
common equivalent shares outstanding and assuming the conversion, if dilutive,
of all outstanding convertible subordinated debentures from the date of issuance
for all periods in which they remained outstanding. For purposes of the fully
diluted computation, net income is adjusted by the after tax interest expense
applicable to the convertible subordinated debentures.
Foreign Currency Translation and Transactions: The Company currently uses the
U.S. dollar as the functional currency of its foreign operations. Gains or
losses from foreign currency translation are included in the determination of
net income. To date, such amounts have been immaterial.
The Company enters into forward exchange contracts and foreign currency options
to hedge certain foreign currency transactions for periods consistent with the
terms of the underlying transactions. Gains and losses on these contracts are
deferred and offset against losses and gains on the underlying transactions. At
December 31, 1993, the Company had approximately $28,000,000 of forward
exchanges contracts and $28,000,000 of foreign currency options outstanding.
Presentation: Certain prior year financial statement balances have been
reclassified to conform to the 1993 presentations.
20 CONNER PERIPHERALS, INC.
<PAGE>
Note 2
Balance Sheet
and Statement
of Operations
Components
<TABLE>
<CAPTION>
December 31, 1993 1992
- -------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Accounts receivable:
Gross receivables $ 372,846 $ 434,820
Less reserves and allowances 39,430 33,692
----------------------------------
$ 333,416 $ 401,128
==================================
Inventories:
Purchased components $ 81,620 $ 125,261
Work-in-process 37,939 85,887
Finished goods 54,301 53,847
----------------------------------
$ 173,860 $ 264,995
==================================
Property, plant and equipment:
Building $ 47,335 $ 47,959
Equipment and furniture 289,517 276,746
Leasehold improvements 60,762 41,390
Construction-in-progress 34,026 14,774
----------------------------------
431,640 380,869
Less accumulated depreciation and amortization 200,303 149,473
----------------------------------
$ 231,337 $ 231,396
==================================
Goodwill and other intangibles:
Goodwill $ -- $ 169,249
Intangibles 64,003 98,260
----------------------------------
64,003 267,509
Less accumulated amortization 21,059 7,666
----------------------------------
$ 42,944 $ 259,843
==================================
Accrued expenses:
Accrued employee compensation $ 33,041 $ 24,736
Accrued income taxes 14,298 26,320
Accrued warranty costs 38,299 36,738
Accrued restructuring costs 66,380 --
Other liabilities 65,042 92,603
----------------------------------
$ 217,060 $ 180,397
----------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Other income, net:
Interest income $ 17,700 $ 35,050 $ 27,566
Minority interest in joint ventures 649 (6,457) (2,541)
Gain on sale of Read-Rite Corporation stock -- 22,540 --
Other 8,318 (2,077) (6,105)
========================================
$ 26,667 $ 49,056 $ 18,920
========================================
</TABLE>
NOTE 3
UNUSUAL ITEMS
During 1993, the Company recorded unusual charges totaling $378,702,000, of
which $40,300,000 was included in cost of sales and $338,402,000 was charged to
unusual items.
At the end of the third quarter of 1993, the Company recorded a charge of
$330,019,000, of which $20,000,000 was charged to cost of sales and $310,019,000
was charged to unusual items. The $20,000,000 charge to cost of sales reflected
the cost of the Company's actions to accelerate the end-of-life of certain disk
drive products. The $310,019,000 charge included a write-down of goodwill and
other intangibles of $212,945,000; a restructuring charge of $78,074,000 for the
reduction of excess manufacturing capacity and the streamlining of operations;
and, a charge of $19,000,000 for certain contingencies.
CONNOR PERIPHERALS, INC. 21
<PAGE>
Notes to Consolidated Financial Statements
The write-down of intangible assets totaling $212,945,000 consisted of
$180,000,000 of goodwill and $32,945,000 of identified intangibles. The write-
off included all of the remaining goodwill associated with the Company's
acquisition of Archive Corporation ("Archive") (see Note 4) as of the end of the
third quarter. Identified intangibles include certain patents, licenses,
trademarks, technology and market data acquired either directly or in connection
with the acquisition of Archive. The Company believes that the write-down of
these assets was necessitated by the emergence during 1993 of fundamental
changes in the storage business, particularly the tape business. These changes
had led to lower expectations for revenue growth and gross margins. Both these
factors have a direct bearing on the value of intangibles and caused the value
of these assets to be permanently impaired based on the related discounted cash
flows.
The restructuring charge of $78,074,000 resulted from the Company's decision
to reduce excess manufacturing capacity to a level more consistent with
sustainable demand and to streamline operations and administrative processes to
reduce the Company's cost structure. This charge also included costs to further
integrate and reduce sales, general and administrative and research and
development activities of both the disk and tape drive operations. The
$78,074,000 was comprised of $27,496,000 for facilities related expenses,
$17,472,000 for write-off of certain assets and $33,106,000 for employee
headcount reductions and other miscellaneous items.
During the first and second quarters of 1993, the Company recorded special
charges totaling $48,683,000, of which $20,300,000 was charged to cost of sales
and $28,383,000 was charged to unusual items. These charges reflected the cost
of the Company's actions to accelerate the phase-out of certain disk drive
products, consolidate headcount and facilities in response to increased
productivity and lower short-term production levels and to further integrate the
tape drive operations. The $28,383,000 charge included in unusual items was
comprised of approximately $17,400,000 for property, plant and equipment related
expenses and $10,983,000 for employee headcount reductions and other
miscellaneous items.
In December 1992, in connection with the acquisition of Archive, the Company
recorded a nonrecurring charge of $57,611,000 representing the fair value of
acquired research and development projects in-process at the date of
acquisition.
During the fourth quarter of 1991, the Company took several actions to
streamline operations, contain costs and reposition manufacturing activities.
These actions included a world-wide reduction in work force and the sale of the
Company's headstack assembly operations in Malaysia to Read-Rite Corporation.
These actions resulted in a net reduction to operating expenses of approximately
$3,389,000.
NOTE 4
ACQUISITION
OF ARCHIVE
CORPORATION
In December 1992, the Company acquired all of the outstanding stock of Archive
Corporation, a manufacturer and supplier of removable tape back-up and data
storage products, for approximately $202,000,000, including cash of
approximately $185,000,000, conversion of outstanding stock options and
transaction costs. In addition, the Company assumed approximately $104,000,000
of Archive debt, all of which had been repaid as of December 31, 1993. The
transaction has been accounted for as a purchase, and accordingly, the purchase
price has been allocated to the assets acquired and liabilities assumed based
upon their estimated fair market values at the date of acquisition. The excess
of the purchase price over the fair market value of the net tangible assets
acquired was initially estimated at approximately $287,860,000.
During 1993, the Company revised the estimates of certain reserves and
accruals established in connection with the purchase accounting which increased
the excess of the purchase price over the fair market value of net tangible
assets acquired to $303,893,000, of which $57,611,000 was allocated to in-
process research and development, $55,000,000 was allocated to various
intangibles including technology, software, patents and trademarks and the
remaining $191,282,000 was allocated to goodwill. During the third quarter of
1993, the Company wrote-off the remaining unamortized goodwill and certain other
intangibles due to impairment resulting from changes in the storage business
(see Note 3). The consolidated statement of operations for the year ended
December 31, 1992 includes a charge of $57,611,000 ($35,719,000 net of tax) for
in-process research and development purchased in connection with the
acquisition. Operations of Archive subsequent to the date of acquisition through
December 31, 1992 were not material and have not been included in the
consolidated statement of operations for the year ended December 31, 1992.
22 CONNOR PERIPHERALS, INC.
<PAGE>
The following unaudited pro forma information reflects the results of
operations for the years ended December 31, 1992 and 1991 as if the acquisition
of Archive had occurred as of the beginning of 1991, and after giving effect to
certain adjustments, including amortization of goodwill and other intangibles,
discontinuation of certain product lines, lost interest income, reduction of
interest expense on retired debt, accounting conformance and related income tax
effects. The pro forma information excludes the effects of the nonrecurring
charge of $57,611,000 for in-process research and development. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of what operating results would have been had the acquisition
actually taken place at the beginning of 1991 or of operating results which may
occur in the future.
<TABLE>
<CAPTION>
Year ended December 31, 1992 1991
- -------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) (Unaudited)
<S> <C> <C>
Net sales $ 2,590,635 $ 1,910,483
Net income $ 157,804 $ 30,761
Earnings per share $ 2.36 $ 0.52
</TABLE>
NOTE 5
SUPPLEMANTAL
CASH FLOW
INFORMATION
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net of $1,682
capitalized in 1991 $49,896 $ 40,506 $ 18,374
Income taxes, net of refunds
amounting to $4,341 in 1993 15,846 17,218 23,546
Non-cash investing and financing activities:
Capital lease obligations -- -- 742
Fair market value of common stock of
Read-Rite Corporation acquired on
sale of the Headstack operations -- -- 16,649
Fair market value of Archive assets
acquired, including goodwill -- 306,485 --
Debt assumed -- (104,000) --
</TABLE>
NOTE 6
INVESTMENT IN
JOINT VENTURES
In August 1993, the Company executed an agreement ("Agreement") with Olivetti,
S.p.A. ("Olivetti") under which the Company purchased for $16,000,000 the 49%
minority interest owned by Olivetti in Conner Peripherals Europe, S.p.A.
("CPE"), the Company's majority-owned subsidiary located in Italy. The Company
is also obligated to make additional payments to Olivetti should earnings of CPE
during the three years ending December 31, 1996 exceed certain amounts. Under
the Agreement, Olivetti has agreed that if certain performance conditions are
met, it will purchase at least 70% of its requirements for disk drives from the
Company during the same three-year period.
In September 1992, the Company entered into a contract with Shenzhen CPC, a
subsidiary of China Electronics Corporation, to establish a joint venture in
Shenzhen, People's Republic of China, for manufacture and distribution of disk
drives. The Company holds a 60% interest in the joint venture. In January 1994,
the Company agreed, subject to certain regulatory approvals, to increase its
ownership in the joint venture to 90%.
CONNOR PERIPHERALS, INC. 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7
INCOME TAXES
Income (loss) before income taxes includes $(148,738,000), $185,708,000, and
$118,065,00 of income (loss) relating to non-U.S. operations for 1993, 1992 and
1991, respectively.
The provision (benefit) for income taxes includes:
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 1,902 $ 24,607 $ 6,067
State 142 5,657 1,962
Foreign 5,039 17,451 5,885
------------------------------------
7,083 47,715 13,914
------------------------------------
Deferred:
Federal (27,848) (8,700) 14,385
State (4,897) (4,367) 5,050
-----------------------------------
(32,745) (13,067) 19,435
------------------------------------
Total $ (25,662) $ 34,648 $ 33,349
====================================
</TABLE>
Deferred taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
December 31, 1993 1992
- -------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Inventory valuation $ (13,552) $ (14,137)
Depreciation and amortization (9,781) (2,486)
Accounts receivable reserves (15,030) (13,753)
Accrued expenses and other (41,178) (17,543)
Net operating loss and tax credit
carryforwards (69,491) (56,151)
---------------------------
(149,032) (104,070)
---------------------------
Unremitted earnings of foreign subsidiaries 138,459 132,286
Technology and other intangibles 13,328 23,180
State income taxes 6,846 2,519
---------------------------
158,633 157,985
---------------------------
Valuation reserves 33,617 22,048
---------------------------
Total $ 43,218 $ 75,963
---------------------------
</TABLE>
A reconciliation of the income tax provision (benefit) computed by applying the
domestic federal statutory rate to pretax income, to the recorded provision
(benefit) for income taxes follows:
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Provision/(benefit) at statutory rate (35.0%) 34.0% 34.0%
Differences between United States and foreign taxes
and limitations on the benefits of foreign losses 12.6 (13.0) (9.3)
State taxes, net of federal benefit (0.7) 0.6 3.7
Goodwill 13.7 _ _
Change in federal valuation reserve 1.9 _ _
Impact of rate change 0.3 _ _
Other 1.8 0.7 (1.9)
---------------------------------------
(5.4%) 22.3% 26.5%
=======================================
</TABLE>
24 CONNER PERIPHERALS, INC.
<PAGE>
At December 31, 1993, the Company has net operating loss carryforwards of
approximately $150,000,000, expiring 1995 through 2007, relating to
preacquisition operations of Archive and its subsidiaries. The majority of
these losses were generated in years that have not yet been examined by the
Internal Revenue Service ("IRS"). These losses may be used to offset taxable
income, subject to an annual maximum of approximately $12,000,000, in future
years. For financial reporting purposes, at the time of acquisition, the
Company recognized tax benefits relating to a portion of these losses to
reduce goodwill and established valuation reserves of $22,048,000 relating to
the remaining losses. Benefits of such remaining losses, if realized, would be
used to reduce the remaining balance of other intangibles relating to the
Archive acquisition. During 1993, the Company increased the valuation reserves
relating to these losses to reflect changes in management's judgment regarding
the realization of these losses.
At December 31, 1993, the Company has alternative minimum tax credit
carryforwards of approximately $6,000,000, which, subject to certain
restrictions, are available to reduce taxes on future taxable income without
any time limitations.
The Company enjoys tax holidays in Singapore and Malaysia with respect to
the manufacture of disk drives, which expire in 1997 and 1995, respectively,
subject to certain extensions and post-holiday benefits. Tax holidays for the
manufacture of tape drives in Singapore expired in June 1993. The net impact
of these tax holidays was to reduce the net loss by approximately $3,000,000
($0.06 per share fully diluted) in 1993, increase net income by approximately
$27,800,000 ($0.37 per share fully diluted) in 1992, and increase net income
by approximately $12,200,000 ($0.19 per share fully diluted) in 1991.
At December 31, 1993, the Company had not provided U.S. federal and state
income taxes of approximately $65,000,000 on cumulative unremitted earnings of
its consolidated foreign subsidiaries and approximately $28,000,000 on
cumulative preacquisition unremitted earnings of Archive's consolidated
foreign subsidiaries, which are intended to be indefinitely reinvested.
The IRS is currently reviewing Conner Peripherals' federal income tax
returns for 1989 and 1990 and Archive and its subsidiaries' federal income tax
returns for 1985 through 1989. Management believes that the ultimate outcome
of these reviews will not have a material adverse impact on the Company's
financial position or results of operations.
NOTE 8
LONG-TERM
DEBT AND LINES
OF CREDIT
<TABLE>
<CAPTION>
December 31, 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Convertible subordinated debentures, 6.75%, due 2001,
convertible into 7,931,035 shares of common stock $ 230,000 $ 230,000
Convertible subordinated debentures, 6.5%, due 2002,
convertible into 14,375,000 shares of common stock 345,000 345,000
Senior unsecured notes, 8.84%, and 9.08%, due through 1998 105,000 105,000
Senior unsecured note, 12%, due through 1994 9,000 10,500
Italian Lire debentures and notes, 7% to 7.38%,
due through 2000 13,628 16,071
Capitalized lease obligations 1,090 3,355
-----------------------------
703,718 709,926
Less current portion 43,112 5,081
-----------------------------
$ 660,606 $ 704,845
=============================
</TABLE>
During 1993, the Company modified certain terms of the senior unsecured notes.
Under the modified terms, in exchange for revising certain financial covenants,
the Company agreed to increase the interest rates of the notes by half a
percent for periods commencing from October 1, 1993 and ending the earlier of
March 31, 1995 or the due dates of the notes.
Based upon quoted market prices, the fair value of the convertible
subordinated debentures was approximately $512,325,000 at December 31, 1993. The
estimated fair value of the Company's other long-term debt was approximately
$144,737,000 at December 31, 1993. The fair values of debt for which quoted
prices were not available has been determined based upon interest rates
available to the Company for issuance of debt with similar terms and remaining
maturities.
CONNER RERIPHERALS, INC. 25
<PAGE>
Notes to Consolidated Financial Statements
At December 31, 1993, future minimum principal payments on long-term debt
and capitalized lease obligations were as follows:
<TABLE>
<CAPTION>
Year ended December 31,
- --------------------------------------------------
<S> <C>
(in thousands)
1994 $ 43,112
1995 34,092
1996 33,778
1997 6,854
1998 6,987
Thereafter 578,895
--------------
$ 703,718
==============
</TABLE>
On December 23, 1993, the Company entered into a revolving credit facility
agreement ("Agreement") with a group of banks allowing borrowings of up to
$100,000,000 through December 31, 1995. Borrowings under the revolving credit
facility carry interest at the banks' prime rate or, at the option of the
Company, at an interbank offered rate (as defined in the Agreement). The
Agreement provides for a commitment fee. As of December 31, 1993, the Company
had no borrowings under the revolving credit facility. At December 31, 1993, the
Company had outstanding letters of credit of approximately $40,300,000.
The revolving credit facility and senior unsecured notes prohibit the
payment of cash dividends and require the maintenance of various financial
covenants. Without the prior consent of the lenders, the Company is also
prohibited from incurring debt and lease commitments in excess of specified
amounts or entering into acquisition, sale of business, merger or joint venture
agreements in excess of certain amounts. At December 31, 1993, the Company was
in full compliance with all covenants and conditions.
NOTE 9
LEASE
COMMITMENTS
The Company leases certain property, facilities and equipment under
non-cancelable operating leases and certain equipment under capitalized leases.
The terms of the leases for property, facilities and equipment expire over the
next 2 years with renewal options in certain instances.
Future minimum lease payments under capitalized and non-cancelable
operating leases as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year ended December 31, leases leases
- ----------------------------------------------------------------------
<S> <C> <C>
(in thousands)
1994 $ 821 $ 23,273
1995 283 12,266
1996 128 7,348
1997 12 6,347
1998 _ 5,996
Thereafter _ 21,595
-------------------------
Total minimum payments 1,244 $ 76,825
----------
Less imputed interest 154
------
Present value of payments under capital
leases 1,090
Less current portion 744
------
Long-term lease obligations $ 346
======
</TABLE>
Rent expense for all operating leases was approximately $24,446,000 in 1993,
$15,958,000 in 1992, and $16,855,000 in 1991.
26 CONNER PERIPHERALS, INC
<PAGE>
NOTE 10
EMPLOYEE
BENEFIT
PLANE
Incentive Stock Plans: In 1986, the Company adopted the 1986 Incentive Stock
Plan ("Plan"). The Plan provides for the issuance of non-transferable stock
options to employees of the Company and non-statutory stock options and stock
purchase rights to directors, employees and consultants of the Company. The
Company has never issued any stock purchase rights. A total of 18,500,000 shares
of common stock have been reserved for issuance of options and stock purchase
rights under the Plan. At December 31, 1993, 5,255,238 shares were available for
future grants of options and stock purchase rights under the Plan.
Stock options are granted at prices of not less than 100% of the fair
market value of the common stock at the time of grant, except that stock options
granted to any employee who owns stock representing more than 10% of total
voting power must have an exercise price of not less than 110% of fair market
value. Options granted under the Plan prior to July 1992 expire five years after
the date of grant and vest over a period of four years. In July 1992, the Plan
was amended to provide an expiration period for subsequent stock grants to 10
years from the date of grant.
On December 29, 1992, upon completion of the acquisition of Archive, the
Company assumed the obligations existing under Archive's Incentive Stock Option
and Restricted Stock Purchase Plans ("Archive Plans"). Effective on that date,
the Company converted existing options to purchase Archive common stock under
the Archive Plans into an equivalent number of options to purchase the Company's
common stock. A total of 1,125,000 shares of the Company's common stock were
reserved for issuance of options of which 1,059,258 were issued upon the
conversion. These options expire at various times through 2002.
The following table summarizes stock option activity under the Plan and
Archive Plans:
<TABLE>
<CAPTION>
Year ended December 31, 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of year 8,592,493 5,510,468 4,666,995
Granted 3,292,099 3,213,825 2,073,763
Conversion of the Archive Plans _ 1,059,258 _
Exercised ($0.05 per share to $26.88 per share) (1,329,620) (868,619) (840,018)
Canceled (2,025,205) (322,439) (390,272)
---------------------------------------------------------
Options outstanding at end of the year 8,529,767 8,592,493 5,510,468
---------------------------------------------------------
Options exercisable at end of the year 3,547,071 2,871,736 1,820,837
Range of exercise price of outstanding options
at end of the year $ 5.19 $ 5.00 $ 0.15
$ 26.88 $ 26.88 $ 26.88
</TABLE>
A total of 3,572,286 non-statutory stock options were outstanding at December
31, 1993.
Restricted Stock Plan: In 1992, the Company's stockholders approved the adoption
of the 1992 Restricted Stock Plan ("Restricted Plan"). A total of 1,000,000
shares of common stock are reserved for issuance under the Restricted Plan. The
aggregate fair value of the shares granted under the Restricted Plan is
considered unearned compensation at the time of grant and compensation is earned
ratably over the vesting period of seven years. Charges to income for the
Restricted Plan during 1993 and 1992 were approximately $1,073,000 and $514,000,
respectively. At December 31, 1993, 440,000 shares have been issued under the
Restricted Plan.
Employee Stock Purchase Plan: In 1988, the Company adopted an Employee Stock
Purchase Plan ("Purchase Plan"). A total of 3,000,000 shares of common stock are
reserved for issuance under the Purchase Plan. Shares may be purchased by
participants at the lower of 85% of the fair market value of the common stock at
the beginning or end of each six-month offering period. Shares are to be
purchased from payroll deductions which are limited to 15% of an employee's
compensation. At December 31, 1993, 2,601,175 shares have been issued under the
Purchase Plan.
Profit Sharing Plan: The Company has a profit sharing plan which provides for
additional compensation to all employees of the Company with the exception of
certain marketing and sales personnel who are compensated on a commission basis
and certain non-U.S. employees. The additional compensation is determined on a
quarterly basis, based upon a percentage of the amount of operating profit in
excess
CONNER PERIPHERALS, INC. 27
<PAGE>
Notes to Consolidated Financial Statements
of a stipulated return on equity. As a result of operating losses
incurred in 1993, the Company did not distribute profit sharing or record
charges to income relating to profit sharing. Charges to income for the profit
sharing plan during 1992 and 1991 were approximately $14,686,000 and $2,225,000,
respectively, which have been included in selling, general and administrative
costs.
401(k) Savings Plan: In 1990, the Company adopted a 401(k) savings plan
("Savings Plan") covering substantially all of its U.S. employees. Under the
Savings Plan, eligible employees may contribute up to 15% of their compensation
to the Saving Plan with the Company matching participant's contributions up to
$250 per employee per year at the rate of 50% of the employee contribution. Both
the participant's and the Company's contributions are fully vested. To date, the
Company's contributions have not been material.
NOTE 11
REPURCHASE OF
COMMON STOCK
As of December 31, 1991, Compaq Computer Corporation ("Compaq") owned
approximately 21% of the outstanding common stock of the Company. In August
1992, the Company repurchased 11,638,802 shares of the Company's common stock
from Compaq representing substantially all of Compaq's equity interest in the
Company.
NOTE 12
FOREIGN
OPERATIONS
The Company operates in one industry segment (see Note 1). The following is a
summary of the Company's operations:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Sales to third party customers:
United States:
Customers in United States $ 997,764 $ 867,916 $ 581,400
Customers in Europe & Asia 859,447 892,506 488,032
-----------------------------------------------
1,857,211 1,760,422 1,069,432
-----------------------------------------------
Asia 193,257 326,502 436,276
Europe 101,204 151,499 93,276
-----------------------------------------------
2,151,672 2,238,423 1,598,984
-----------------------------------------------
Intercompany sales between geographic
areas:
United States 285,250 74,579 85,327
Asia 1,426,370 1,388,617 1,046,122
Europe 98,007 106,037 80,931
----------------------------------------------
1,809,627 1,569,233 1,212,380
----------------------------------------------
Consolidation eliminations (1,809,627) (1,569,233) (1,212,380)
----------------------------------------------
Net sales $ 2,151,672 $ 2,238,423 $ 1,598,984
==============================================
Operating income:
United States $ (295,722) $ (3,287) $ 8,765
Asia (88,303) 119,348 108,279
Europe (62,405) 37,469 13,167
----------------------------------------------
$ (446,430) $ 153,530 $ 130,211
==============================================
Identifiable assets:
United States $ 577,962 $ 815,382 $ 306,257
Asia 313,319 404,506 390,613
Europe 55,223 70,292 67,264
----------------------------------------------
946,504 1,290,180 764,134
General corporate assets 517,547 614,527 570,404
----------------------------------------------
Total assets $ 1,464,051 $ 1,904,707 $ 1,334,538
==============================================
</TABLE>
28 CONNER PERIPHERALS, INC
<PAGE>
Intercompany sales are accounted for at prices intended to approximate those
that would be charged to unaffiliated customers. At December 31, 1993 and 1992,
foreign liabilities (excluding intercompany balances) were $273,288,000 and
$280,053,000, respectively.
NOTE 13
LITIGATIOR
The Company and certain officers and directors are defendants in a securities
class action lawsuit which purports to represent a class of investors who
purchased or otherwise acquired the Company's common stock between January 1992
and May 1993. Certain officers and directors are also defendants in a related
shareholders derivative suit. Both complaints seek unspecified damages and other
relief. the Company believes there are meritorious defenses to the matters
raised and intends to defend the actions vigorously.
In August 1993, the Company was served with a patent infringement complaint
filed by IBM in the United States District Court for the Northern District of
California. The complaint alleges that products manufactured by the Company
infringe nine patents owned by IBM. In addition, the complaint seeks declaratory
relief to the effect that drives produced by IBM do not infringe five patents
held by the Company and seeks to have such patents declared invalid. The Company
answered the complaint, denying all material allegations and counter claiming
that IBM disk drives infringe six patents owned by Conner, including the five
contained in the IBM complaint. The Company expects that it may engage in cross-
licensing negotiations with IBM with a view towards resolving this matter;
however, the Company believes that it has meritorious defenses against these
allegations and will defend this action vigorously. The Company is unable to
predict the outcome of the litigation or ultimate effect, if any, on its
operations or financial condition.
Report of Independent Accountents
To the Board of Directors and
Stockholders of Conner Peripherals, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Conner
Peripherals, Inc. and its subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 13, the Company is a defendant in a lawsuit alleging
infringement of certain patents. The Company is unable to predict the outcome of
the litigation or ultimate effect, if any, on its operations or financial
condition.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
San Jose, California
January 20, 1994
CONNER PERIPHERALS, INC. 29
<PAGE>
Report of Management
Responsibility for the integrity and objectivity of the financial information
presented in this Annual Report rests with Conner management. The accompanying
financial statements have been prepared in conformity with generally accepted
accounting principles.
Conner maintains an effective internal control structure. It consists,
in part, of organizational arrangements which clearly define lines of
responsibility and comprehensive systems of review and control procedures. We
believe this structure provides reasonable assurance that transactions are
executed in accordance with management's authorization, that they are
appropriately recorded, in conformity with generally accepted accounting
principles and that they adequately safeguard, verify and maintain
accountability of assets. In order to assure an effective internal control
system, we carefully select and train our employees, develop and disseminate
written policies and procedures and foster an environment conducive to the
effective functioning of controls. We believe that it is essential for the
Company to conduct its business affairs in accordance with the highest ethical
standards.
The Audit Committee of the Board of Directors is composed solely of outside
directors, and is responsible for recommending to the Board, the independent
accounting firm to be retained for the coming year, subject to stockholder
approval. The Audit Committee meets periodically and privately with the
independent accountants, with our internal auditors, as well as with Conner
management, to review accounting, auditing, internal control structure and
financial reporting matters.
Price Waterhouse, independent accountants, are retained to examine
Conner's financial statements. Their accompanying report is based on an
examination conducted in accordance with generally accepted auditing standards,
including a review of the internal control structure and tests of accounting
procedures and records.
/s/DAVID T. MITCHELL /s/P. JACKSON BELL
David T. Mitchell P. Jackson Bell
President and Executive Vice President
Chief Operating Officer and Chief Financial Officer
30 CONNER PERIPHERALS, INC.
<PAGE>
Corporate Directory
EXECUTIVE
OFFICERS AND
DIRECTORS
Finis F. Conner
Chairman of the Board of Directors
and Chief Executive Officer
William J. Schroeder
Vice Chairman and Director
David T. Mitchell
President, Chief Operating Officer
and Director
John P. Squires
Executive Vice President of Research
and Development and Director
P. Jackson Bell
Executive Vice President
and Chief Financial Officer
William S. Anderson/1/,/2/
Director
Roger S. Penske
Director
Mark Rossi/1/,/2/
Director
Linda Wertheimer Hart/1/,/2/
Director
Ambassador
L. Paul Bremer, III/2/
Director
/1/ Member of the Audit Committee
/2/ Member of the Compensation Committee
LEGAL COUNSEL
Wilson, Sonsini, Goodrich & Rosati, P.C.
Palo Alto, CA
INDEPENDENT ACCOUNTANTS
Price Waterhouse
San Jose, CA
REGISTRAR AND TRANSFER AGENT
The First National Bank of Boston
Boston, MA
Bank of Boston stockholder services inquiry number 1-800-442-2001.
ANNUAL MEETING
The annual meeting of stockholders of Conner Peripherals, Inc. will be held at
10:00 a.m. on April 19, 1994, at the Fairmont Hotel at the Fairmont Plaza
located at 170 S. Market Street, San Jose, California 95113. All Conner
stockholders are encouraged to attend.
For additional copies of this annual report, contact the Investor Relations
Department, Conner Peripherals, Inc., 3081 Zanker Road, San Jose, California
95134-2128.
FORM 10-K
A copy of the Company's Form 10-K, filed with the Securities and Exchange
Commission, is available without charge upon written request to the Investor
Relations Department, Conner Peripherals, Inc., 3081 Zanker Road, San Jose,
California 95134-2128.
MARKET PRICE OF COMMON STOCK
The Company's common stock is traded on the New York Stock Exchange under the
symbol "CNR." The following table shows the high and low closing sales prices
for the Common Stock of the Company for the periods indicated, as reported by
the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1993 High Low
- ---------------------------------------------------
<S> <C> <C>
Quarter ended March 31, 1993 24 3/8 13 1/2
Quarter ended June 30, 1993 13 5/8 9 1/4
Quarter ended September 30, 1993 13 0/0 9 1/4
Quarter ended December 31, 1993 14 5/8 9 1/4
<CAPTION>
1992 High Low
- ---------------------------------------------------
<S> <C> <C>
Quarter ended March 31, 1992 21 3/8 15 5/8
Quarter ended June 30, 1992 23 1/2 17 1/2
Quarter ended September 30, 1992 22 0/0 16 7/8
Quarter ended December 31, 1992 22 5/8 18 1/2
</TABLE>
The Company has not paid cash dividends on its common stock and does not plan
to pay cash dividends to its stockholders in the near future. The Company
presently intends to retain its earnings to finance further growth of its
business.
As of December 31, 1993, the Company had 2,713 stockholders of record.
<PAGE>
Conner Peripherals, Inc.
3081 Zanker Road
San Jose, CA 95134-2128
408-456-4500
1994 Conner Peripherals, Inc. Printed in U.S.A. 63K
<PAGE>
CONNER PERIPHERALS, INC.
EXHIBIT 21.1
Registered Entities
<TABLE>
<CAPTION>
CORPORATIONS REGISTERED OWNER(S)
- ------------ -------------------
<S> <C>
Conner Peripherals, Inc. (CPI) N/A
Conner Peripherals (U.K.) Limited (CPUK) CPI
Conner Peripherals GmbH (GMBH) CPI
Conner Peripherals Singapore, Ltd. (in Cayman Islands) (CPS) CPI
Conner Peripherals Pte. Ltd. (in Singapore) (CPPL) CPS
Conner Peripherals Malaysia Sdn. Bhd. (CPM) CPPL
Conner Finance Limited (in Cayman Islands) CPM
Conner Peripherals K.K. (KK) CPI
Conner Peripherals Europe S.p.A. (CPE) CPI
Conner Peripherals France S.a.r.l. (CPF) CPI
Conner Peripherals (U.K.) Sales Limited CPI
Conner Peripherals Korea, Ltd. (CPK) CPI
Conner Peripherals (Hong Kong) Limited (CPHK) CPI
Conner Peripherals China Holding Company (CPCHC) CPS/CPHK
Conner Shenzhen Peripherals Co. Ltd. CPCHC/Shenzhen
CPC
Conner Technology International Limited CPI
Archive (Singapore) Pte. Ltd. (in Singapore) CPS
Archive Europe Ltd. (AEL) CPI
Archive U.K. Ltd. AEL
Archive France S.a.r.l. CPI
Optimem, Inc. CPI/Xerox*
Archive Peripherals Asia Pacific Pte. Ltd. (APA) (in Singapore) CPI
Arcada Holdings, Inc. (AHI) CPI*
Arcada Software, Inc. AHI
BRANCHES
- --------
Conner Peripherals Pte. Ltd., Taiwan Branch (CPT) CPPL
Archive Peripherals Asia Pacific Pte. Ltd., Taiwan Branch APA
</TABLE>
* - Minority interest held by certain individuals.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Forms S-8 (Nos. 33-46886 and
33-56878) of Conner Peripherals, Inc. of our report dated January 20, 1994,
appearing on page 29 of the Annual Report to Stockholders which is incorporated
in this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedules, which appears on
page S-3 of this Form 10-K.
/s/ PRICE WATERHOUSE
Price Waterhouse
San Jose, California
March 31, 1994
