<PAGE>
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 3, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to _____
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Commission File Number 0-15160
ATL ULTRASOUND, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1353386
(State of incorporation) (IRS Employee Identification No.)
22100 Bothell-Everett Highway
Post Office Box 3003
Bothell, Washington 98041-3003
(Address of principal executive offices) (Zip Code)
(425) 487-7000
(Telephone number)
Common stock, $0.01 par value; 14,789,665 shares outstanding as of July 31, 1998
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___
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<PAGE>
ATL ULTRASOUND, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page No.
- ------ --------------------- -------
<S> <C>
Item 1. Financial Statements
--------------------
Condensed Consolidated Balance Sheets -
July 3, 1998 (Unaudited) and December 31, 1997......................................3
Condensed Consolidated Statements of Income (Unaudited) -
Three Months and Six Months Ended July 3, 1998 and
June 27, 1997.......................................................................4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended July 3, 1998 and June 27, 1997.....................................5
Notes to Condensed Consolidated Financial Statements....................................6
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations................................................10
-----------------------------------
PART II OTHER INFORMATION
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Item 1. Legal Proceedings......................................................................14
-----------------
Item 2. Changes in Securities..................................................................14
---------------------
Item 3. Defaults Upon Senior Securities........................................................14
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders....................................14
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Item 5. Other Information......................................................................15
-----------------
Item 6. Exhibits and Reports on Form 8-K.......................................................15
--------------------------------
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements
--------------------
ATL ULTRASOUND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 7/3/98 12/31/97
- --------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 46,375 $ 30,821
Receivables, net 116,424 136,351
Inventories 97,339 98,677
Prepaid expenses 3,568 2,207
Deferred income taxes, net 14,286 13,668
---------------------------------------
Total current assets 277,992 281,724
PROPERTY, PLANT AND EQUIPMENT, NET 82,654 74,630
OTHER ASSETS, NET 5,238 5,456
---------------------------------------
$ 365,884 $ 361,810
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 687 $ 654
Current portion of long-term debt 754 449
Accounts payable and accrued expenses 65,649 80,529
Payable to SonoSight, Inc. 12,061 -
Deferred revenue 16,538 15,831
Taxes on income 8,382 1,457
---------------------------------------
Total current liabilities 104,071 98,920
LONG-TERM DEBT 28,778 12,307
OTHER LONG-TERM LIABILITIES 22,326 20,862
SHAREHOLDERS' EQUITY 210,709 229,721
---------------------------------------
$ 365,884 $ 361,810
=======================================
- --------------------------------------------------------------------------------------------------------------------------
Common shares outstanding 14,760 14,413
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
ATL ULTRASOUND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
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(In thousands, except per share data) 7/3/98 6/27/97 7/3/98 6/27/97
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Product sales $ 88,617 $ 78,148 $ 170,616 $ 155,862
Service 23,095 22,660 46,512 45,064
---------------------------------------------------------------------
111,712 100,808 217,128 200,926
---------------------------------------------------------------------
COST OF SALES
Cost of product sales 40,369 37,657 78,684 77,473
Cost of service 14,930 13,725 29,234 26,247
---------------------------------------------------------------------
55,299 51,382 107,918 103,720
---------------------------------------------------------------------
GROSS PROFIT 56,413 49,426 109,210 97,206
OPERATING EXPENSES, NET
Selling, general and administrative 35,271 31,264 68,927 61,572
Research and development 14,032 15,216 28,966 29,980
Other expense, net 478 60 2,097 416
---------------------------------------------------------------------
49,781 46,540 99,990 91,968
---------------------------------------------------------------------
INCOME FROM OPERATIONS 6,632 2,886 9,220 5,238
Interest income 501 1,207 927 2,163
Interest expense (390) (908) (676) (1,650)
--------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 6,743 3,185 9,471 5,751
Income tax expense 1,293 636 1,838 1,150
---------------------------------------------------------------------
NET INCOME $ 5,450 $ 2,549 $ 7,633 $ 4,601
=====================================================================
Net income per share:
Basic $ 0.38 $ 0.18 $ 0.53 $ 0.33
Diluted $ 0.35 $ 0.17 $ 0.50 $ 0.31
Weighted average common shares and
equivalents outstanding:
Basic 14,480 13,990 14,392 13,981
Diluted 15,450 14,891 15,230 14,864
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ATL ULTRASOUND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
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(In thousands) 7/3/98 6/27/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,633 $ 4,601
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 9,494 8,040
Deferred income tax benefit (618) (37)
Changes in:
Receivables, net 18,672 16,474
Inventories 710 (4,506)
Accounts payable and accrued expenses (14,358) 1,678
Deferred revenue 1,897 (2,691)
Taxes on income 7,012 (1,774)
Other (1,205) (914)
----------------------------------
Cash provided by operations 29,237 20,871
INVESTING ACTIVITIES
Investment in property, plant and equipment (15,351) (7,096)
Proceeds from sale of business interests - 4,500
----------------------------------
Cash used by investing activities (15,351) (2,596)
FINANCING ACTIVITIES
Increase in short-term borrowings 33 965
Proceeds from issuance of long-term debt 17,000 -
Repayment of long-term debt (224) (463)
Repurchase of common shares (919) (4,393)
Exercise of stock options 4,058 3,983
Capital contribution to SonoSight, Inc. (18,270) -
----------------------------------
Cash provided by financing activities 1,678 92
Effect of exchange rate changes (10) (101)
----------------------------------
Increase in cash and cash equivalents 15,554 18,266
Cash and cash equivalents, beginning of period 30,821 63,262
----------------------------------
Cash and cash equivalents, end of period $ 46,375 $ 81,528
==================================
- -------------------------------------------------------------------------------------------------------------------
Non-cash financing transaction:
Accrual of capital contribution to SonoSight, Inc. $ 12,061 -
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
ATL ULTRASOUND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of ATL Ultrasound, Inc. (ATL), which includes its subsidiaries and is
referred to as the "Company". The Company is a worldwide leader in the
development, manufacture, distribution and service of diagnostic medical
ultrasound systems and related accessories and supplies. The Company sells its
products to hospitals, clinics and physicians for use in radiology, cardiology,
women's health care, vascular, musculoskeletal and intraoperative applications.
The accompanying condensed consolidated financial statements and related notes
have been prepared pursuant to the Securities and Exchange Commission rules and
regulations for Form 10- Q. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The accompanying condensed consolidated
financial statements and related notes should be read in conjunction with the
consolidated financial statements and notes thereto incorporated by reference in
the Company's 1997 Form 10-K.
The information furnished reflects, in the opinion of management, all
adjustments necessary for a fair presentation of the results for the interim
periods presented. Interim results are not necessarily indicative of results for
a full year.
2. CASH AND CASH EQUIVALENTS
The Company considers short-term investments with maturity dates of three months
or less at the date of purchase to be cash equivalents.
3. INVENTORIES
<TABLE>
<CAPTION>
7/3/98 12/31/97
--------------- ---------------
<S> <C> <C>
Materials and work in process $34,526 $36,717
Finished products 21,377 20,545
Demonstrator equipment 23,950 23,838
Customer service 17,486 17,577
--------------- ---------------
$97,339 $98,677
=============== ===============
</TABLE>
6
<PAGE>
ATL ULTRASOUND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
4. PER SHARE DATA
In accordance with Statement of Financial Accounting Standards (FAS) No. 128,
Earnings Per Share, the Company has reported both basic and diluted net income
per common share for each period presented. Basic earnings per share (EPS) is
calculated based on the weighted average number of common shares outstanding
during the period. The computation of diluted EPS includes the effect of all
dilutive potential common shares outstanding. Conversion of dilutive potential
common shares is assumed based on the average market price of common shares
outstanding during the period. All previously reported EPS have been restated to
conform with the provisions of FAS 128.
The schedules below represent a reconciliation of the numerators and
denominators of the basic and diluted EPS calculations for the second quarter of
1998 and 1997 as well as year-to-date (YTD) 1998 and 1997.
<TABLE>
<CAPTION>
Q2 1998 Q2 1997
--------------------------------- ---------------------------------------
Income Shares EPS Income Shares EPS
--------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average shares outstanding 14,674 14,119
Weighted-average unvested restricted stock (194) (129)
---------- ----------
Basic EPS $5,450 14,480 $0.38 $2,549 13,990 $0.18
Effect of dilutive securities:
Restricted stock 99 35
Common stock equivalents 871 866
---------- ----------
Diluted EPS $5,450 15,450 $0.35 $2,549 14,891 $0.17
</TABLE>
Common stock equivalents totaling 536 and 44 shares in the second quarter of
1998 and 1997, respectively, were excluded from the calculation of diluted EPS
as they were antidilutive.
<TABLE>
<CAPTION>
YTD 1998 YTD 1997
------------------------------------- ------------------------------------
Income Shares EPS Income Shares EPS
------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average shares outstanding 14,562 14,105
Weighted-average unvested restricted stock (170) (124)
---------- ----------
Basic EPS $7,633 14,392 $0.53 $4,601 13,981 $0.33
Effect of dilutive securities:
Restricted stock 74 46
Common stock equivalents 764 837
---------- ----------
Diluted EPS $7,633 15,230 $0.50 $4,601 14,864 $0.31
</TABLE>
Common stock equivalents totaling 541 and 190 shares YTD 1998 and 1997,
respectively, were excluded from the calculation of diluted EPS as they were
antidilutive.
7
<PAGE>
ATL ULTRASOUND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
5. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued FAS No. 130,
Reporting Comprehensive Income, which became effective for fiscal years
beginning after December 15, 1997. FAS 130 requires that an entity report an
amount representing total comprehensive income in condensed financial statements
of interim periods issued to Company shareholders. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
Comprehensive income represents the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources and includes net income as well as items referred to as other
comprehensive income or loss. For the periods presented, the only item of other
comprehensive loss for the Company is the foreign currency translation
adjustment resulting from the consolidation of foreign operations. The table
below provides a reconciliation of net income to total comprehensive income for
each period presented.
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------ ----------------------------------
7/3/98 6/27/97 7/3/98 6/27/97
------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Net income $5,450 $2,549 $7,633 $4,601
Foreign currency translation adjustments
resulting in other comprehensive loss (303) (828) (1,325) (3,191)
------------------------------ -------------------------------
Comprehensive income $5,147 $1,721 $6,308 $1,410
============================== ===============================
</TABLE>
At July 3, 1998, the accumulated total of other comprehensive loss relating to
foreign currency translation adjustments was $7.7 million.
6. RECLASSIFICATIONS
Certain amounts reported in the previous year have been reclassified to conform
to the 1998 presentation.
8
<PAGE>
ATL ULTRASOUND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
7. Distribution
On February 2, 1998, the Company approved a plan to spin-off its handheld
business division as an independent, publicly owned company (SonoSight, Inc.) to
its shareholders. A registration statement on Form 10 was filed with the
Securities and Exchange Commission in the name of SonoSight, Inc. and became
effective on April 2, 1998. The spin-off was effected through a tax-free
distribution of SonoSight shares to ATL shareholders on April 6, 1998 (the
"Distribution"). The Company's shareholders received one share of SonoSight
common stock for each three shares of the Company's common stock held. In
connection with the Distribution, the Company contributed to SonoSight
additional funding of $18,000 in cash on the Distribution date and will
contribute $12,000 in cash in January 1999. The Company and SonoSight have
entered into a number of agreements to facilitate the Distribution and the
transition of the company to an independent business.
Handheld business division spending totaled approximately $1,200 for the three
month period ended June 27, 1997. The EPS impact of the handheld business net
operating expenses was approximately $0.07 in the second quarter of 1997. There
was no handheld spending during the second quarter of 1998. Handheld business
division spending totaled approximately $2,500 and $2,200, respectively, for the
six month periods ended July 3, 1998 and June 27, 1997. The EPS impact of the
handheld business net operating expenses was approximately $0.13 and $0.12,
respectively, for the first half of 1998 and 1997. In connection with the
Distribution, the Company incurred stock distribution expenses of approximately
$1,300 in the first quarter of 1998. The EPS impact of the stock distribution
expenses was approximately $0.07 for the first six months of 1998.
8. Subsequent Event
On July 29, 1998, Royal Philips Electronics (Philips) of the Netherlands and the
Company announced the signing of an Agreement and Plan of Merger for Philips to
acquire all of the outstanding shares of the Company for approximately $800,000
or $50.50 per share for each outstanding share of the Company's common stock.
The transaction will be a cash tender offer followed by a cash merger to acquire
any shares not previously tendered. As a result of the transaction, the Company
will become a wholly owned subsidiary of Philips.
The Company's Board of Directors unanimously approved the transaction. Philips
commenced its cash tender offer on August 4, 1998. The cash tender offer is
subject to Philips receiving at least a majority of the fully diluted shares of
the Company as well as the receipt of customary regulatory approvals. Completion
of the transaction is expected in September 1998 provided the above conditions
are met.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
---------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share data) 7/3/98 6/27/97 % Change 7/3/98 6/27/97 % Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $111.7 $100.8 10.8% $217.1 $200.9 8.1%
Gross Profit $ 56.4 $ 49.4 14.1% $109.2 $ 97.2 12.3%
Operating Expenses $ 49.8 $ 46.5 7.0% $100.0 $ 92.0 8.7%
Net Income $ 5.5 $ 2.5 113.8% $ 7.6 $ 4.6 65.9%
Diluted Net Income per Share $ 0.35 $ 0.17 106.1% $ 0.50 $ 0.31 61.6%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company reported net income of $5.5 million or $0.35 per share in the second
quarter of 1998 compared with net income of $2.5 million or $0.17 per share in
the second quarter of 1997. For the first six months, the Company reported net
income of $7.6 million or $0.50 per share in 1998 compared with net income of
$4.6 million or $0.31 per share in 1997. The impact on YTD net income and net
income per share from the SonoSight, Inc. stock distribution expenses incurred
during the first quarter of 1998 was approximately $1.0 million and $0.07 per
share, respectively. All per share amounts are stated on a diluted basis.
REVENUES AND GROSS PROFIT
- -------------------------
The Company's worldwide revenues increased 10.8% to $111.7 million in the second
quarter of 1998 compared with $100.8 million in the second quarter of 1997. The
majority of this growth can be attributed to product sales which increased by
$10.5 million or 13.4% in the second quarter of 1998 compared to the same period
in the prior year. The increase in product sales reflects strong worldwide
demand for the Company's HDI(R) 5000 and HDI 3000 systems, partially offset by
the foreign exchange impact of the stronger U.S. dollar on international
business and the sale of the Company's image management business in the second
quarter of 1997. Service revenues approximated amounts reported in the same
period of 1997. For the first six months of 1998, worldwide revenues increased
8.1% to $217.1 million compared with $200.9 million in the prior year for the
reasons noted above.
Gross profit was $56.4 million in the second quarter of 1998, an increase of
$7.0 million compared with gross profit of $49.4 million in the same quarter of
the prior year. Total gross margin for the second quarter of 1998 increased to
50.5% compared with 49.0% in the prior year. The improvement in gross margin
reflects the favorable shift in product mix to the Company's higher margin HDI
products. Gross profit rose on higher unit volumes of both the HDI 5000 and HDI
3000, partially offset by the impact of a stronger U.S. dollar on international
business and the sale of the Company's image management business. For the first
six months of 1998, gross profit was $109.2 million compared to $97.2 million
for the same period of 1997. YTD gross margin increased to 50.3% from 48.4% in
1997 for the reasons noted above.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
(Continued)
OPERATING EXPENSES, NET
- -----------------------
Operating expenses increased to $49.8 million in the second quarter of 1998 from
$46.5 million in the same period of 1997. Selling, general and administrative
expenses were $35.3 million, an increase of 12.8% over the second quarter of
1997. The increase in selling, general, and administrative expenses reflects
higher sales volumes over the prior year and increased market development
expenditures in Asia and Latin America. These increases were partially offset by
the spin-off of SonoSight in April 1998, favorable impacts of foreign exchange
and the sale of the Company's image management business in 1997. Research and
development (R&D) expenses decreased 7.8% to $14.0 million in the second quarter
of 1998 compared with $15.2 million in the second quarter of 1997. The decrease
in R&D expenses is primarily due to the spin-off of SonoSight and the sale of
the Company's image management business as discussed above. Handheld business
division spending totaled approximately $1.2 million for the three month period
ended June 27, 1997. The EPS impact of the handheld business net operating
expenses was approximately $0.07 in the second quarter of 1997. There was no
handheld spending during the second quarter of 1998.
For the first six months of 1998, operating expenses increased to $100.0 million
or 46.1% of total revenues compared to $92.0 million or 45.8% of total revenues
in 1997. This increase is primarily due to one-time stock distribution expenses
of approximately $1.3 million incurred during the first quarter of 1998 for the
spin-off of SonoSight as well as the factors noted above. Handheld business
division spending totaled approximately $2.5 million and $2.2 million,
respectively, for the six month periods ended July 3, 1998 and June 27, 1997.
The EPS impact of the handheld business net operating expenses was approximately
$0.13 and $0.12, respectively, for the first half of 1998 and 1997.
INTEREST INCOME AND EXPENSE
- ---------------------------
The Company earned net interest income of $0.1 million during the second quarter
of 1998 compared with net interest income of $0.3 million during the same period
in 1997. Net interest income includes interest income earned on cash balances
available for investment, extended term receivables and leasing activity, offset
by interest expense on long-term debt. 1997 interest expense also includes
post-judgment interest expense accrued on patent litigation damages which were
fully paid in the fourth quarter of 1997.
TAXES AND NET INCOME
- --------------------
For the second quarter of 1998, the Company reported an income tax expense of
$1.3 million, which represents a 19.2% effective tax rate for U.S. federal,
state and foreign income. For the second quarter of 1997, the Company reported
income tax expense of $0.6 million which represents a 20% effective tax rate for
U.S. federal, state and foreign income.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
(Continued)
<TABLE>
<CAPTION>
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
- -----------------------------------------------------------------------------------------------
(In millions) 7/3/98 12/31/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 46.4 $ 30.8
Total Assets $ 365.9 $ 361.8
Long-term debt $ 28.8 $ 12.3
Shareholders' Equity $ 210.7 $ 229.7
- -----------------------------------------------------------------------------------------------
</TABLE>
Cash and cash equivalents totaled $46.4 million at July 3, 1998 compared with
$30.8 million at December 31, 1997. As shown in the Condensed Consolidated
Statement of Cash Flows, during the first six months of 1998, the Company
generated $29.2 million from operating activities while financing activities
provided cash of $1.7 million. At July 3, 1998, receivables, net, decreased
$18.7 million and accounts payable and accrued expenses decreased $14.4 million
from December 31, 1997 reflecting seasonally high activity levels in the fourth
quarter of 1997. During the second quarter of 1998, the Company borrowed
approximately $17 million to finance the construction of a new building on its
corporate campus and contributed $18 million of cash to SonoSight in connection
with the spin-off (see detailed discussion of items below). In addition, $4.1
million was generated from the exercise of employee stock options during the
first six months of 1998.
The Company began to take occupancy of the new 101,000 square foot building on
its corporate campus in July 1998. The building has an estimated completion cost
of approximately $15 to $16 million. Initial funding for the project came from
working capital with the transition to long-term debt in the second quarter of
1998.
The Company spun-off its handheld business on April 6, 1998 (the
"Distribution"). In connection with the spin-off, the Company contributed
capital of $18 million in cash on the Distribution date and will contribute an
additional $12 million in cash in January 1999 (see Note 7 to the Condensed
Consolidated Financial Statements, Distribution).
The Company repurchased 16,700 shares of its own common stock in the open market
for $0.7 million during the second quarter of 1998 under repurchase programs
intended to service the Company's benefit programs. The Company repurchased
5,000 shares totaling $0.2 million during the first quarter of 1998 and 343,000
shares totaling $11.9 million in 1997. In May 1997, the Board of Directors
authorized the Company to purchase up to 1,000,000 shares of its common stock,
subject to certain criteria.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
(Continued)
In addition to its cash balances, the Company has available domestic credit
facilities of $35 million, including a committed line of credit of $25 million.
Barring any unforeseen circumstances or events, management expects existing
cash, available credit lines and funds from operations to be sufficient to meet
the Company's operating requirements for 1998 (see Forward Looking Information).
FORWARD LOOKING INFORMATION
- ---------------------------
As an update to the forward looking information provided in the Company's 1997
Annual Report to Shareholders and the Form 10-Q filing for the first quarter of
1998, the Company provides the following information.
The Company reiterates the guidance provided at the end of the first quarter of
1998 that it is targeting earnings for the 1998 fiscal year to be in the range
of approximately $2.35 per share.
Certain statements in this report relating to the sufficiency of credit lines
and funds from operations, the tender offer and consummation and success of the
merger, and anticipated financial results for the balance of 1998 are forward
looking statements which involve a number of risks and uncertainties which could
cause actual results to differ materially from those anticipated in the forward
looking statements. Among the ongoing factors that could cause actual results to
differ materially from the above are the following considerations. Growth in the
ultrasound market in Europe remains slow and certain Asian markets are troubled
by turbulent economic conditions, which may cause revenue growth to fall short
of expectations. Worldwide competition in the ultrasound market continues at an
intense level, and the Company may lose sales to other product offerings. These
factors may adversely impact the Company's sales volume or selling prices or
both. Unanticipated events, such as delays in the Company's product development
and cost reduction programs, the unavailability of components critical to the
Company's products due to natural disasters, changes in vendor businesses or
otherwise, economic instability in Asian and other markets, the stronger U.S.
dollar, delays in receiving necessary regulatory approvals, or other unforeseen
events could adversely impact the Company's financial results for 1998. The
factors which may impede the merger and its outcome include securing all
necessary governmental and other approvals, the satisfaction of all conditions
to the merger, changing business or other market conditions, and the success of
the business combination as planned by the parties. If the merger is not
completed the Company will nonetheless bear significant legal, investment
banking, and other costs attendant to preparation for the merger, and the price
of the Company's stock can become volatile. These and other factors could
adversely affect the outcome and financial effects of the plans and events
described herein.
13
<PAGE>
PART II OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings - None.
-----------------
Item 2. Changes in Securities - None.
---------------------
Item 3. Defaults Upon Senior Securities - None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual General Meeting of Shareholders was held on May 5, 1998
(b) At the Annual General Meeting of Shareholders there were four
matters submitted to a vote of security holders. Proxies were solicited
pursuant to Regulation 14 of the Securities and Exchange Act of 1934
and there was no solicitation in opposition to management's nominees as
listed in the proxy statement. Each director nominated and proposal
submitted to a vote passed and the voting outcome of each proposal is
as follows:
(1) Election of Directors:
Kirby L. Cramer For: 12,789,282 Withheld: 39,595
Harvey Feigenbaum For: 12,794,692 Withheld: 43,185
Dennis C. Fill For: 12,793,116 Withheld: 44,761
Eugene A. Larson For: 12,795,913 Withheld: 41,964
Ernest Mario For: 12,786,976 Withheld: 50,901
John R. Miller For: 12,792,438 Withheld: 45,439
Phillip M. Nudelman For: 12,790,007 Withheld: 47,870
Harry Woolf For: 12,789,873 Withheld: 48,004
(2) The adoption of an amendments to the 1992, Option, Stock
Appreciation Right, Restricted Stock, Stock Grant and Performance Unit
Plan, including an increase in the number of shares issuable under the
plan by 850,000:
For: 8,567,911 Opposed: 2,441,328 Abstained: 122,695 Broker Non-
votes: 1,705,943
(3) The adoption of an amendment to the Nonemployee Director Stock
Option Plan to increase the number of shares issuable under the plan by
100,000:
For: 9,906,014 Opposed: 1,096,822 Abstained: 52,966 Broker Non-
votes: 1,782,075
(4) Ratification of Auditors - The Company proposal to approve the
appointment of KPMG Peat Marwick LLP as independent auditors for the
Company for 1998:
For: 12,780,081 Withheld: 18,220 Abstained: 39,576
14
<PAGE>
Item 5. Other Information
-----------------
On July 29, 1998, Royal Philips Electronics (Philips) of the Netherlands and the
Company announced the signing of an Agreement and Plan of Merger for Philips to
acquire all of the outstanding shares of the Company for approximately $800,000
or $50.50 per share for each outstanding share of the Company's common stock.
The transaction will be a cash tender offer followed by a cash merger to acquire
any shares not previously tendered. As a result of the transaction, the Company
will become a wholly owned subsidiary of Philips.
The Company's Board of Directors unanimously approved the transaction. Philips
commenced its cash tender offer on August 4, 1998. The cash tender offer is
subject to Philips receiving at least a majority of the fully diluted shares of
the Company as well as the receipt of customary regulatory approvals. Completion
of the transaction is expected in September 1998 provided the above conditions
are met.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - Financial Data Schedule
Exhibit Description
------- -----------
l0.1 Revolving Credit Loan Agreement and Guaranty by and
among Advanced Technology Laboratories, Inc., ATL
Ultrasound, Inc. and Seafirst Bank, dated as of July
1, 1997.
10.2 Revolving Credit Loan Modification Agreement, dated
as of April 21, 1998, to Revolving Credit Loan
Agreement, by and among Advanced Technology
Laboratories, Inc., ATL Ultrasound, Inc. and Seafirst
Bank.
10.3 Loan Modification Agreement between Seafirst Bank,
Advanced Technology Laboratories, Inc., and ATL
Ultrasound, Inc. dated as of June 16, 1998.
10.4 Guaranty of Payment and Performance by ATL
Ultrasound, Inc. to Seafirst Bank, dated as of June
16, 1998.
10.5 Promissory Note to Seafirst Bank, made by Advanced
Technology Laboratories, Inc., dated as of June16,
1998.
10.6(A) Form of Employment Agreements between ATL Ultrasound,
Inc. and Donald D. Blem, Castor F. Diaz, Pamela L.
Dunlap, and Jacques Souquet, effective as of January
1, 1997.
10.7 Agreement and Plan of Merger, dated as of July 29,
1998 among ATL Ultrasound, Inc. Philips North America
Corporation and Philips Acquisition, Inc.
(Incorporated by reference from Philips Acquisition
Inc. Tender Offer Statement on Schedule 14D-1 dated
August 4, 1998.)
----------
(A) Management Contracts and Compensatory Arrangements.
(b) Reports of Form 8-K - None.
15
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATL ULTRASOUND, INC.
(Registrant)
Date: August 13, 1998 BY: /s/ Pamela L. Dunlap
______________________________
Pamela L. Dunlap
Senior Vice President
Finance and Administration
and Chief Financial Officer
16
<PAGE>
EXHIBIT 10.1
REVOLVING CREDIT LOAN AGREEMENT AND GUARANTY
BY AND AMONG
ADVANCED TECHNOLOGY LABORATORIES, INC.,
A WASHINGTON CORPORATION
AS BORROWER,
ATL ULTRASOUND, INC.,
A WASHINGTON CORPORATION
AS GUARANTOR,
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
DOING BUSINESS AS
SEAFIRST BANK
AS LENDER.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS........................................................... 1
Section 1.1 Certain Defined Terms..................................... 1
---------------------
Section 1.2 General Principles Applicable to Definitions.............. 7
--------------------------------------------
Section 1.3 Accounting Terms.......................................... 7
----------------
ARTICLE 2
U.S. DOLLAR FACILITY.................................................. 7
Section 2.1 Loans..................................................... 7
-----
Section 2.2 Manner of Borrowing a Loan................................ 7
--------------------------
Section 2.3 Reduction of Commitment................................... 7
-----------------------
Section 2.4 Repayment of Principal.................................... 7
----------------------
Section 2.5 Interest on Loans......................................... 7
-----------------
Section 2.6 Prepayments............................................... 10
-----------
Section 2.7 Revolving Note............................................ 10
--------------
Section 2.8 Manner of Payments........................................ 11
------------------
Section 2.9 Commitment Fees........................................... 11
---------------
Section 2.10 Extension of Maturity Date................................ 11
--------------------------
ARTICLE 3
MULTICURRENCY FACILITY................................................ 11
Section 3.1 Multicurrency Advances.................................... 11
----------------------
Section 3.2 Multicurrency Note........................................ 12
------------------
ARTICLE 4
STANDBY LETTER OF CREDIT FACILITY..................................... 12
Section 4.1 Issuance.................................................. 12
--------
Section 4.2 Fees...................................................... 12
----
Section 4.3 Yield Indemnity........................................... 12
---------------
Section 4.4 Collateral................................................ 12
----------
ARTICLE 5
CONDITIONS OF LENDING................................................. 13
Section 5.1 Conditions to Initial Loan................................ 13
--------------------------
Section 5.2 Conditions to All Loans................................... 13
-----------------------
ARTICLE 6
REPRESENTATIONS AND WARRANTIES........................................ 14
Section 6.1 Corporate Existence and Power............................. 14
-----------------------------
Section 6.2 Corporate Authorization................................... 14
-----------------------
Section 6.3 Government Approvals, Etc................................. 14
-------------------------
Section 6.4 Binding Obligations, Etc.................................. 14
------------------------
Section 6.5 Litigation................................................ 14
----------
Section 6.6 Financial Condition....................................... 14
-------------------
Section 6.7 Title and Liens........................................... 15
---------------
Section 6.8 Taxes..................................................... 15
-----
Section 6.9 Laws, Orders; Other Agreements............................ 15
------------------------------
Section 6.10 Federal Reserve Regulations............................... 15
---------------------------
Section 6.11 ERISA..................................................... 16
-----
Section 6.12 Subsidiaries.............................................. 16
------------
Section 6.13 Patents, Licenses, Franchises............................. 16
-----------------------------
Section 6.14 Investment Company; Public Utility Holding Company........ 16
--------------------------------------------------
<PAGE>
ARTICLE 7
AFFIRMATIVE COVENANTS................................................. 16
Section 7.1 Use of Proceeds........................................... 17
---------------
Section 7.2 Financial Statements...................................... 17
--------------------
Section 7.3 Inspection of Property.................................... 17
----------------------
Section 7.4 Payment of Taxes.......................................... 17
----------------
Section 7.5 Preservation of Corporate Existence....................... 17
-----------------------------------
Section 7.6 Maintenance of Property................................... 18
-----------------------
Section 7.7 Insurance................................................. 18
---------
Section 7.8 Records and Accounts...................................... 18
--------------------
Section 7.9 Additional Payments; Additional Tax....................... 18
-----------------------------------
Section 7.10 Notification.............................................. 18
------------
Section 7.11 Maintenance of Quick Ratio................................ 18
--------------------------
Section 7.12 Maintenance of Current Ratio.............................. 18
----------------------------
Section 7.13 Maintenance of Tangible Net Worth......................... 19
---------------------------------
ARTICLE 8
NEGATIVE COVENANTS.................................................... 19
Section 8.1 Limitations on Liens...................................... 19
--------------------
Section 8.2 Limitations on Indebtedness............................... 19
---------------------------
Section 8.3 Limitations on Dividends.................................. 20
------------------------
Section 8.4 Limitations on Stock Repurchases.......................... 20
--------------------------------
Section 8.5 Limitation on Investments................................. 20
-------------------------
Section 8.6 Merger or Sale of Assets.................................. 21
------------------------
Section 8.7 Limitation on Capital Expenditures........................ 21
----------------------------------
Section 8.8 Maintenance of Leverage Ratio............................. 21
-----------------------------
Section 8.9 Limitation on Net Losses.................................. 22
------------------------
Section 8.10 Transactions with Affiliates.............................. 22
----------------------------
ARTICLE 9
EVENTS OF DEFAULT.................................................... 22
Section 9.1 Events of Default......................................... 22
-----------------
Section 9.2 Consequences of Default................................... 23
-----------------------
ARTICLE 10
GUARANTY.............................................................. 24
Section 10.1 Guaranteed Obligations.................................... 24
----------------------
Section 10.2 Guarantor's Consent....................................... 24
-------------------
Section 10.3 Guarantor's Waiver........................................ 24
------------------
Section 10.4 Unconditional Guaranty.................................... 24
----------------------
Section 10.5 Waiver of Subrogation..................................... 24
---------------------
ARTICLE 11
MISCELLANEOUS......................................................... 25
Section 11.1 No Waiver; Remedies Cumulative............................ 25
------------------------------
Section 11.2 Governing Law............................................. 25
-------------
Section 11.3 Consent to Jurisdiction................................... 25
-----------------------
Section 11.4 Notices................................................... 25
-------
Section 11.5 Assignment................................................ 25
----------
Section 11.6 Severability.............................................. 25
------------
Section 11.7 Survival.................................................. 26
--------
Section 11.8 Conditions Not Fulfilled.................................. 26
------------------------
Section 11.9 Entire Agreement; Amendment............................... 26
---------------------------
Section 11.10 Headings.................................................. 26
--------
Section 11.11 Prevailing Party Attorney's Fees.......................... 26
--------------------------------
Section 11.12 Counterparts.............................................. 26
------------
Section 11.13 Confidentiality........................................... 26
---------------
<PAGE>
Section 11.14 CONCERNING ORAL AGREEMENTS................................ 26
--------------------------
SCHEDULES
Schedule 1 Prepayment Fees
Schedule 2 Borrower and Subsidiary Schedule
Schedule 3 Notice Addresses
EXHIBITS
Exhibit A Form of Revolving Note
Exhibit B Form of Multicurrency Note
Exhibit C Form of Multicurrency Borrowing Notice
Exhibit D Form of Quarterly Officer's Certificate
<PAGE>
REVOLVING CREDIT LOAN AGREEMENT AND GUARANTY
--------------------------------------------
THIS REVOLVING CREDIT AGREEMENT AND GUARANTY ("Agreement") is made
effective as of July 1, 1997, by and among Bank of America National Trust and
Savings Association, doing business as SEAFIRST BANK, successor by merger to
Seattle-First National Bank, (the "Lender"), ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation (the "Borrower") and ATL ULTRASOUND, INC., a
Washington corporation, (the "Guarantor"). This Agreement replaces the Revolving
Credit Loan Agreement and Guaranty dated as of June 26, 1992, and all amendments
thereto.
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the following meanings:
"Aggregate Collateral Value" shall mean (i) the market value of
--------------------------
Marketable Securities pledged to secure the L/C Obligations, multiplied by (ii)
the following percentages as to the category of Marketable Securities indicated:
<TABLE>
<CAPTION>
=======================================================================================================
SECURITY TYPE ADVANCE PERCENTAGE
-------------------------------------------------------------------------------------------------------
<S> <C>
Seafirst Bank Time Deposits 100%
-------------------------------------------------------------------------------------------------------
Money Market Mutual Funds 90%
-------------------------------------------------------------------------------------------------------
U.S. Common Stocks (by S&P Rating) other
than Bank America Corporation:
A+, A, A- 75%
B+ 60%
B 50%
-------------------------------------------------------------------------------------------------------
Bank America Corporation Common or 70%
Preferred Stock
-------------------------------------------------------------------------------------------------------
U.S. Corporate and Municipal Bonds
S&P AAA & AA or Moody's Aaa & Aa 80%
S&P A or Moody's A 75%
S&P BBB or Moody's Baa 50%
-------------------------------------------------------------------------------------------------------
U.S. Government Issued or Guaranteed
(Treasury Bills, Treasury Notes, Treasury Bonds),
by years to maturity:
less than 1 year 90%
1 to 5 years 85%
more than 5 years 80%
-------------------------------------------------------------------------------------------------------
U.S. Government Sponsored (e.g., Farm 75%
Credit System, Federal Home Loan Bank,
FNMA)
-------------------------------------------------------------------------------------------------------
Bankers Acceptances (Accepting bank is 90%
Seafirst Bank or another Bank America
Corporation affiliate
-------------------------------------------------------------------------------------------------------
Commercial Paper issued by U.S. companies
and rated:
A1/P1 90%
=======================================================================================================
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
SECURITY TYPE ADVANCE PERCENTAGE
-------------------------------------------------------------------------------------------------------
<S> <C>
A2/P2 85%
=======================================================================================================
</TABLE>
"Applicable Interest Period" means, with respect to any Loan accruing
--------------------------
interest at a Fixed Rate, or any Multicurrency Advance, the period commencing on
the first date the Borrower elects to have such Fixed Rate apply to such Loan
pursuant to Section 2.5(d) or, as the case may be, the day of funding a
Multicurrency Advance, and ending:
(a) No less than seven (7) and no more than thirty (30) days
thereafter in the case of a Quoted Rate Loan as specified in the
Interest Rate Notice given in respect of such loan; or
(b) One, two, three or six months thereafter in the case of a
LIBOR Loan as specified in the Interest Rate Notice given in respect of
such Loan, or in the case of a Multicurrency Advance specified in the
Multicurrency Borrowing Notice given in respect of such Multicurrency
Advance;
provided, however, that no Applicable Interest Period may be selected if it
- -------- -------
extends beyond the Maturity Date.
"Applicable Interest Rate" means for each Loan, the Reference Rate, the
------------------------
Quoted Rate or LIBOR Rate as designated by the Borrower in an Interest Rate
Notice given with respect to such Loan (or portion thereof) or otherwise
determined pursuant to Section 2.5(d).
"Available Amount" means the Commitment, minus the outstanding
----------------
principal balances of all Loans outstanding, minus the sum of the U.S. dollar
equivalent of the outstanding principal balance of all Multicurrency Advances,
based on the Exchange Rate for each such Multicurrency Advance.
"Borrower" means Advanced Technology Laboratories, Inc., a Washington
--------
corporation, and any permitted Successor or assign pursuant to the terms of this
Agreement.
"Business Day" means any day other than Saturday, Sunday or another day
------------
on which banks are authorized or obligated to close in Seattle, Washington,
except in the context of the selection of a LIBOR Loan or the calculation of the
LIBOR Rate for any Applicable Interest Period, in which event "Business Day"
means any day other than Saturday or Sunday on which dealings in foreign
currencies and exchange between banks may be carried on in London, England and
Seattle, Washington.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral Account" shall mean an account established by Borrower with
------------------
the Custodian, pledged by Borrower to Lender to secure the L/C Obligations, and
subject to a custodial agreement and pledge instructions satisfactory to Lender.
"Commitment" and "Commitment Period" have the meanings given in Section
---------- -----------------
2.1.
"Consolidated Net Income" means for any period the consolidated net
-----------------------
income of the Guarantor, Borrower, and Borrower's Consolidated Subsidiaries,
excluding all extraordinary items (other than utilization of net operating loss
carry-forwards), after eliminating all intercompany items and portions of
earnings properly attributable to minority interests in stock of any Subsidiary
of Borrower, all computed in accordance with generally accepted accounting
principles.
"Consolidated Subsidiaries" means those Subsidiaries that are included
-------------------------
in determining the consolidated financial condition of Guarantor or Borrower in
accordance with generally accepted accounting principles.
"Controlled Group" means all members of a controlled group of
----------------
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
2
<PAGE>
"Custodian" shall mean BNY Western Trust Company or other custodian
---------
satisfactory to Lender in its sole discretion.
"Default" means any event which but for the passage of time or the giving
-------
of notice or both would be an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Event of Default" has the meaning given in Section 9.1.
----------------
"Exchange Rate" shall mean the rate of exchange actually obtained by Lender
-------------
for a given currency in funding a Multicurrency Advance in such currency.
"Fixed Rate" means the Quoted Rate or the LIBOR Rate, as applicable.
----------
"Fixed Rate Loan" means any Quoted Rate Loan or LIBOR Loan.
---------------
"Fiscal Year" means the year, for accounting purposes, which ends on
-----------
December 31st of each calendar year.
"Guarantor" means ATL Ultrasound, Inc., a Washington corporation.
---------
"Government Approval" means an approval, permit, license, authorization,
-------------------
certificate, or consent of any Governmental Authority.
"Governmental Authority" means the government of the United States or any
----------------------
State or any foreign country or any political subdivision of any thereof or any
branch, department, agency, instrumentality, court, tribunal or regulatory
authority which constitutes a part or exercises any sovereign power of any of
the foregoing.
"Indebtedness" means for any person (i) all items of indebtedness or
------------
liability (except capital, surplus, deferred taxes and deferred revenues as
such) which would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date as of which indebtedness is
determined, (ii) indebtedness secured by any Lien, whether or not such
indebtedness shall have been assumed, (iii) any other indebtedness or liability
for borrowed money or for the deferred purchase price of property or services
for which such person is directly or contingently liable as obligor, guarantor,
or otherwise, or in respect of which such person otherwise assures a creditor
against loss, (iv) any other obligations of such person under leases which shall
have been or should be recorded as capital leases and (v) obligations of such
person for unsatisfied judgments or orders; provided, however, Indebtedness does
-------- -------
not include accounts payable and accrued expenses arising in the ordinary course
of such person's business, payable on terms customary in the trade.
"Interest Rate Notice" shall have the meaning given in Section 2.5(d).
--------------------
"L/C Agreement" shall have the meaning given in Section 4.1.
-------------
"L/C Obligations" shall have the meaning given in Section 4.4.
---------------
"Lender" means Bank of America National Trust and Savings Association,
------
doing business as Seafirst Bank, and any Successors thereto or permitted assigns
thereof.
"Letter of Credit" shall have the meaning given in Section 4.1.
----------------
"LIBOR Loan" means any Loan or portion thereof bearing interest at the
----------
LIBOR Rate.
3
<PAGE>
"LIBOR Rate" shall mean, with respect to any LIBOR Loan for any Applicable
----------
Interest Period, an interest rate per annum equal to the sum of (a) the
applicable Usage Factor and (b) the product of (i) the Euro-dollar Rate in
effect for such Applicable Interest Period and (ii) the Euro-dollar Reserves in
effect on the first day of such Applicable Interest Period.
The "Euro-dollar Rate" will be determined on the basis of the offered
rate for deposits in U.S. Dollars for the Applicable Interest Period
commencing on the first day of such Applicable Interest Period (the "Reset
Date") which appears on the display designated as the "LIBO" page in the
Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks; or such other financial news service provider
to which Lender and Borrower mutually agree) as of 11:00 o'clock a.m.,
London time, on the day that is two Business Days preceding the Reset Date.
If at least two such offered rates appear on such Reuters screen LIBO page,
the Euro-dollar Rate in respect of that Reset Date will be the arithmetic
mean of such offered rates. If fewer than two offered rates appear, the
Euro-dollar Rate will be determined on the basis of the rates at which
deposits in U.S. Dollars are offered by four major banks (selected by
Lender) in the London interbank market at approximately 11:00 o'clock a.m.,
London time, on the day that is two Business Days preceding the Reset Date
to prime banks in the London interbank market for the Applicable Interest
Period. The Lender will request the principal London office of each of the
four banks to provide a quotation of its rate. If at least two such
quotations are provided, the Euro-dollar Rate will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested,
the Euro-dollar Rate in respect of that Reset Date will be the arithmetic
mean of the rates quoted by major banks in New York City (selected by the
Lender) at approximately 11:00 o'clock a.m., New York city time, on that
Reset Date for loans in U.S. Dollars in an amount equal to the applicable
Loan to leading banks in Europe for the Applicable Interest Period.
As used herein, the term "Euro-dollar Reserves" means a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including, without limitation, any special,
supplemental, marginal or emergency reserves) expressed as a decimal
established by the Board of Governors of the Federal Reserve System or any
other banking authority to which the Lenders are subject for Eurocurrency
Liability (as defined in Regulation D of such Board of Governors). It is
agreed that for purposes hereof, each Loan shall be deemed to constitute a
Eurocurrency Liability and to be subject to the reserve requirements of
Regulation D, without benefit of credit or proration, exemptions or offsets
which might otherwise be available to the Lenders from time to time under
such Regulation D. Each LIBOR Rate shall be adjusted automatically on and
as of the effective date of any change in the Euro-dollar Reserves.
"Lien" means, for any person, any security interest, pledge, mortgage,
----
charge, assignment, hypothecation, encumbrance, attachment, garnishment,
execution or other voluntary or involuntary lien upon or affecting the revenues
of such person or any real or personal property in which such person has or
hereafter acquires any interest, except (i) liens for Taxes which are not
------
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof; (ii) liens imposed by law (such as
mechanics' liens) incurred in good faith in the ordinary course of business
which are not delinquent or which remain payable without penalty or the validity
or amount of which is being contested in good faith by appropriate proceedings
upon stay of execution of the enforcement thereof; and (iii) deposits or pledges
under worker's compensation, unemployment insurance, social security or other
similar laws or made to secure the performance of bids, tenders, contracts
(except for repayment of borrowed money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance or
other similar bonds given in the ordinary course of business.
"Loan Documents" means this Agreement, the Multicurrency Note, the L/C
--------------
Agreement, and the Revolving Note.
4
<PAGE>
"Loans" has the meaning given in Section 2.1.
-----
"Marketable Securities" shall mean securities of the types listed under the
---------------------
definition of "Aggregate Collateral Value" above; provided, that only securities
having a minimum per-share price of $15 shall be deemed "Marketable Securities."
"Maturity Date" means June 30, 2000 or such later date as shall be
-------------
established pursuant to Section 2.10 hereof.
"Multicurrency Advances" shall have the meaning given in Subsection 3.1.
----------------------
"Multicurrency Borrowing Notice" shall have the meaning given in Section
------------------------------
3.1.
"Multicurrency Note" shall have the meaning given in Section 3.2.
------------------
"Multicurrency Rate" shall mean for each Multicurrency Advance (i) the per
------------------
annum rate for the currency advanced, calculated on the basis of actual number
of days elapsed over a year of 365/366 days as to Canadian Dollars and British
Pounds Sterling, and on the basis of actual number of days elapsed over a year
of 360 days as to all other currency, determined by Lender to be the applicable
borrowing rate for such currency in an amount and for the Applicable Interest
Period of the Multicurrency Advance requested, as determined between 6:30 a.m.
and 7:00 a.m., Seattle time, on the day which is (a) two Business Days prior to
the date of such Multicurrency Advance as to all currencies other than Canadian
Dollars, and (b) one Business Day prior to the date of such Multicurrency
Advance as to Canadian Dollars; which rate shall be a rate within 0.125% of the
index rate appearing on the display designated as "Page 3740" and "Page 3750" on
the Telerate Service, or such other financial news service provided to which
Lender and Borrower mutually agree, for such currency between 6:30 a.m. and 7:00
a.m. on the same date; plus (ii) the applicable Usage Factor.
"Notice of Borrowing" means a request for a Loan from Borrower delivered to
-------------------
Lender and containing the information set forth in Section 2.2 which shall be
delivered prior to 10:00 a.m. (Seattle time) on the requested date of borrowing
of a Reference Rate Loan or a Quoted Rate Loan and at least three (3) Business
Days before the requested date of borrowing in the case of a LIBOR Loan.
Requests for borrowing received after the designated hour will be deemed
received on the next succeeding Business Day. A Notice of Borrowing may be
given in writing or telephonically (but if given telephonically, shall be
confirmed in writing prior to 12:00 noon (Seattle time) on the first day of the
Applicable Interest Period).
"Officer's Certificate" means a certificate signed in the name of the
---------------------
Borrower or Guarantor, as the case may be, by its Chairman, President, senior
financial officer, or Treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means an "employee pension benefit plan" (as such term is
------------
defined in ERISA) from time to time maintained by the Borrower or a member of
the Controlled Group.
"Permitted Foreign Governments" shall mean the governments of the nations
-----------------------------
of Canada, United Kingdom, Germany, France, Belgium, Austria, Netherlands,
Australia, Italy, Argentina, China, and Singapore, or any agencies thereof
entitled to commit the full faith and credit of such national government.
"Person" shall mean any natural person, corporation, unincorporated
------
organization, limited liability company, trust, joint stock company, joint
venture, association, company, partnership or government, or any agency or
political subdivision of any government.
"Plan" shall mean, at any time, an employee pension benefit plan which is
----
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by the Borrower or any
member of a Controlled Group for employees of the Borrower or any
5
<PAGE>
member of such Controlled Group or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which the Borrower or any member of a Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five (5) plan years made contributions.
"Quoted Rate" means, with respect to any Quoted Rate Loan for any
-----------
Applicable Interest Period, an interest rate per annum, as determined by Lender
in its sole discretion and quoted to Borrower.
"Quoted Rate Loan" means a Loan or portion thereof bearing interest at the
----------------
Quoted Rate.
"Reference Rate" means the rate of interest publicly announced from time to
--------------
time by Lender in San Francisco, California, as its "Reference Rate." The
Reference Rate is set based on various factors, including Lender's costs and
desired return, general economic conditions, and other factors, and is used as a
reference point for pricing some loans. Any change in the Reference Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in the Reference Rate.
"Reference Rate Loan" means a Loan or portion thereof bearing interest at
-------------------
the Reference Rate.
"Revolving Note" has the meaning given in Section 2.7.
--------------
"Subsidiary" means any corporation of which a majority (by number of shares
----------
or by number of votes) of any class of outstanding capital stock normally
entitled to vote for the election of one or more directors (regardless of any
contingency which does or may suspend or dilute the voting rights of such class)
is at such time owned directly or indirectly by the Guarantor or Borrower.
"Successor" means, for any corporation or banking association, any
---------
successor by merger or consolidation, or by acquisition of substantially all of
the assets of the predecessor.
"Tangible Net Worth" shall have the meaning given in Section 7.3.
------------------
"Tax" means for any person any tax, assessment, duty, levy, impost or other
---
charge imposed by any Governmental Authority on such person or on any property,
revenue, income, or franchise of such person and any interest or penalty with
respect to any of the foregoing, provided, however, as used herein a "Tax"
-------- -------
imposed on or assessed against the Lender shall not include any income tax,
business and occupation tax, gross receipts tax, value added tax, franchise tax,
tax penalty (unless the tax penalty is the result of Borrower's failure to
perform its obligations hereunder) or any other tax imposed generally upon the
business of the Lender if any of the above taxes are imposed by a Governmental
Authority of a jurisdiction (including a municipal, state, national or federal
jurisdiction) under the laws of which Lender is organized, maintains a place of
business or would otherwise be subject to taxation without regard to the
transactions with Borrower and Guarantor contemplated by this Agreement or the
activities of Borrower and Guarantor.
"Unfunded Vested Liabilities" shall mean, with respect to any Plan, at any
---------------------------
time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Borrower or any member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.
"Usage Factor" means, in any calendar quarter, the percentage set forth
------------
below for any LIBOR Loan, expressed as a function of the average daily principal
balance of Loans outstanding during such quarter:
Average Daily Balance of Loans Usage Factor
------------
and U.S. Dollar equivalent of
Multicurrency Advances Outstanding
----------------------------------
Less than $7.5 million 5/8%
6
<PAGE>
$7.5 million or more 3/4%
Section 1.2 General Principles Applicable to Definitions. Definitions
---------------------------------------------
given in Section 1.1 shall be equally applicable to both singular and plural
forms of the terms therein defined and references herein to he or it shall be
applicable to persons whether masculine, feminine or neuter. References herein
to any document including, but without limitation, this Agreement shall be
deemed a reference to such document as it now exists, and as, from time to time
hereafter, the same may be amended.
Section 1.3 Accounting Terms Except as otherwise provided herein,
----------------
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted United
States accounting principles consistently applied.
ARTICLE 2
U.S. DOLLAR FACILITY
--------------------
Section 2.1 Loans. Lender agrees on the terms and conditions of this
-----
Agreement to make loans ("Loans") to the Borrower from time to time on Business
Days during the period beginning on the date hereof and ending on the Maturity
Date (the "Commitment Period"), up to the Available Amount, in an aggregate
principal amount not exceeding Fifteen Million Dollars ($15,000,000) less any
reductions made pursuant to Section 2.3 (the "Commitment").
Section 2.2 Manner of Borrowing a Loan. The Borrower shall give Lender
--------------------------
the required Notice of Borrowing specifying the date of the borrowing of any
Loan and the amount thereof, which shall be in integral multiples of Five
Hundred Thousand Dollars ($500,000) and, for a Quoted Rate Loan, in a minimum
amount of Five Million Dollars ($5,000,000). Such notice shall be irrevocable
and shall be deemed to constitute a representation and warranty by the Borrower
that as of the date of the notice the statements set forth in Article 6 hereof
are true and correct and that no Default or Event of Default has occurred and is
continuing. Upon fulfillment to the Lender's satisfaction of the applicable
conditions set forth in Article 5, the Lender will promptly make such
immediately available funds available to the Borrower by depositing them to the
ordinary checking account maintained by the Borrower with the Lender.
Section 2.3 Reduction of Commitment. Upon not less than ten (10) Business
-----------------------
Days' written notice to the Lender, the Borrower may terminate the Commitment in
whole or in part, provided that in no event may the Commitment be reduced to an
--------
amount less than the outstanding principal balance of the Loans plus the U.S.
Dollar equivalent of the outstanding principal balance of all Multicurrency
Advances.
Section 2.4 Repayment of Principal. The Borrower shall repay to the
----------------------
Lender the principal amount of each Loan on the Maturity Date.
Section 2.5 Interest on Loans.
-----------------
(a) Interest Rate. The Borrower agrees to pay to Lender interest
-------------
on the unpaid principal amount of each Loan from the date of such Loan
until such Loan shall be due and payable at a per annum rate equal to the
Applicable Interest Rate, and, if default shall occur in the payment when
due of any such Loan, from the maturity of that Loan until it is paid in
full at a per annum rate equal to two percentage points (2%) above the
Reference Rate (changing as the Reference Rate changes).
(b) Interest Payment Dates. Accrued but unpaid interest on each
----------------------
Fixed Rate Loan shall be paid on the last day of each Applicable Interest
Period, on the date of any principal payment (to the extent accrued on the
principal amount paid), and at maturity and, in the case of a LIBOR Loan
for which the Applicable Interest Period is six months, on the day that is
three months after the commencement of such Applicable Interest Period.
Accrued but unpaid interest on each Reference Rate Loan shall be paid on
the last Business Day of each calendar quarter commencing
7
<PAGE>
on June 30, 1997, and continuing on the last Business Day of each March,
June, September and December thereafter and on the date of any principal
payment (to the extent accrued on the principal amount paid) and at
maturity. Unpaid interest accruing on amounts in default shall be payable
on demand.
(c) Adjustments in Interest Rate Resulting from Usage Factor Changes.
----------------------------------------------------------------
During any calendar quarter, interest shall initially accrue and be paid on
LIBOR Loans based on the Usage Factor that would apply if, during such
calendar quarter, the average daily outstanding balance of Loans was less
than $7,500,000 (the "Preliminary Usage Factor"). The interest as so
accrued and paid shall be subject to adjustment as provided in this Section
at the end of the calendar quarter for the actual Usage Factor for such
quarter. At the end of each calendar quarter, Lender shall determine the
actual daily outstanding balance of Loans during the preceding calendar
quarter and the correspondingly appropriate Usage Factor to be used in
determining the actual interest rate for each LIBOR Loan outstanding during
such calendar quarter (the "Actual Usage Factor"). The Lender shall
calculate the adjustments to be made in interest accruing or paid on each
LIBOR Loan resulting from the difference between the Actual Usage Factor
and the Preliminary Usage Factor and shall so notify the Borrower. To the
extent that such adjustment relates to LIBOR Loans for which interest was
previously paid in such calendar quarter, Borrower's demand deposit account
with Lender shall be debited for the amount of such adjustment on the day
following such notice (and Borrower shall assure that there are available
funds in such account to permit such withdrawal). To the extent the
adjustment relates to LIBOR Loans for which interest has accrued during
such calendar quarter but not been paid, the interest, as adjusted, shall
be paid on the dates scheduled for interest payment pursuant to Section
2.5(d).
(d) Selection of Alternative Rates.
------------------------------
(i) The Borrower may, subject to the requirements of this
Section 2.5(d), on same-day notice (in the case of a selection of
Reference Rate or Quoted Rate) or three (3) Business Days' prior
notice (in the case of a selection of a LIBOR Rate) elect to have
interest accrue on any Loan or any portion thereof at a Fixed Rate for
an Applicable Interest Period. Such notice (herein, an "Interest Rate
Notice") shall be deemed delivered on receipt by Lender except that
the Interest Rate Notice received by the Lender after 10:00 a.m.,
(Seattle time), on any Business Day, shall be deemed to be received on
the immediately succeeding Business Day. An Interest Rate Notice may
be given in writing or telephonically (but, if given telephonically,
shall be confirmed in writing prior to 12:00 noon (Seattle time) on
the first day of the Applicable Interest Period). Such Interest Rate
Notice shall identify, subject to the conditions of this Section
2.5(d), the Loan or portions thereof, the Fixed Rate and the
Applicable Interest Period which the Borrower selects. Any such
Interest Rate Notice shall be irrevocable and shall constitute a
representation and warranty by the Borrower that as of the date of
such Interest Rate Notice no Event of Default or Default has occurred
and is continuing.
(ii) Borrower's right to select a Fixed Rate to apply to a Loan
or any portion thereof shall be subject to the following conditions:
(i) the aggregate of all Loans or portions thereof to accrue interest
at a particular LIBOR Rate for the same Applicable Interest Period
shall be an integral multiple of Five Hundred Thousand Dollars
($500,000); (ii) the Quoted Rate may not be selected for any Loan or
portion thereof which is less than Five Million Dollars ($5,000,000);
(iii) a Fixed Rate may not be selected for any Loan or portion thereof
which is already accruing interest at a Fixed Rate unless such
selection is only to become effective at the maturity of the
Applicable Interest Period then in effect; (iv) the Lender shall not
have given notice pursuant to Section 2.5(f) that the selected LIBOR
Rate is not available on or before the day the Borrower gave the
Interest Rate Notice; and (v) no Default or Event of Default shall
have occurred and be continuing.
(iii) In the absence of an effective request for the application
of a Fixed Rate, the Loans or remaining portions thereof shall accrue
interest at the Reference Rate.
8
<PAGE>
(iv) The Interest Rate Notice may be given with and contained in
any Notice of Borrowing.
(v) If the Borrower delivers an Interest Rate Notice and a
condition precedent to the making of the applicable Loan set forth in
Article 5 or the conversion to the requested interest rate set forth
in this section 2.5 is not satisfied or waived in writing by Lender,
Borrower shall indemnify the Lender for all losses and any costs which
the Lender sustains as a consequence thereof including, without
limitation, the costs of re-employment of funds at rates lower than
the cost to the Lender of such funds. A certificate of the Lender
setting forth the amount due to it pursuant to this subparagraph (v)
and the basis for, and the calculation of, such amount shall be prima
facie evidence of the amount due to it hereunder, absent manifest
error. Payment of the amount owed shall be due within fifteen (15)
days after the Borrower's receipt of such certificate.
(e) Applicable Days For Computation of Interest. Computations of
-------------------------------------------
interest shall be made on the basis of a year of three hundred sixty days
(360), in each case, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest
is payable.
(f) Unavailable LIBOR Rate. If Lender determines that for any reason
----------------------
beyond Lender's control fair and adequate means do not exist for
establishing a particular LIBOR Rate or that a specific LIBOR Rate will not
adequately and fairly reflect the cost to it of making or maintaining the
principal amount of a particular LIBOR Loan or that accruing interest on
any Loan at a LIBOR Rate by Lender has become unlawful, Lender may give
notice of that fact to the Borrower and such determination shall be
conclusive and binding absent manifest error. After such notice has been
given and until Lender notifies the Borrower that the circumstances giving
rise to such notice no longer exist, the interest rate or rates so
identified in such notice shall no longer be available. If,
notwithstanding such notice, Borrower shall thereafter select a LIBOR Rate,
the Lender shall promptly notify the Borrower again that a LIBOR Rate is
unavailable. Thereafter, any subsequent request by the Borrower to have
interest accrue at a LIBOR Rate shall be deemed to be a request for
interest to accrue at the Reference Rate. If the circumstances giving rise
to the notice described herein no longer exist, the Lender shall notify the
Borrower in writing of that fact, and the Borrower shall then once again
become entitled to request that a LIBOR Rate apply to the Loans in
accordance with Section 2.5(d) hereof.
(g) Compensation for Increased Costs. In the event that after the
--------------------------------
date hereof any change occurs in any applicable law, regulation, treaty or
directive or interpretation thereof by any authority charged with the
administration or interpretation thereof, or any condition is imposed by
any authority after the date hereof or any change occurs in any condition
imposed by any authority on or prior to the date hereof which:
(i) subjects Lender to any Tax, or changes the basis of
taxation of any payments to Lender on account of principal of or
interest on the Fixed Rate Loans, the Revolving Note (to the extent
the Revolving Note evidences Fixed Rate Loans) or fees in respect of
Lender's obligation to make Fixed Rate Loans or other amounts payable
with respect to its Fixed Rate Loans (other than a change in the rate
of tax based solely on the overall net or gross income of Lender); or
(ii) imposes, modifies or determines applicable any reserve,
deposit or similar requirements against any assets held by, deposits
with or for the account of, or loans or commitments by, any office of
Lender in connection with its Fixed Rate Loans to the extent the
amount of which is in excess of, or was not applicable at the time of
computation of, the amounts provided for in the definition of the
applicable Fixed Rate; or
(iii) affects the amount of capital required or expected to be
maintained by
9
<PAGE>
banks generally or corporations controlling banks and Lender
determines the amount by which Lender or any corporation controlling
Lender is required or expected to maintain or increase its capital is
increased by, or based upon, the existence of this Agreement or the
Loans or the Commitment hereunder;
(iv) imposes upon Lender any other condition with respect to
the Fixed Rate Loans or the obligation to make Fixed Rate Loans;
which, as a result thereof, (1) increases the cost to Lender of making or
maintaining the Loans or its commitment hereunder, or (2) reduces the net
amount of any payment received by Lender in respect of its Fixed Rate Loans
(whether of principal, interest, commitment fees or otherwise), or (3)
requires Lender to make any payment on or calculated by reference to the
gross amount of any sum received by it in respect of its Fixed Rate Loans,
then and in any such case Lender shall, as soon as reasonably practical
after becoming aware of such event, notify Borrower thereof, and, the
Borrower shall pay to Lender on demand such amount or amounts as will
compensate Lender for any such increased cost, deduction or payment
actually incurred or made by Lender. The demand for payment by Lender
shall be delivered to the Borrower and shall state the subjection or change
which occurred or the reserve or deposit requirements or other conditions
which have been imposed upon Lender or the request, direction or
requirement with which it has complied, together with the date thereof, the
amount of such cost, reduction or payment and the manner in which such
amount has been calculated. The statement of Lender as to the additional
amounts payable pursuant to this Section 2.5(g) shall be prima facie
evidence of the amounts due hereunder, unless manifest error.
The protection of this Section 2.5(g) shall be available to Lender
regardless of any possible contention of invalidity or inapplicability of
the relevant law, regulation, treaty, directive, condition or
interpretation thereof. In the event that the Borrower pays Lender the
amount necessary to compensate Lender for any charge, deduction or payment
incurred or made by Lender as provided in this Section 2.5(g), and such
charge, deduction or payment or any part thereof is subsequently returned
to Lender as a result of the final determination of the invalidity or
inapplicability of the relevant law, regulation, treaty, directive or
condition, then Lender shall remit to the Borrower the amount paid by the
Borrower which has actually been returned to Lender (together with any
interest actually paid to Lender on such returned amount), less the
percentage share of Lender's costs and expenses incurred in connection with
such governmental regulation or any challenge made by Lender with respect
to its validity or applicability that is proportionate to the percentage
that the affected Loan or Commitment bears to all of Lender's affected
assets.
Section 2.6 Prepayments. Reference Rate Loans may be repaid at any time
-----------
without penalty or premium. Quoted Rate Loans may not be voluntarily repaid
prior to the end of the Applicable Interest Period. LIBOR Loans may be repaid
prior to the end of the Applicable Interest Period. A fee computed in the
manner set out in Schedule 1 shall be assessed and paid at the time of such
early repayment of a LIBOR Loan or refinancing. Such fee shall apply in all
circumstances where a LIBOR Loan is paid prior to the end of the Applicable
Interest Period, regardless of whether such payment is voluntary, mandatory or
the result of the Lender's collection efforts.
Section 2.7 Revolving Note. The Loans shall be evidenced by a promissory
--------------
note of the Borrower substantially in the form of Exhibit A hereto, payable to
the order of Lender, dated as of the date hereof, and in the face amount of the
Commitment (the "Revolving Note"). Lender is hereby authorized to record the
date and amount of Loans it makes and the date and amount of each payment of
principal and interest thereon on a schedule or computer-generated statement
constituting part of its Revolving Note; provided, however, that the failure to
-------- -------
make any such recordation or any error in any such recordation shall not affect
the obligations of the Borrower hereunder or under the Revolving Note.
10
<PAGE>
Section 2.8 Manner of Payments.
------------------
(a) All payments and prepayments of principal and interest on
any Loan or Multicurrency Advance and all other amounts payable hereunder
by the Borrower or Guarantor to Lender shall be made by paying the same in
United States Dollars or the currency that was advanced and in immediately
available funds to the Lender at its Commercial Loan Service Center,
Seattle, Washington not later than 10:00 o'clock a.m., Seattle time, on the
date on which such payment or prepayment shall become due. If such payment
is received after 10:00 o'clock a.m., then it will be deemed received on
the next Business Day.
(b) The Borrower and Guarantor hereby authorize the Lender, if
and to the extent any payment is not promptly made pursuant to this
Agreement or any other Loan Document, to charge from time to time against
any or all of the accounts of the Borrower or Guarantor with the Lender.
(c) Whenever any payment hereunder or under any other Loan
Document shall be stated to be due or whenever the last day of any interest
period would otherwise occur on a day other than a Business Day, such
payment shall be made and the last day of such interest period shall occur
on the next succeeding Business Day and such extension of time shall in
such case be included in the computation and payment of interest or
commitment fees, as the case may be, unless such extension would cause such
payment to be made or the last day of such interest period to occur in the
next following calendar month, in which case such payment shall be due and
the last day of such interest period shall occur on the next preceding
Business Day.
Section 2.9 Commitment Fees. During the Commitment Period, Borrower
---------------
agrees to pay to the Lender a commitment fee computed daily at the rate of one-
fourth of one percent (1/4%) per annum on the difference between the Commitment
and the combined outstanding principal balance of the Loans and Multicurrency
Advances (based on U.S. Dollar equivalent determined on the date of funding such
Multicurrency Advance) payable in arrears at quarterly intervals commencing on
June 30, 1997, and payable on the last Business Day of each March, June,
September and December thereafter, except that accrued commitment fees shall be
payable on the Maturity Date and on demand after Default. Computations of
commitment fees shall be made on the basis of a year of three hundred sixty
(360) days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such fees are payable.
Section 2.10 Extension of Maturity Date. The Borrower may request that
--------------------------
Lender extend the Maturity Date for successive one-year periods by notifying the
Lender in writing at any time before a date one (1) year prior to the then-
existing Maturity Date. If Lender consents in writing to such an extension
within sixty (60) days of such request, the Maturity Date shall be extended for
one (1) additional year.
ARTICLE 3
MULTICURRENCY FACILITY
----------------------
Section 3.1 Multicurrency Advances. Borrower may request a loan in
----------------------
Australian Dollars, British Pounds Sterling, Canadian Dollars, French Francs,
German Marks, Hong Kong Dollars, Japanese Yen, Italian Lire, Dutch Guilders,
Belgian Francs, Danish Kroner, Finnish Marks, Norwegian Kroner, Swedish Kroner,
Swiss Francs, Singapore Dollars, Austrian Shillings, and/or Spanish Pesetas
(each a "Multicurrency Advance"), up to the U.S. Dollar equivalent of the
Available Amount, as determined by the Exchange Rate for each such currency, as
determined on the date the interest rate for such Multicurrency Advance is
determined, by delivering its borrowing notice to Lender in the form of Exhibit
C attached ("Multicurrency Borrowing Notice"), on or before 9:30 a.m., Seattle
time, on a London Banking Day at least three Business Days prior to the date the
Multicurrency Advance is to be made. Such notice shall specify the currency,
principal amount, and Applicable Interest Period requested. Each Multicurrency
Advance shall be in a minimum amount equivalent to U.S.$500,000.
11
<PAGE>
Section 3.2 Multicurrency Note. The obligation of Borrower to repay the
------------------
Multicurrency Advances shall be evidenced by a promissory note (including all
renewals, modifications, and extensions thereof, the "Multicurrency Note"), made
by Borrower to the order of Lender. The Multicurrency Note shall be unsecured,
and shall be in substantially the same form as Exhibit B attached.
(a) Interest. Each Multicurrency Advance shall bear interest
--------
from the date of advance until the end of its Applicable Interest Period at
the Multicurrency Rate determined by Lender. All interest accrued on each
such Multicurrency Advance shall be due and payable in full on the last day
of the Applicable Interest Period applicable to such Multicurrency Advance.
(b) Principal. Borrower shall repay in full the outstanding
---------
principal balance of each Multicurrency Advance, in the currency advanced,
on the last day of its Applicable Interest Period. Such repayment may be
effected either (a) by making payment to Lender in immediately available
funds in the same manner as provided in Section 2.8, or (b) by obtaining a
Multicurrency Advance, pursuant to the procedures of Section 3.1, in the
same currency and at least the same amount as the maturing Multicurrency
Advance (but in any case not to exceed the Available Amounts), with
instructions to Lender to apply the proceeds of such new Multicurrency
Advance to the maturing Multicurrency Advance before disbursing the balance
(if any) to Borrower. Lender shall have no liability for, nor bear any of
the risk of, intra-day fluctuations in foreign exchange rates.
Multicurrency Advances may not be prepaid prior to the end of their
respective Applicable Interest Periods.
ARTICLE 4
STANDBY LETTER OF CREDIT FACILITY
---------------------------------
Section 4.1 Issuance. Upon Borrower's execution of Lender's standard
--------
form Application and Agreement for Standby Credit ("L/C Agreement"), Lender
shall issue for Borrower's account a standby letter of credit ("Letter of
Credit") in an amount not to exceed $40,000,000, with an expiration date (or a
right to terminate under an evergreen expiration clause) no later than December
31, 1998, to an entity providing a supersedeas bond on Borrower's behalf to stay
the SRI Judgment (as defined in Section 8.9 of the Agreement). If there is a
draw under the Letter of Credit, Borrower shall on demand immediately reimburse
Lender for the amount of the draw, together with interest on the amount drawn,
from the date drawn, until paid, at the default rate of interest set forth in
Section 2.5(a) of the Agreement. Lender shall in addition have all rights
provided in the L/C Agreement. Any default in the L/C Agreement shall be an
Event of Default under the Agreement.
Section 4.2 Fees. Borrower shall pay to Lender quarterly in advance a
----
commitment fee determined according to the following formula, on the date of
issuance of the Letter of Credit, and on the same day of every third month
thereafter until the Letter of Credit is no longer outstanding: 0.25% per annum
of the face amount of the Letter of Credit. Borrower shall additionally, on
demand, pay transaction fees according to Lender's then-outstanding standard fee
schedule on all drafts, transfers, extensions, and other transactions with
regard to the Letter of Credit, and reimburse Lender for all out-of-pocket
costs, legal fees, and expenses.
Section 4.3 Yield Indemnity. If any law or regulation imposes or
---------------
increases any reserve, special deposit, or similar requirement against letters
of credit issued by Lender or subjects Lender to any tax, charge, fee,
deduction, or withholding of any kind in regard to the Letter of Credit,
Borrower shall promptly on demand indemnify Lender for any such increased costs,
taxes, or charges.
Section 4.4 Collateral. All of Borrower's obligations under the L/C
----------
Agreement (the "L/C Obligations") shall be secured by: Marketable Securities
having an Aggregate Collateral Value equal to the face amount of the Letter of
Credit. Borrower hereby grants to Lender a security interest in investments
held in the Collateral Account. Upon an Event of Default, Lender may instruct
the Custodian to liquidate investments and disburse to Lender all amounts
necessary for the payment in full of the L/C Obligations. If at any time Lender
shall determine that the Aggregate Collateral Value of the Marketable Securities
in the Collateral Account is less than the amount required under this Section,
Borrower (or Guarantor if necessary)
12
<PAGE>
shall, within three Business Days of demand by Lender, deliver for deposit to
the Collateral Account additional Marketable Securities so that the total in the
Collateral Account shall again equal the Aggregate Collateral Value.
ARTICLE 5
CONDITIONS OF LENDING
---------------------
Section 5.1 Conditions to Initial Loan. In addition to the conditions
--------------------------
set forth in Section 5.2, the obligation of the Lender to make the initial Loan
and Multicurrency Advance hereunder is subject to fulfillment of the following
conditions:
(a) Loan Documents. Lender shall have received all of the Loan
--------------
Documents, each duly executed and delivered by the respective parties
thereto, and satisfactory to Lender in form and substance.
(b) Corporate Certificates. The Lender shall have received all
----------------------
of the following, each satisfactory to the Lender in form and substance:
(i) Certified copies of the Articles of Incorporation
and Bylaws of the Borrower and Guarantor;
(ii) Certificate of good standing issued by the
Secretary of State of the applicable state of incorporation with
respect to the Borrower and Guarantor;
(iii) Borrower's Officers' Certificate attaching copies
of the resolutions adopted by the Board of Directors of the Borrower
authorizing the execution, delivery and performance by the Borrower of
this Agreement, the Multicurrency Note and the Revolving Note; and
(iv) Guarantor's Officers' Certificate attaching copies
of the resolutions adopted by the Board of Directors of Guarantor
authorizing the execution, delivery and performance by Guarantor of
this Agreement;
(v) Incumbency certificates describing the office and
identifying the specimen signatures of the individuals signing the
Loan Documents on behalf of the Borrower and Guarantor.
(c) Certificates. The Lender shall have received a certificate
------------
of the Borrower's Chief Financial Officer, President, or Treasurer as to
the accuracy of the Borrower's representations and warranties set forth in
Article 6.
Section 5.2 Conditions to All Loans. The obligation of the Lender to
-----------------------
make any Loans and Multicurrency Advances hereunder, including the initial Loan
and/or Multicurrency Advance, is subject to fulfillment of the following
conditions:
(a) Prior Conditions. All of the conditions set forth in Section
----------------
5.1 shall have been satisfied.
(b) Notice of Borrowing. The Lender shall have received the
-------------------
Notice of Borrowing in respect of such Loan or the Multicurrency Borrowing
Notice as to such Multicurrency Advance.
(c) No Default. At the date of the Loan or Multicurrency
----------
Advance, no Default or Event of Default shall have occurred and be
continuing or will have occurred as the result of the making of the Loans
or Multicurrency Advances; and the representations and warranties in
Article 6 shall be true on and as of such date with the same force and
effect as if made on and as of such date.
13
<PAGE>
(d) Other Information. The Lender shall have received such other
-----------------
statements, certificates, documents and information as it may reasonably
request in order to satisfy itself that the foregoing conditions have been
fulfilled.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower and Guarantor, jointly and severally, represents and warrant
to the Lender as follows:
Section 6.1 Corporate Existence and Power. Guarantor, Borrower, and
-----------------------------
Borrower's Subsidiaries are each a corporation duly incorporated, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation. The Guarantor, Borrower, and Borrower's Subsidiaries are each
duly qualified to do business in each other jurisdiction where the nature of
their respective activities or the ownership of their respective properties
requires such qualification. The Borrower and Guarantor each has full corporate
power, authority and legal right to carry on its business as presently
conducted, to own and operate its properties and assets, and to execute, deliver
and perform the Loan Documents to which it is a party.
Section 6.2 Corporate Authorization. The execution, delivery and
-----------------------
performance by the Borrower of this Agreement, the Multicurrency Note and the
Revolving Note, and any borrowing hereunder or thereunder, and the execution,
delivery and performance by Guarantor of this Agreement have been duly
authorized by all necessary corporate action of the Borrower or the Guarantor,
as the case may be, do not require any shareholder approval or the approval or
consent of any trustee or the holders of any Indebtedness of the Borrower or
Guarantor, except such as have been obtained (certified copies thereof having
been delivered to the Lender), do not contravene any law, regulation, rule or
order binding on the Borrower or Guarantor or the Articles of Incorporation or
Bylaws of the Borrower or Guarantor and do not contravene the provisions of or
constitute a default under any indenture, mortgage, contract or other agreement
or instrument to which the Borrower or Guarantor is a party or by which the
Borrower or Guarantor or any of their properties may be bound or affected.
Section 6.3 Government Approvals, Etc. No Government Approval or filing
--------------------------
or registration with any Governmental Authority is required for the making and
performance by the Borrower or Guarantor of the Loan Documents to which it is a
party or in connection with any of the transactions contemplated hereby or
thereby, except such as have been heretofore obtained and are in full force and
effect (certified copies thereof having been delivered to the Lender).
Section 6.4 Binding Obligations, Etc. This Agreement, the Multicurrency
------------------------
Note and the Revolving Note have been duly executed and delivered by the
Borrower and constitute the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with their respective terms.
This Agreement has been duly executed and delivered by the Guarantor and
constitutes the legal, valid and binding obligation of Guarantor enforceable
against it in accordance with its terms.
Section 6.5 Litigation. Except for the SRI judgement defined in Section
----------
8.9, there are no actions, proceedings, investigations, or claims against or
affecting the Guarantor, Borrower or any of Borrower's Subsidiaries now pending
before any court, arbitrator or Governmental Authority (nor to the knowledge of
Borrower or Guarantor has any thereof been threatened, nor to the knowledge of
Borrower or Guarantor does any basis exist therefor) which if determined
adversely to the Guarantor, Borrower, or any of the Borrower's Subsidiaries
would be likely to have a material adverse effect on the consolidated financial
condition of the Guarantor or the Borrower or on the ability of the Borrower or
Guarantor to perform its obligations under the Loan Documents.
Section 6.6 Financial Condition. The consolidated balance sheet of the
-------------------
Guarantor (which includes Borrower and Borrower's Subsidiaries) as of December
31, 1996, and the related consolidated statements of income, cash flows, and
shareholders' equity for the Fiscal Year then ended and the
14
<PAGE>
consolidated balance sheet of the Guarantor (which includes Borrower and
Borrower's Subsidiaries) as of March 28, 1997, and the related consolidated
statements of income and cash flows for the quarter then ended copies of which
have been furnished to Lender, fairly present the consolidated financial
condition of the Guarantor, Borrower, and Borrower's Subsidiaries as at such
dates and the results of consolidated operations of the Guarantor, Borrower, and
Borrower's Subsidiaries for the periods then ended, all in accordance with
generally accepted accounting principles consistently applied. The Guarantor,
Borrower and the Borrower's Subsidiaries did not have on such dates any material
contingent liabilities for Taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in that balance sheet and in the notes
to those financial statements. Since March 28, 1997, there have been no material
changes to the operations, business or financial condition of Guarantor,
Borrower and the Borrower's Subsidiaries that would be sufficient to impair the
Borrower's ability to repay any outstanding or requested Loans or Multicurrency
Advances or that have resulted in, or are forecast by Borrower or Guarantor to
result in, a Default or Event of Default.
Section 6.7 Title and Liens. The Guarantor, Borrower, and Borrower's
---------------
Subsidiaries have good and marketable title to each of the properties and assets
reflected in the balance sheet referred to in Section 6.6 (except such as have
been since sold or otherwise disposed of in the ordinary course of business or
in compliance with the terms of Section 8.6 hereof). No assets or revenues of
the Guarantor, the Borrower, or Borrower's Subsidiaries are subject to any
material Lien except as required or permitted by this Agreement or disclosed in
the balance sheets referred to in Section 6.6 or otherwise disclosed to the
Lender in writing prior to the date of this Agreement. All properties of the
Guarantor, Borrower, and Borrower's Subsidiaries and their respective use
thereof comply in all material respects with all applicable material zoning and
use restrictions and with applicable material laws and regulations relating to
the environment.
Section 6.8 Taxes. As of the date of this Agreement, the Guarantor,
-----
Borrower and Borrower's Subsidiaries have filed all material tax returns and
reports required of them, have paid all material Taxes which are due and
payable, and have provided adequate reserves for payment of any Tax whose
payment is being contested. The charges, accruals and reserves on the books of
the Guarantor, Borrower, and Borrower's Subsidiaries in respect of Taxes for all
fiscal periods to date of this Agreement are accurate to the best of their
knowledge. There are no questions or disputes between the Guarantor, Borrower,
or any Subsidiaries of Borrower and any Governmental Authority with respect to
any material Taxes except as disclosed in the balance sheets referred to in
Section 6.6 or otherwise disclosed to the Lender in writing prior to the date of
this Agreement and except disputes which if resolved adversely to the positions
being asserted by the Guarantor, Borrower, or any Subsidiary of Borrower would
not result in a material adverse change in the consolidated financial condition
of the Guarantor, Borrower, and Borrower's Subsidiaries.
Section 6.9 Laws, Orders; Other. Except as described in the financial
-------------------
statements delivered to Lender pursuant to Section 6.6 neither the Guarantor nor
Borrower, is in violation of or subject to any contingent liability on account
of any material laws, statutes, rules, regulations and orders of any
Governmental Authority. Neither the Guarantor nor Borrower is in material
breach of or default under any agreement to which it is a party or which is
binding on it or any of its assets.
Section 6.10 Federal Reserve Regulations. Neither the Borrower nor the
---------------------------
Guarantor is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Federal Reserve Regulation U), and no part
of the proceeds of any Loan or Multicurrency Advance will be used to purchase or
carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any other purpose that
violates the applicable provisions of any Federal Reserve Regulation. The
Borrower will furnish to the Lender on request a statement conforming with the
requirements of Regulation U.
15
<PAGE>
Section 6.11 ERISA.
-----
(a) The present value of all benefits vested under all Pension
Plans did not, as of the most recent valuation date of such Pension Plans,
exceed the value of the assets of the Pension Plans allocable to such
vested benefits by an amount which would represent a potential material
liability of the Guarantor and the Borrower, taken as a whole, or affect
materially the ability of the Borrower and Guarantor to perform this
Agreement.
(b) Except as disclosed to the Lender in writing prior to the
date hereof, no Plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such
term is defined in Section 406 or Section 2003(a) of ERISA) which could
subject such Plan or any other Plan, any trust created thereunder, or any
trustee or administrator thereof, or any party dealing with any Plan or any
such trust to the tax or penalty on prohibited transactions imposed by
Section 502 or Section 2003(a) of ERISA.
(c) No Pension Plan or trust has been terminated, except in
accordance with the Code, ERISA, and the regulations of the Internal
Revenue Service and the PBGC as applicable to solvent plans in which
benefits of participants are fully protected. No "reportable event" as
defined in Section 4043 of ERISA has occurred for which notice has not been
waived or for which alternative notice procedures are permitted.
(d) No Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA.
(e) The required allocations and contributions to Pension Plans
will not violate Section 415 of the Code.
Section 6.12 Subsidiaries. Schedule 2 to this Agreement sets forth as of
------------
the date of this Agreement a list of Guarantor's and Borrower's Subsidiaries.
Except as noted otherwise, all subsidiaries are wholly owned by Guarantor,
Borrower or Subsidiaries of Borrower.
Section 6.13 Patents, Licenses, Franchises. To the best of their
-----------------------------
knowledge, the Guarantor, Borrower, and each of Borrower's Subsidiaries owns or
possesses all the patents, trademarks, service marks, trade names, copyrights,
licenses, franchises, permits and rights with respect to the foregoing necessary
to own and operate its properties and to carry on its business as presently
conducted and presently planned to be conducted without material conflict with
the valid rights of others except as previously disclosed in writing to the
Lender prior to the date hereof.
Section 6.14 Investment Company; Public Utility Holding Company. Neither
--------------------------------------------------
the Borrower nor the Guarantor is (a) an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended; or (b) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a "holding company"
or a "subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
ARTICLE 7
AFFIRMATIVE COVENANTS
---------------------
So long as Lender shall have any commitment hereunder and, until payment in
full of each Loan and the Revolving Note, each Multicurrency Advance and the
Multicurrency Note and performance of all other obligations of the Borrower and
the Guarantor under this Agreement and the L/C Agreement, the Borrower and
Guarantor, as applicable, agree to do all of the following unless the Lender
shall otherwise consent in writing.
16
<PAGE>
Section 7.1 Use of Proceeds. The proceeds of all Loans and Multicurrency
---------------
Advances shall be used by Borrower solely for general corporate purposes of
Borrower.
Section 7.2 Financial Statements. The Borrower covenants and agrees that
--------------------
it will deliver to Lender:
(i) as soon as practicable and in any event within forty-
five (45) days after the end of each quarterly period (other than the
last quarterly period) in each Fiscal Year, the consolidated
statements of income and of cash flows of the Guarantor (which
includes Borrower and Borrower's 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 Guarantor (which includes Borrower, and Borrower's
Subsidiaries) as at the end of such quarterly period, setting forth in
each case in comparative form figures for the corresponding period in
the preceding Fiscal Year, all in reasonable detail and certified by
an authorized financial officer of the Guarantor, subject to changes
resulting from year-end adjustments;
(ii) as soon as practicable and in any event within ninety
(90) days after the end of each Fiscal Year, consolidated statements
of income, cash flows, and shareholders' equity of the Guarantor
(which includes the Borrower and Borrower's Subsidiaries) for such
year, and a consolidated balance sheet of the Guarantor (which
includes the Borrower and Borrower's Subsidiaries) as at the end of
such year, setting forth in each case in comparative form
corresponding figures from the preceding annual financial statements,
all in reasonable detail and satisfactory in scope to the Lender. The
annual consolidated financial statements shall be certified to the
Guarantor (or to its Board of Directors and Shareholders) by
independent public accountants of recognized standing selected by the
Guarantor whose certificate shall be in scope and substance
satisfactory to Lender; and
(iii) promptly after transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as
Guarantor shall send to its stockholders and copies of all
registration statements (without exhibits) and all reports, if any,
which it files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the
Securities and Exchange Commission).
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Borrower will deliver to Lender an Officer's Certificate of
Guarantor in the form of Exhibit D.
Section 7.3 Inspection of Property. The Borrower and Guarantor each
----------------------
covenant and agree that it will permit Lender on reasonable notice, at Lender's
expense (unless a Default or Event of Default shall have occurred, in which
event the expense of such visit and inspection shall be for the Borrower's
account), to visit and inspect any of the properties of the Guarantor and the
Borrower, to examine the corporate books and financial records of the Guarantor
and the Borrower, and to make copies thereof or extracts therefrom and to
discuss the affairs, finances and accounts of the Guarantor and the Borrower
with the principal officers of the Borrower or Guarantor and its independent
public accountants, all at such reasonable times as Lender may reasonably
request.
Section 7.4 Payment of Taxes. During the term of this Agreement, the
----------------
Borrower and Guarantor shall each cause to be paid and discharged all material
Taxes imposed upon the Guarantor, Borrower, or any Subsidiary of Borrower before
the same shall be in default, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might become a lien or charge upon such property
or any part thereof; provided, however, that the Borrower, Guarantor, and any
-------- -------
Subsidiary of Borrower shall not be required to cause to be paid or discharged
any such Tax or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings, and the Borrower, Guarantor, and the
Subsidiary of Borrower shall have set aside on their books adequate reserves
with respect thereto.
Section 7.5 Preservation of Corporate Existence. The Borrower and
-----------------------------------
Guarantor shall each
17
<PAGE>
cause to be done all things necessary to preserve and keep in full force and
effect their corporate existence and shall comply with all laws applicable to
the Guarantor or Borrower.
Section 7.6 Maintenance of Property. The Borrower and Guarantor shall,
-----------------------
and shall cause the Subsidiaries of Borrower to at all times keep, maintain,
preserve and protect all the property of the Borrower, Guarantor and
Subsidiaries of Borrower in good repair, working order and condition and from
time to time make all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
Section 7.7 Insurance. The Borrower and Guarantor shall, and shall cause
---------
the Borrower's Subsidiaries to, at all times keep adequately insured, by
financially sound and reputable insurers, all property of the Guarantor,
Borrower, and the Borrower's Subsidiaries of the character usually insured by
corporations engaged in the same or similar business against loss or damage of
the kinds customarily insured against by such corporations, and carry such other
insurance as is usually carried by corporations engaged in the same or similar
business.
Section 7.8 Records and Accounts. The Borrower and Guarantor shall at all
--------------------
times keep true and complete books of record and accounts in accordance with
generally accepted accounting principles.
Section 7.9 Additional Payments; Additional Tax. From time to time, the
-----------------------------------
Borrower shall (a) pay or reimburse the Lender for all out-of-pocket expenses,
including reasonable legal fees, actually incurred by the Lender in connection
with the preparation or making of this Agreement or the other Loan Documents, or
the making of any Loan or any Multicurrency Advance, or, except as provided in
Section 11.11, incurred by Lender in connection with the enforcement by judicial
proceedings or otherwise of any of the rights of the Lender under this Agreement
or the other Loan Documents, only if Lender is the prevailing party; (b) upon
Lender's request, obtain and promptly furnish to Lender evidence of all such
Government Approvals as may be required to enable the Borrower and Guarantor to
comply with their obligations under this Agreement and the other Loan Documents;
and (c) execute and deliver all such instruments and perform all such other acts
as the Lender may reasonably request to carry out the transactions contemplated
by this Agreement.
Section 7.10 Notification. Promptly after learning thereof, Borrower or
------------
Guarantor will notify the Lender of (a) the details of any action, proceeding,
investigation or claim against or affecting Guarantor or Borrower instituted
before any court, arbitrator or Governmental Authority or, to Borrower's or
Guarantor's knowledge threatened to be instituted, which, if determined
adversely to Guarantor or Borrower would be likely to result in a material
adverse change in the consolidated financial condition of the Guarantor or
Borrower; (b) any labor controversy which has resulted in or, to Borrower's or
Guarantor's knowledge, threatens to result in a strike which would significantly
affect the consolidated financial condition of Guarantor or Borrower; (c) if
Borrower, Guarantor or any member of the Controlled Group gives or is required
to give notice to the PBGC of any "reportable event" (as defined in subsections
(b)(1), (2), (5) or (6) of Section 4043 of ERISA) with respect to any Plan (or
the Internal Revenue Service gives notice to the PBGC of any "reportable event"
as defined in subsection (c)(2) of Section 4043 of ERISA and Borrower or
Guarantor obtains knowledge thereof) which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; and (d) if any Event of Default or Default
exists, the nature and period of existence thereof and any action Borrower or
Guarantor has taken or proposes to take with respect thereto.
Section 7.11 Maintenance of Quick Ratio. Based on the consolidated
--------------------------
financial statements of Guarantor and the Consolidated Subsidiaries, the
Guarantor shall maintain, as of the end of each fiscal quarter of Guarantor, a
Quick Ratio of not less than 1.0 to 1.0. The "Quick Ratio" shall be the ratio
of (a) the sum of Cash and Cash Equivalents plus Short Term Marketable
Securities plus Receivables (net of the allowance for doubtful receivables and
sales returns) of Guarantor and the Consolidated Subsidiaries to (b)
consolidated Current Liabilities of Guarantor and the Consolidated Subsidiaries,
all as reflected on the quarterly consolidated financial statements required to
be furnished hereunder.
Section 7.12 Maintenance of Current Ratio. Based on the consolidated
----------------------------
financial statements of
18
<PAGE>
Guarantor and the Consolidated Subsidiaries, Guarantor shall maintain, as of the
end of each fiscal quarter of Guarantor, a Current Ratio of not less than 1.8 to
1.0. The "Current Ratio" shall be the ratio of (a) consolidated current assets
of Guarantor and the Consolidated Subsidiaries to (b) consolidated current
liabilities of Guarantor and the Consolidated Subsidiaries, all as reflected on
the quarterly consolidated financial statements required to be furnished
hereunder.
Section 7.13 Maintenance of Tangible Net Worth. Based on the consolidated
---------------------------------
financial statements of Guarantor and the Consolidated Subsidiaries, Guarantor
shall maintain, as of the end of each fiscal quarter of Guarantor, a minimum
consolidated Tangible Net Worth equal to at least the sum of (i) 90% of the
actual consolidated Tangible Net Worth of Guarantor and the Consolidated
Subsidiaries as of December 31, 1996, plus (ii) 50% of Consolidated Net Income
(if positive) in each fiscal quarter of Guarantor ending after December 31,
1996, plus (iii) one hundred percent (100%) of the contribution to Tangible Net
Worth arising since December 31, 1996, from the raising or contribution of
additional equity to Guarantor or any of the Consolidated Subsidiaries or the
conversion of any subordinated debt of Guarantor or any Consolidated Subsidiary
to equity in Guarantor or any Consolidated Subsidiary (excluding equity
adjustments arising from employee stock compensation plans). "Tangible Net
Worth" means the excess of the total assets over total liabilities of Guarantor
and the Consolidated Subsidiaries (excluding from such difference the cumulative
foreign currency translation adjustment appearing on the applicable consolidated
balance sheet of Guarantor and the Consolidated Subsidiaries); provided,
--------
however, that for purposes of this section, the determination of total assets
- -------
shall exclude (i) all assets which should be classified as intangible assets
(such as goodwill, patents, trademarks, copyrights, franchises, unamortized debt
discount, capitalized research and development costs, capitalized software costs
and organization costs) (ii) cash held in a sinking or other similar fund
established for the purpose of redemption or other retirement of capital stock,
(iii) to the extent not already deducted from total assets, reserves for
depreciation, depletion, obsolescence or amortization of properties and other
reserves or appropriations of retained earnings which have been or should be
established in connection with the business conducted by the relevant
corporation, and (iv) any revaluation or other write-up in book value of assets
subsequent to December 31, 1996.
ARTICLE 8
NEGATIVE COVENANTS
------------------
So long as Lender shall have any commitment hereunder and, until payment in
full of each Loan and the Revolving Note, each Multicurrency Advance and the
Multicurrency Note and performance of all other obligations of the Borrower and
the Guarantor under this Agreement and the L/C Agreement, the Borrower and the
Guarantor, as applicable, agree not to do any of the following unless the Lender
shall otherwise consent in writing.
Section 8.1 Limitations on Liens.
--------------------
(a) The Guarantor and the Borrower will not, and will not permit
any Subsidiary of Borrower to, create or suffer to be created or to exist
any Lien upon any of its property or assets; provided, however, that the
-------- -------
foregoing shall not apply to:
(i) Liens on property acquired by the Guarantor, Borrower,
or a Subsidiary of Borrower to secure the payment of all or any part
of the purchase price or construction cost thereof; provided, however,
-------- -------
that such Lien shall not extend to other property;
(ii) Any Lien on assets of the Guarantor, Borrower, or a
Subsidiary of Borrower located outside the United States of America;
provided, however, that the aggregate amount of the Indebtedness
-------- -------
secured by such assets shall not exceed Six Million Dollars
($6,000,000);
(iii) Tax liens and routine mechanics' and materialmen's
liens incurred in the ordinary course of business; and
19
<PAGE>
(v) Any Lien renewing, extending, refunding or replacing
any Lien permitted above by clauses (i) through (iv), inclusive,
provided that the principal amount of Indebtedness secured thereby
--------
shall not exceed the principal amount of Indebtedness secured at the
time of such renewal, extension, refunding or replacement, and that
such renewal, extension, refunding or replacement Lien shall be
limited to all or part of the same property (plus improvements,
additions, extensions, repairs and replacements to or on such
property) which secured the Lien renewed, extended, refunded or
replaced.
(b) Nothing in this Section 8.1 shall be construed to permit the
Guarantor, Borrower, or a Subsidiary of Borrower to incur any Indebtedness
the incurrence of which would at the time be prohibited pursuant to the
provisions of Section 8.2.
Section 8.2 Limitations on Indebtedness. The Guarantor and Borrower will
---------------------------
not, and will not permit any Subsidiary of Borrower to, create, incur, or become
liable for any Indebtedness except:
(a) Taxes;
(b) Indebtedness of Guarantor to Borrower, or of Borrower to a
Subsidiary of Borrower, or of Borrower or Guarantor to Lender;
(c) Indebtedness for the payment of obligations under operating
leases in an amount not exceeding Nine Million Dollars ($9,000,000) in any
Fiscal Year;
(d) Indebtedness in addition to that described in clauses (a) -(d)
the aggregate outstanding principal amount of which does not at any time
exceed Fifteen Million Dollars ($15,000,000) (or its equivalent in foreign
currencies); and
(e) Guarantees by Guarantor or Borrower of Indebtedness of a
Subsidiary that is permitted hereunder.
Section 8.3 Limitations on Dividends. The Guarantor will not declare or
------------------------
pay any dividend on, or make any distribution to the holders of, any shares of
its capital stock of any class for a consideration other than shares of capital
stock of the Guarantor nor make any payment on account thereof, if, after giving
effect to such dividend or distribution or payment and to any other such
dividend declared but not yet paid, the sum of the aggregate of all such
dividends and distributions declared after December 31, 1996, would exceed fifty
percent (50%) of Consolidated Net Income as of the most current reporting
periof.
Section 8.4 Limitations on Stock Repurchases. The Guarantor and Borrower
--------------------------------
will not, and will not permit any Subsidiary of Borrower to, purchase, redeem,
or otherwise acquire any shares of capital stock of any class of the Guarantor
or such Subsidiary of Borrower if, after giving effect to such purchase,
redemption, or acquisition, the cumulative, aggregate amount paid for the
purchase, redemption, or acquisition of such capital stock during any Fiscal
Year commencing after the Closing Date would exceed Twenty Million Dollars
($20,000,000).
Section 8.5 Limitation on Investments. The Guarantor and Borrower will
-------------------------
not, and will not permit any Subsidiary of Borrower to, make or permit to remain
outstanding any loan or advance to any Person or purchase or otherwise acquire
the capital stock, shares, voting trust certificates, bonds, debentures, notes
or instruments or other securities or evidences of indebtedness of, or any
interest in, or make any capital contribution to, any Person (collectively,
"Investments") except that the Guarantor, Borrower, and Subsidiaries of Borrower
may:
(a) Make or permit to remain outstanding loans or advances to any
Subsidiary;
(b) Own, purchase or acquire stock, obligations or securities of a
corporation that, upon such ownership, purchase or acquisition, shall be a
Subsidiary;
20
<PAGE>
(c) Own, purchase or acquire (i) obligations including, but not
limited to, time deposits maturing within one year of commercial banks
having combined capital and surplus in excess of $100,000,000 (or the
equivalent in a foreign currency), organized or licensed to conduct a
banking business under the laws of the United States of America, any state
thereof, or a Permitted Foreign Government; (ii) obligations of the United
States government, any agency thereof or of a Permitted Foreign Government;
(iii) obligations guaranteed by the United States government or a Permitted
Foreign Government; and (iv) short-term commercial paper rated in the
highest available class by Moody's Investors Services or Standard & Poor's
Corporation; and
(d) Make additional Investments in an amount not exceeding, in the
aggregate for Guarantor, Borrower, and all Subsidiaries of Borrower for all
such additional Investments, Fifteen Million Dollars ($15,000,000) which
are consistent with the guidelines adopted from time to time by the
Guarantor's and Borrower's Board of Directors.
Section 8.6 Merger or Sale of Assets. The Borrower and Guarantor will not
------------------------
and will cause the Subsidiaries of Borrower not to merge or consolidate with any
other corporation or sell, lease or transfer or otherwise dispose of any portion
of its or their business or assets, to any Person (either in a single
transaction or in a series of transactions during any Fiscal Year), except that:
(a) Any Subsidiary may merge with the Borrower (provided that the
Borrower shall be the continuing or surviving corporation);
(b) Any Subsidiary may sell, lease, transfer or otherwise dispose
of any of its assets to the Borrower, Guarantor, or another subsidiary or
Guarantor;
(c) The Guarantor may merge with any other corporation, provided
--------
that (a) the Guarantor shall be the continuing or surviving corporation,
and (b) immediately after such merger, no Default or Event of Default shall
exist;
(d) Guarantor, Borrower and Subsidiaries of Borrower may, in the
aggregate, enter into leases for assets not exceeding 10% of Guarantor's
total consolidated assets;
(e) The Borrower and its Subsidiaries may sell their products in
the ordinary course of business; and
(f) The Guarantor, Borrower, and the Borrower's Subsidiaries may
sell assets in addition to those described in clauses (a) through (d) above
in an aggregate amount for all sales by Guarantor, Borrower, and the
Borrower's Subsidiaries in any Fiscal Year not to exceed Fifteen Million
Dollars ($15,000,000); provided, that the sales of notes receivable and
leases of ultrasound equipment including service contracts to Borrower's
end customers by Guarantor or any of the Borrower's Subsidiaries shall not
be deemed sales of assets for purposes of this subsection.
Guarantor shall notify Lender in writing of all asset sales by Guarantor or any
subsidiary that involve a sales price of more than Five Million Dollars
($5,000,000) and that are outside the ordinary course of business.
Section 8.7 Limitation on Capital Expenditures. The Guarantor and
----------------------------------
Borrower shall not, and shall not permit any Subsidiary of Borrower to, make
expenditures for fixed assets or other capital expenditures which in any Fiscal
Year exceed, in the aggregate for Guarantor and the Consolidated Subsidiaries
combined, based on the consolidated financial statements, the sum of Twenty-Five
Million Dollars ($25,000,000). Nothing in this Section 8.7 shall be construed
to permit the Guarantor or any subsidiary to incur any Indebtedness the
incurrence of which would at the time be prohibited pursuant to the provisions
of Section 8.2.
Section 8.8 Maintenance of Leverage Ratio. Based on the consolidated
-----------------------------
financial statements of Guarantor and the Consolidated Subsidiaries, the
Guarantor shall not, as of the end of any Fiscal Year, permit the ratio of the
consolidated total liabilities of Guarantor to consolidated Tangible Net Worth
of
21
<PAGE>
Guarantor to exceed 1.2 to 1.0.
Section 8.9 Limitation on Net Losses. Based on the consolidated financial
------------------------
statements of Guarantor and the Consolidated Subsidiaries, the consolidated net
loss of Guarantor shall not exceed in any one fiscal quarter the amount of Ten
Million Dollars ($10,000,000) and shall not exceed in any period of four
consecutive fiscal quarters, the aggregate amount of Twenty Million Dollars
($20,000,000); provided, that the effects of the judgment entered against
Borrower in favor of SRI International (the "SRI Judgment") by the U.S. District
Court for the Northern District of California in a case involving alleged patent
violations shall not be included when calculating compliance with this covenant,
up to a maximum amount excluded of $40,000,000.
Section 8.10 Transactions with Affiliates. Neither Guarantor, Borrower
----------------------------
nor any Subsidiary of Borrower shall enter into or be a party to any transaction
or arrangement with any Affiliate, as defined below, except in the ordinary
course of and pursuant to the reasonable requirements of Guarantor's, Borrower's
or such Subsidiary's business, and upon fair and reasonable terms no less
favorable to Guarantor, Borrower or such Subsidiary of Borrower than the
Guarantor, Borrower or Subsidiary of Borrower would obtain in a comparable arms'
length transaction with a Person other than an Affiliate. Notwithstanding the
foregoing, Guarantor or Borrower may enter into or be a party to a transaction
or arrangement with an Affiliate which, in the reasonable business judgement of
Borrower and Guarantor serves a legitimate business purpose and is in the best
interest of the Guarantor or Borrower. "Affiliate" shall mean any Person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by or is under common control with, Guarantor or any Consolidated
Subsidiary, or 5% or more of the equity interest of which is held beneficially
or of record by Guarantor or a Consolidated Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
ARTICLE 9
EVENTS OF DEFAULT
-----------------
Section 9.1 Events of Default. The occurrence of any of the following
-----------------
events shall constitute an "Event of Default" hereunder.
(a) Payment Default. The Borrower shall fail to pay when due any
---------------
amount of principal of or interest on any Loan or Multicurrency Advance or
the Borrower or Guarantor shall fail to pay when due any other amount
payable by it hereunder; or
(b) Breach of Warranty. Any representation or warranty made by
------------------
the Borrower or Grantor under or in connection with this Agreement or the
other Loan Documents shall prove to have been incorrect in any material
respect when made; or
(c) Breach of Certain Covenants. The Borrower or Guarantor shall
---------------------------
fail to perform or observe the covenant set forth in clause (d) of Section
7.10; or
(d) Breach of Other Covenants. The Borrower shall fail to perform
-------------------------
or observe any other covenant, obligation or term of this Agreement to be
performed by and such failure shall remain unremedied for thirty (30) days
after written notice thereof shall have been given to the Borrower by the
Lender; or
(e) Cross-default. The Guarantor, Borrower, or any Subsidiary of
-------------
Borrower shall fail to pay when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) any Indebtedness
having an outstanding principal balance in the aggregate in excess of Five
Hundred Thousand Dollars ($500,000) (except any Loan or Multicurrency
Advance) or any interest or premium thereon and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or
(f) Voluntary Bankruptcy, Etc. The Guarantor, Borrower, or
-------------------------
Subsidiary of Borrower
22
<PAGE>
shall: (1) file a petition seeking relief for itself under Title 11 of the
United States Code, as now constituted or hereafter amended, or file an
answer consenting to, admitting the material allegations of or otherwise
not controverting, or fail timely to controvert a petition filed against it
seeking relief under Title 11 of the United States Code, as now constituted
or hereafter amended, or (2) file such petition or answer with respect to
relief under the provisions of any other now existing or future applicable
bankruptcy, insolvency, or other similar law of the United States of
America or any state thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations
or an arrangement, composition, extension or adjustment with creditors,
unless such act or failure to act described in Section 9.1(f) with respect
------
to Subsidiaries of Borrower has no material adverse affect on the
consolidated financial condition of Guarantor or Borrower or on the ability
of Guarantor or Borrower to perform its obligations under the Loan
Documents; or
(g) Involuntary Bankruptcy, Etc. An order for relief shall be entered
---------------------------
against the Guarantor, Borrower, or Subsidiary of Borrower under Title 11
of the United States Code, as now constituted or hereafter amended, which
order is not stayed; or upon the entry of an order, judgment or decree by
operation of law or by a court having jurisdiction in the premises which is
not stayed adjudging it a bankrupt or insolvent under, or ordering relief
against it under, or approving as properly filed a petition seeking relief
against it under the provisions of any other now existing or future
applicable bankruptcy, insolvency or other similar law of the United States
of America or any state thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations
or any arrangement, composition, extension or adjustment with creditors, or
appointing a receiver, liquidator, assignee, sequestrator, trustee or
custodian of the Guarantor, Borrower, or any Subsidiary of Borrower or of
any substantial part of its property, or ordering the reorganization,
winding-up or liquidation of its affairs, or upon the expiration of thirty
(30) days after the filing of any involuntary petition against it seeking
any of the relief specified in Section 9.1(f) or this Section 9.1(g)
without the petition being dismissed prior to that time, unless such
------
occurrence described in this Section 9.1(g) with respect to Subsidiaries of
Borrower has no material adverse affect on the consolidated financial
condition of Guarantor or Borrower or on the ability of Guarantor or
Borrower to perform its obligations under the Loan Documents; or
(h) Insolvency, Etc. The Guarantor, Borrower, or any Subsidiary of
---------------
Borrower shall (i) make a general assignment for the benefit of its
creditors or (ii) consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, or custodian of all or a
substantial part of the property of the Guarantor, Borrower, or any
Subsidiary of Borrower, or (iii) admit its insolvency or inability to pay
its debts generally as they become due, or (iv) fail generally to pay its
debts as they become due, or (v) take any action (or suffer any action to
be taken by its directors or shareholders) looking to the dissolution or
liquidation of the Borrower, unless such occurrence described above in (i)
------
through (v) with respect to Subsidiaries of Borrower has no material
adverse affect on the consolidated financial condition of Guarantor or
Borrower or on the ability of Guarantor or Borrower to perform its
obligations under the Loan Documents; or
(i) ERISA. The Borrower or any member of the Controlled Group shall
-----
fail to pay when due an amount or amounts aggregating in excess of Five
Hundred Thousand Dollars ($500,000) which it shall have become liable to
pay to the PBGC or to a Plan under Section 515 of ERISA or Title IV of
ERISA; or notice of intent to terminate a Plan or Plans (other than a
multi-employer plan, as defined in Section 4001(3) of ERISA), having
aggregate Unfunded Vested Liabilities in excess of Five Hundred Thousand
Dollars ($500,000) shall be filed under Title IV of ERISA by the Borrower,
any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate any such Plan or Plans; or
(j) Borrower's Status as Wholly-Owned Subsidiary. Borrower shall
--------------------------------------------
cease to be a wholly-owned Subsidiary of Guarantor.
Section 9.2 Consequences of Default. If any of the Events of Default
-----------------------
described in Section 9.1(f) or Section 9.1(g) shall occur, the Commitment shall
immediately terminate, the principal of and the interest on
23
<PAGE>
Loans, Multicurrency Advances and all other sums payable by Borrower hereunder
and under the Revolving Note and the Multicurrency Note shall become immediately
due and payable, and shall become immediately due and payable all without
protest, presentment, notice or demand, all of which the Borrower and Guarantor
expressly waive. If any other Event of Default shall occur and be continuing,
then in any such case and at any time thereafter so long as any such Event of
Default shall be continuing, the Lender may immediately terminate the Commitment
and, if Loans or Multicurrency Advances shall have been made, the Lender may
declare the principal of and the interest on the Loans and the Revolving Note,
and on the Multicurrency Advances and the Multicurrency Note, and all other sums
payable by the Borrower or Guarantor hereunder or thereunder to be immediately
due and payable, whereupon the same shall become immediately due and payable all
without protest, presentment, notice, or demand, all of which the Borrower and
Guarantor expressly waive.
ARTICLE 10
GUARANTY
--------
Section 10.1 Guaranteed Obligations. The Guarantor absolutely and
----------------------
unconditionally guarantees payment to the Lender when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) of all
indebtedness, liabilities and obligations whatsoever of the Borrower owing to
the Lender hereunder or under the Revolving Note or the Multicurrency Note or
the L/C Agreement, whether presently existing or hereafter arising
(collectively, the "Obligations"), without set-off, counterclaim, recoupment or
deduction of any amounts owing or alleged to be owing by Lender to Borrower.
This guaranty is a guaranty of payment and not merely of collection.
Section 10.2 Guarantor's Consent. The Guarantor hereby consents that the
-------------------
Lender may without further consent or disclosure and without affecting or
releasing the obligations of Guarantor hereunder: (a) waive or delay the
exercise of any rights or remedies of the Lender against the Borrower; and (b)
renew, extend, waive or modify the terms of any Obligation or any instrument or
agreement evidencing the same.
Section 10.3 Guarantor's Waiver. The Guarantor waives any action on
------------------
delinquency in respect of the Obligations or any part thereof, including any
right to require Lender to sue Borrower. Guarantor further waives notice of (a)
any default by the Borrower; (b) the obtaining of any guaranty or surety
agreement (in addition to this guaranty); (c) the obtaining of any pledge,
assignment or other security for any Obligations; (d) any renewal, extension or
modification of the terms of any Obligation or of the obligations or liabilities
of any surety or guarantor or any instruments or agreements evidencing the same;
(e) any other demands or notices whatsoever with respect to the Obligation or
this guaranty.
Section 10.4 Unconditional Guaranty. The obligations of the Guarantor
----------------------
under this guaranty are absolute and unconditional without regard to the
obligations of any other party or person. The obligations of the Guarantor
hereunder shall not be in any way limited or effected by any circumstances
whatsoever including, without limitation, (a) any failure by the Borrower or any
other guarantor or surety to perform or comply with the Obligations or the terms
of any instrument or agreement relating thereto; (b) any change in the name,
purpose, capital stock or constitution of the Borrower; (c) any irregularity or
defect by Lender (excluding negligent or willful misconduct), Borrower or any
other guarantor or surety or any of their respective officers, directors or
other agents in executing and delivering any instrument or agreements relating
to the Obligations or in carrying out or attempting to carry out the terms of
any such agreements; (d) any insolvency, bankruptcy, reorganization or similar
proceeding by or against Borrower, Lender, Guarantor or any other surety or
guarantor; (e) any setoff, counterclaim, recoupment, deduction, defense or other
right which Guarantor may have against Lender, Borrower or any other person for
any reason whatsoever whether related to the Obligations or otherwise; or (f)
any other circumstances which might constitute a legal or equitable discharge or
defense, in whole or in part, of a surety or guarantor. Guarantor hereby waives
all defenses of a surety to which it may be entitled by statute or otherwise.
Section 10.5 Waiver of Subrogation. Guarantor hereby irrevocably waives
---------------------
all claims it has or may acquire against Borrower in respect of the Obligations,
including rights of exoneration, reimbursement and subrogation.
24
<PAGE>
ARTICLE 11
MISCELLANEOUS
-------------
Section 11.1 No Waiver; Remedies Cumulative. No failure by Lender,
------------------------------
Guarantor or the Borrower to exercise, and no delay in exercising, any right,
power or remedy under this Agreement or any other Loan Document shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or remedy under this Agreement or any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy.
The exercise of any right, power, or remedy shall in no event constitute a cure
or waiver of any Event of Default under this Agreement or any other Loan
Document nor prejudice any party's rights in the exercise of any powers
hereunder or thereunder. The rights and remedies provided herein and therein
are cumulative and not exclusive of any right or remedy provided by law.
Section 11.2 Governing Law. This Agreement and the other Loan Documents
-------------
shall be governed by and construed in accordance with the laws of the State of
Washington, U.S.A.
Section 11.3 Consent to Jurisdiction. Each party hereto irrevocably
-----------------------
submits to the nonexclusive jurisdiction of any state or federal court sitting
in Seattle, King County, Washington, in any action or proceeding brought to
enforce or otherwise arising out of or relating to this Agreement or any other
Loan Document and agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 11.3
shall impair the right of any party to bring any action or proceeding hereunder
in the courts of any other jurisdiction, and the Borrower and Guarantor
irrevocably submit to the nonexclusive jurisdiction of the appropriate courts of
the jurisdiction in which any property or an office of the Borrower or Guarantor
is located.
Section 11.4 Notices. All notices and other communications provided for
-------
in this Agreement shall be in writing or (unless otherwise specified) by telex,
facsimile transmission, telegram or cable and shall be mailed (with first class
postage prepaid) or sent or delivered to each party at the address set forth
under its name on Schedule 3 hereof, or at such other address as shall be
designated by such party in a written notice to each other party. Except as
otherwise specified all notices sent by mail, if duly given, shall be effective
three (3) Business Days after deposit into the mails, all notices sent by a
nationally recognized overnight courier service, if duly given, shall be
effective one (1) Business Day after delivery to such courier service, and all
other notices and communications if duly given or made shall be effective upon
receipt.
Section 11.5 Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of the parties and their respective Successors and assigns,
provided that the Borrower or Guarantor may not assign or otherwise transfer all
- --------
or any part of its rights or obligations hereunder or under any other Loan
Document without the prior written consent of the Lender. Except as provided
herein, Lender shall not have the right to sell or assign all or any portion of
the Loans or Multicurrency Advances or of its right, title and interest therein
or thereto or in or to this Agreement or any other Loan Document to any other
person without the Borrower's prior written consent; provided, however, Lender
-------- -------
may grant participations in all or any portion of its Loans or Multicurrency
Advances, or the Commitment, but Lender's obligations under the Loan Documents
shall remain unchanged, and the Borrower and Guarantor shall continue to deal
solely and directly with the Lender in connection with Lender's rights and
obligations under the Loan Documents.
Section 11.6 Severability. Any provision of this Agreement or any other
------------
Loan Document which is prohibited or unenforceable in any jurisdiction shall as
to such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.
25
<PAGE>
Section 11.7 Survival. All representations, warranties and indemnities of
--------
the Borrower, Guarantor or the Lender shall survive the execution and delivery
of this Agreement and the other Loan Documents and the making of any Loan or
Multicurrency Advance. Notwithstanding anything in this Agreement or implied by
law to the contrary, the indemnities of Borrower and Guarantor in favor of the
Lender, and the obligations of Borrower and Guarantor contained herein to pay
fees to, and expenses incurred by, the Lender shall survive the payment of the
Loans and Revolving Note and the Multicurrency Advances and the Multicurrency
Note, and the termination of the Commitment and this Agreement.
Section 11.8 Conditions Not Fulfilled. If the Commitment is not borrowed,
------------------------
owing to nonfulfillment of any condition precedent specified in Article 5, no
party hereto shall be responsible to any other party for any damage or loss by
reason thereof, except that the Borrower shall in any event be liable to pay the
fees, Taxes, and expenses for which it is obligated hereunder and the
Guarantor's obligations under Article 10 hereof shall extend to the Borrower's
responsibility to pay such amounts.
Section 11.9 Entire Agreement; Amendment. This Agreement comprises the
---------------------------
entire agreement of the parties and may not be amended or modified except by
written agreement, executed in conformance with the terms of Section 11.1
hereof. No provision of this Agreement may be waived except in writing and then
only in the specific instance and for the specific purpose for which given.
Section 11.10 Headings. The headings of the various provisions of this
--------
Agreement are for convenience of reference only, do not constitute a part
hereof, and shall not affect the meaning or construction of any provision
hereof.
Section 11.11 Prevailing Party Attorney's Fees. If a final judgment is
--------------------------------
rendered in any judicial proceeding brought by any party against any other party
to enforce the provisions of this Agreement or any other Loan Document, the
party in whose favor such judgment is rendered shall be entitled to recovery of
its reasonable attorney's fees and costs, including the allocated cost of in-
house counsel.
Section 11.12 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same Agreement.
Section 11.13 Confidentiality. Lender agrees during the term of this
---------------
Agreement and for three years thereafter, except as required by applicable law
or regulation or as is necessary to the enforcement of the Loan Documents, to
maintain in confidence any confidential information provided by Borrower or
Guarantor which is not or does not become publicly known without breach of this
provision. Lender agrees to use such confidential information only in
connection with the administration of the Loans, the Multicurrency Advances and
the Letter of Credit.
Section 11.14 CONCERNING ORAL. ORAL AGREEMENTS OR ORAL COMMITMENTS TO
---------------
LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING PAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW (RCW 19.36).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized as of
the date first above written.
26
<PAGE>
BORROWER:
ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation
By: /s/ Pamela L. Dunlap
________________________________
Its: Vice President & Treasurer
_______________________________
GUARANTOR:
ATL ULTRASOUND, INC., a Washington
corporation
By: /s/ Pamela L. Dunlap
________________________________
Its: Vice President & Treasurer
_______________________________
LENDER:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, dba SEAFIRST
BANK
By: /s/ [signature illegible]
________________________________
Its: Vice President
_______________________________
27
<PAGE>
EXHIBIT A
REVOLVING NOTE
$15,000,000 July _____,1997
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, ADVANCED TECHNOLOGY LABORATORIES, INC.
a Washington corporation (the "Borrower"), hereby promises to pay to the order
of Bank of America National Trust and Savings Association, doing business as
SEAFIRST BANK (the "Lender") on the Maturity Date the unpaid principal balance
of all loans made under this Note, in a maximum amount not to exceed Fifteen
Million Dollars ($15,000,000), together with interest thereon from the date
hereof until maturity at a per annum rate equal to the Interest Rate (changing
as the Interest Rate changes), and, if default shall occur in the payment when
due (whether by acceleration or otherwise) of any principal amount hereunder,
from the maturity of that amount until it is paid in full at a per annum rate
equal to the Reference Rate (changing as the Reference Rate changes), plus two
percent (2%). Notwithstanding anything herein to the contrary, interest shall
not accrue at a rate in excess of the maximum rate permitted by applicable law.
The Borrower further agrees as follows:
1. All payments of principal and interest on this Note shall be made to
Seafirst Bank, at its Commercial Loan Service Center, Seattle, Washington, in
immediately available funds.
2. As used herein "Interest Rate" shall mean the Reference Rate unless
the Borrower shall elect to have some or all of the loans made hereunder accrue
interest at the Quoted Rate or the LIBOR Rate as provided in Section 2.5(d) of
the Revolving Credit Agreement and Guaranty dated July ______, 1997, among
Lender, Borrower, and ATL ULTRASOUND, INC., as "Guarantor" ("Loan Agreement").
Accrued but unpaid interest on loans bearing interest at the Reference Rate
shall be paid on (i) the last Business Day of each calendar quarter commencing
on June 30, 1997, and continuing on the last Business Day of each March, June,
September and December thereafter, (ii) the date of any principal payment (to
the extent accrued on the principal amount paid) and (iii) at maturity. Accrued
but unpaid interest on each Quoted Rate Loan or LIBOR Loan shall be paid (i) on
the last day of each Applicable Interest Period, (ii) the date of any principal
payment (to the extent accrued on the principal amount paid), (iii) at maturity
and (iv) for LIBOR Loans for which the Applicable Interest Period is six months,
interest shall also be payable on a day 90 days or three months, respectively,
after the commencement of such Applicable Interest Period. Unpaid interest
accruing on amounts in default shall be payable on demand.
3. This Note is issued under and is subject to the terms of the Loan
Agreement. In the event of any conflict between the terms of this Note and the
Loan Agreement, the Loan Agreement shall control. Capitalized terms not defined
herein have the meanings set forth in the Loan Agreement.
4. It is expressly provided that if any of the Events of Default defined
in Sections 9.1(f) or 9.1(g) of the Loan Agreement shall occur, the entire
unpaid balance of the principal and interest hereunder shall be immediately due
and payable in accordance with the terms of the Loan Agreement. It is also
expressly provided that upon the occurrence of any other Event of Default, the
entire remaining unpaid balance of the principal and interest may be declared by
the Lender to be immediately due and payable in accordance with the terms of
the Loan Agreement.
5. The unpaid principal balance of the Loans made hereunder shall be the
total amount advanced hereunder, less the amount of the principal payments made
hereon. This Note is given to avoid the execution of an individual note for
each Loan by the Lender to the Borrower. This Note evidences a revolving credit
and within the limits and on the conditions set forth in the Loan Agreement,
prior to the Maturity Date, the Borrower may borrow, repay and reborrow
hereunder. The Lender is hereby
1
<PAGE>
authorized to record on a schedule or computer-generated statement the date and
amount of each Loan it makes hereunder and the date and amount of each payment
of principal and interest thereon, and such schedule or statement shall
constitute a part of this Note. Any such recordation by the Lender shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation or any error in
any such recordation shall not affect the obligations of the Borrower hereunder.
6. Each maker, surety, guarantor and endorser of this Note expressly
waives all notices, demands for payment, presentations for payment, notices of
intention to accelerate the maturity, protest and notice of protest.
7. In the event this Note is placed in the hands of an attorney for
collection, or suit is brought on the same, or the same is collected through
bankruptcy or other judicial proceedings, except as provided in Section 11.11 of
the Loan Agreement, the Borrower agrees and promises to pay reasonable
attorneys' fees and collection costs, including all out-of-pocket expenses
incurred by the Lender, and the allocated cost of in-house counsel.
8. This Note has been executed and delivered in and shall be governed by
and construed in accordance with the internal laws of the State of Washington.
The Borrower hereby irrevocably submits to the nonexclusive jurisdiction of any
state or federal court sitting in Seattle, King County, Washington, in any
action or proceeding brought to enforce or otherwise arising out of or relating
to this Note.
2
<PAGE>
BORROWER:
ADVANCED TECHNOLOGY LABORATORIES, INC., a Washington corporation
By:_________________________________
Its:________________________________
2
<PAGE>
EXHIBIT B
MULTICURRENCY NOTE
July _____, 1997
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, ADVANCED TECHNOLOGY LABORATORIES, a
Washington corporation (the "Borrower"), hereby promises to pay to the order of
Bank of America National Trust and Savings Association, doing business as
SEAFIRST BANK (the "Lender") on the Maturity Date, in immediately available
funds, all principal amounts advanced under this Note, pursuant to the terms,
conditions, and definitions of the Revolving Credit Agreement and Guaranty dated
July ______, 1997, among Lender, Borrower, and ATL ULTRASOUND, INC., as
"Guarantor" ("Loan Agreement"), together with interest on the daily unpaid
principal balance from the date of each Multicurrency Advance until paid in full
in accordance with the Loan Agreement.
This Note is the Multicurrency Note referred to in the Loan Agreement, and
the Loan Agreement is incorporated herein.
Each Multicurrency Advance shall be repaid in the currency which was
advanced, and shall be repaid on the last day of its Applicable Interest Period.
Interest accrued on each Multicurrency Advance under this Note shall be paid as
provided in the Loan Agreement.
1. All payments of principal and interest on this Note shall be made to
Seafirst Bank, at its Commercial Loan Service Center, Seattle, Washington, in
immediately available funds.
2. This Note is issued under and is subject to the terms of the Loan
Agreement. In the event of any conflict between the terms of this Note and the
Loan Agreement, the Loan Agreement shall control. Capitalized terms not defined
herein have the meanings set forth in the Loan Agreement.
3. It is expressly provided that if any of the Events of Default defined
in Sections 9.1(f) or 9.1(g) of the Loan Agreement shall occur, the entire
unpaid balance of the principal and interest hereunder shall be immediately due
and payable in accordance with the terms of the Loan Agreement. It is also
expressly provided that upon the occurrence of any other Event of Default, the
entire remaining unpaid balance of the principal and interest may be declared by
the Lender to be immediately due and payable in accordance with the terms of the
Loan Agreement.
4. The unpaid principal balance of the Multicurrency Advances made
hereunder shall be the total amount advanced hereunder, less the amount of the
principal payments made hereon. This Note is given to avoid the execution of an
individual note for each Multicurrency Advance by the Lender to the Borrower.
This Note evidences a revolving credit and within the limits and on the
conditions set forth in the Loan Agreement, prior to the Maturity Date, the
Borrower may borrow, repay and reborrow hereunder. The Lender is hereby
authorized to record on a schedule or computer-generated statement the date and
amount of each Loan it makes hereunder and the date and amount of each payment
of principal and interest thereon, and such schedule or statement shall
constitute a part of this Note. Any such recordation by the Lender shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation or any error in
any such recordation shall not affect the obligations of the Borrower hereunder.
5. Each maker, surety, guarantor and endorser of this Note expressly
waives all notices, demands for payment, presentations for payment, notices of
intention to accelerate the maturity, protest and notice of protest.
6. In the event this Note is placed in the hands of an attorney for
collection, or suit is brought
1
<PAGE>
on the same, or the same is collected through bankruptcy or other judicial
proceedings, except as provided in Section 11.11 of the Loan Agreement, the
Borrower agrees and promises to pay reasonable attorneys' fees and collection
costs, including all out-of-pocket expenses incurred by the Lender, and the
allocated cost of in-house counsel.
7. This Note has been executed and delivered in and shall be governed by
and construed in accordance with the internal laws of the State of Washington.
The Borrower hereby irrevocably submits to the nonexclusive jurisdiction of any
state or federal court sitting in Seattle, King County, Washington, in any
action or proceeding brought to enforce or otherwise arising out of or relating
to this Note.
BORROWER:
ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation
By:___________________________________
Its:__________________________________
2
<PAGE>
EXHIBIT C
MULTICURRENCY BORROWING NOTICE
TO: Seafirst Bank
Metropolitan Commercial Team 2
701 Fifth Ave., 11th Floor
Seattle, Washington 98104
Att'n: Hank Knottnerus
Phone: (206) 358-3369
Fax: (206) 358-3113
BORROWING INSTRUCTIONS:
Date of Borrowing: ______________
Specify New Advance or Rollover: ______________
Currency Type: ______________
Amount requested in applicable Currency: ______________
Interest Period (1, 2, 3, or 6 months): ______________
WIRE INSTRUCTIONS:
Bank Name: ______________
SWIFT Code: ______________
Account Name: ______________
Account Number: ______________
Attention: ______________
Phone Number: ______________
DATED as of this __________ day of _____________________________, 19______.
ADVANCED TECHNOLOGY LABORATORIES
By___________________________________
Title________________________________
________________________________________________________________________________
Bank Use Only:
Currency Borrowing Rate: ______________
Plus Usage Factor (0.625% or 0.75%) ______________
All-In Rate: ______________
Accrual Basis (actual/360 or actual/365/66) ______________
U.S.$ Equivalent: ______________
<PAGE>
EXHIBIT D
QUARTERLY COMPLIANCE CERTIFICATE
The undersigned, being the _______________________ of ATL ULTRASOUND,
INC., a Washington corporation, (the "Guarantor"), does hereby certify to Bank
of America National Trust and Savings Association, doing business as SEAFIRST
BANK, (the "Lender"), as follows:
(a) This Certificate is given pursuant to Section 7.2 of that certain
Revolving Credit Loan Agreement (the "Credit Agreement") dated as of July
______, 1997, among the Lender, the Guarantor and Advanced Technology
Laboratories, Inc., a Washington corporation (the "Borrower").
(b) The financial statements for the Fiscal Year [fiscal quarter]
ended _________________ delivered with this Certificate pursuant to the
requirements of Section 7.2 of the Credit Agreement have been prepared in
accordance with generally accepted accounting principles consistently applied
and present fairly the financial position and the results of operations of the
Guarantor and the Consolidated Subsidiaries as of the end of and for such fiscal
period.
(c) Since the Fiscal Year-end report previously provided to the Lender
pursuant to Section 6.6 or Section 7.2(ii) of the Credit Agreement, there have
been no changes to the operations, business or financial condition of the
Guarantor and the Consolidated Subsidiaries that would be sufficient to impact
the Borrower's ability to repay any outstanding or requested Loans or that have
resulted in, or are forecast by Borrower to result in, a Default or Event of
Default.
(d) There has not existed during the fiscal quarter ended
_______________________ and there does not now exist any Event of Default or
Default under the Credit Agreement.
(e) If an Event of Default has existed or does exist, the nature of
such event is as follows: ________________________________. Such Event of
Default occurred on ________________ and existed for a period of
____________________. Guarantor or Borrower took the following action, or
propose to take the following action with respect to such Event of
Default:_______________________
(f) The computations and descriptions set forth in Schedule 1 hereto
demonstrate compliance with Sections 7.11-7.13, 8.3-8.9 of the Credit Agreement.
(g) Capitalized terms used herein and not otherwise defined shall have
the meanings defined in the Credit Agreement.
DATED this _____ day of _______________, 19___.
ATL ULTRASOUND, INC., a Washington
corporation
By: ______________________________
Its:______________________________
1
<PAGE>
SCHEDULE 1 TO QUARTERLY COMPLIANCE CERTIFICATE
Section 7.11 Quick Ratio
- ------------------------
Actual Quick Ratio
------------------
1. Cash and Cash Equivalents $__________
2. Short Term Marketable
Securities $__________
3. Receivables (net of allowance
for doubtful receivables and
sales returns) $__________
4. Sum of 1, 2 & 3 $__________
5. Total Current
Liabilities $__________
6. Actual Quick Ratio
(clause 4 divided
by clause 5) __________
Permitted Minimum Quick Ratio Not less than
1.1 to 1
Section 7.12 Current Ratio
- --------------------------
1. Consolidated Current
Assets $________
2. Consolidated
Current Liabilities $________
3. Current Ratio (clause 1 divided by clause 2) ________
Permitted Minimum Current Ratio Not less than 1.8 to 1.0
Section 7.13 Tangible Net Worth
- -------------------------------
Actual Tangible Net Worth
as of 199
-------------------------
1. Total assets as reflected
on balance sheet $__________
Page 1
<PAGE>
Less excluded assets:
a. intangible assets $__________
b. cash in fund for
redemption or retire-
ment of capital stock $__________
c. reserves to the extent
not already deducted
from total assets $__________
d. revaluation or write-up
of book value of assets
subsequent to Fiscal
Year ended December 31, 1996 $__________
2. Sum of non-excluded
assets $__________
3. Total Liabilities (as used
in Section 7.13) $__________
4. Difference between 2 and 3 $__________
5. Cumulative Foreign Currency
Translation Adjustments
Excluded $__________
6. Actual Tangible Net Worth
(difference between 4 and 5) $__________
Required Tangible Net Worth
---------------------------
1. 90% of consolidated Tangible
Net Worth of Borrower and
its Subsidiaries as of
December 31, 1996 $__________
2. 50% of Consolidated Net
Income since December 31, 1996
(if positive) $__________
3. Contribution to Tangible Net
Worth arising since
December 31, 1996, from
additional equity (excluding
equity adjustments arising
from stock compensation
plans) $__________
Page 2
<PAGE>
4. Required Tangible Net Worth:
(sum of 1, 2 and 3) $__________
Section 8.3 Dividends
- ---------------------
1. Actual dividends since December 31, 1996 $__________
2. Permitted dividends: 50% of
Consolidated Net Income since
December 31, 1996 $__________
Section 8.4 Stock Repurchases
- -----------------------------
1. Actual amount paid for
acquisition of Guarantor stock
during fiscal quarter ended
___________________ $__________
2. Total actual amount paid for
acquisition of Guarantor stock
in applicable Fiscal Year
through quarter ended
___________________ $__________
3. Permitted amount to be paid
for acquisition of Guarantor
stock during any Fiscal Year $20,000,000
Section 8.5 Investments
- -----------------------
1. Actual amount invested in any
related business during fiscal
quarter ended ________________
(other than investments
specifically permitted by
subsections (a)-(b) of
Section 8.5) $__________
2. Total actual amount invested in
any related business in applicable
Fiscal Year through quarter ended
___________________ (other than
investments specifically permitted
by subsections (a)-(b) of Section 8.5)
$__________
Page 3
<PAGE>
3. Permitted amount to be invested
in any related business during
any Fiscal Year (other than
amounts specifically permitted
in subsections (a)-(b) of
Section 8.5) $15,000,000
Section 8.6 Merger or Sale of Assets
- ------------------------------------
1. Aggregate sales price of assets
sold in fiscal quarter ended
_______________ (other than
sales permitted by clauses
(a)-(e) of Section 8.6) $__________
2. Aggregate sales price of assets
sold in applicable Fiscal Year
through quarter ended
___________________ (other
than sales permitted by clauses
(a)-(e) of Section 8.6) $__________
3. Permitted asset sales during any
Fiscal Year (other than sales
permitted by clauses (a)-(e)
of Section 8.6) $15,000,000
Description of asset sales of Guarantor or a Subsidiary that involve a
sales price of more than $5,000,000 and are outside the ordinary course of
business: ________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Section 8.7 Capital Expenditures
- --------------------------------
1. Aggregate capital expenditures of
Guarantor and Subsidiaries for
fiscal quarter ended _____________ $__________
2. Aggregate capital expenditures of
Guarantor and Subsidiaries in applicable
Fiscal Year through quarter
ended ___________________ $__________
3. Permitted aggregate capital expenditures
of Guarantor and Subsidiaries for any
Fiscal Year $25,000,000
Page 4
<PAGE>
Section 8.8 Leverage Ratio (Fiscal Year End Only)
- --------------------------
Actual Leverage Ratio as of ______________
---------------------
1. Consolidated total liabilities of
Guarantor and Subsidiaries $__________
2. Consolidated Tangible Net Worth
(as defined in Section 7.13) of
Guarantor and Subsidiaries $__________
3. Leverage Ratio (clause 1 divided
by clause 2) __________
Permitted Maximum Leverage Ratio Not greater
--------------------------------
than 1.2 to 1.0
Section 8.9
- -----------
Consolidated Net Losses
(Most recent quarter)
1. Consolidated Net Losses of
Guarantor and its Subsidiaries
During Quarter Ending ________ $__________
2. Permitted Consolidated Net
Losses of Guarantor and its
Subsidiaries $10,000,000
Quarter
Ending
-------
Consolidated Net Losses
(Most recent 4 consecutive
quarters)
1. Consolidated Net Losses _________ $___________
of Guarantor and its _________ $___________
Subsidiaries _________ $___________
_________ $___________
Total $___________
2. Permitted consolidated Net
Losses of Guarantor and its
Subsidiaries in any period of
four consecutive fiscal
quarters $20,000,000
Page 5
<PAGE>
SCHEDULE 3
NOTICE ADDRESSES
BORROWER:
ADVANCED TECHNOLOGY LABORATORIES
Advanced Technology Laboratories.
22100 Bothell Highway S.E.
Bothell, Washington 98021
Attn: Senior Vice President, Finance
and Administration
Phone: (206) 487-7000
Fax: (206) 485-3680
GUARANTOR:
ATL ULTRASOUND, INC.
ATL Ultrasound, Inc.
22100 Bothell Highway S.E.
Bothell, Washington 98021
Attn: Senior Vice President, Finance
and Administration
Phone: (206) 487-7000
Fax: (206) 485-3680
LENDER:
SEAFIRST BANK
Seafirst Bank
Metropolitan Wholesale, Team 2
701 Fifth Avenue, 11th Floor
Seattle, Washington 98104
Att: Mr. Hendrikus T. Knottnerus,
Vice President
Phone: (206) 358-3369
Fax: (206) 358-3124
<PAGE>
EXHIBIT 10.2
[LETTERHEAD OF SEAFIRST BANK APPEARS HERE]
LOAN MODIFICATION AGREEMENT
This Amendment amends the Revolving Credit Loan Agreement and Guaranty
dated July 2, 1997 ("Agreement") executed by ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation ("Borrower"), ATLULTRASOUND, INC., a Washington
corporation ("Guarantor"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, DOING BUSINESS AS SEAFIRST AK ("Lender"), regarding a revolving
loan in the maximum principal amount of $15,000,000 (the "Loan"), and also
amends the "Revolving Note," as such term is defined in the Agreement. All terms
defined in the Agreement shall have the same meaning when used in this
Amendment, except as may be otherwise provided in this Amendment. For mutual
consideration, Borrower and Lender agree to amend the Agreement as follows:
1. Commitment. Section 2.1 of the Agreement is amended to provide that
----------
the "Commitment" shall mean $25,000,000 less any reductions made pursuant to
Section 2.3 of the Agreement.
2. Revolving Note. The maximum principal amount of the Revolving Note is
---------------
hereby amended to be $25,000,000
3. Maturity Date. Section 1.1 of the Agreement is amended to amend the
-------------
definition of "Maturity Date" to read as follows:
"Maturity Date" means June 30, 2001, or such later date as shall be
established pursuant to Section 2.10 hereof.
4. Tangible Net Worth. Section 1.1 of the Agreement is amended to amend
------------------
the definition of "Tangible Net Worth" to read as follows:
"Tangible Net Worth" shall have the meaning given in Section 7.13.
and the first sentence of Section 7.13 of the Agreement is amended to read as
follows:
Based on the consolidated financial statements of Guarantor and the
Consolidated Subsidiaries, Guarantor shall maintain, as of the end of each
fiscal quarter of Guarantor, a minimum consolidated Tangible Net Worth
equal to at least the sum of (i) 90% of the actual consolidated Tangible
Net Worth of Guarantor and the Consolidated Subsidiaries as of December 31,
1997, minus (ii) $30,000,000, plus (iii) 50% of Consolidated Net Income (if
positive) in each fiscal quarter of Guarantor ending after December 31,
1997, plus (iv) one hundred percent (100%) of the contribution to Tangible
Net Worth arising since December 31, 1997, from the raising or contribution
of additional equity to Guarantor or any of the Consolidated Subsidiaries
or the conversion of any subordinated debt of Guarantor or any Consolidated
Subsidiary to equity in Guarantor or any Consolidated Subsidiary (excluding
equity adjustments arising from employee stock compensation plans).
5. Dividends. A dividend of up to $30,000,000 may be paid in connection
---------
with the spinoff and capitalization of Borrower's hand-held business division
into a separate, publicly-held corporation, without regard to Section 8.3 of the
Agreement, and such dividend shall not be counted in calculating compliance with
said Section 8.3.
6. Other Terms. Except as specifically amended by this Amendment or any
-----------
prior amendment, all other terms, conditions, and definitions of the Agreement
and all other guaranties, notes, and other instruments or agreements entered
into with regard to the Loan shall remain in full force and effect.
<PAGE>
DATED April 21, 1998.
Lender: Borrower:
SEAFIRST BANK ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation
By /s/ [SIGNATURE ILLEGIBLE] By: /s/ Pamela L. Dunlap
-------------------------------- -------------------------------
Pamela L. Dunlap,
Title VP S.V.P. & CFO
-----------------------------
Guarantor:
ATL ULTRASOUND, INC., a Washington
corporation
By: /s/ Pamela L. Dunlap
-------------------------------
Pamela L. Dunlap,
S.V.P. & CFO
<PAGE>
EXHIBIT 10.3
WHEN RECORDED RETURN TO:
SEAFIRST BANK
CREG, LOAN ADMINISTRATION
P.O. BOX 3686 (CSC-15)
SEATTLE, WA 98124-3686
ATTN: LOIS GUNNISON
Document Title: Loan Modification Agreement
GRANTOR: Advanced Technology Laboratories, Inc.
GRANTEE: Bank of America National Trust and Savings Association, doing business
as Seafirst Bank, the successor in interest by merger to Seattle-First
National Bank
LEGAL DESCRIPTION:
ABBREVIATED LEGAL DESCRIPTION: SW Quarter, NE Quarter, Section 30,
Township 27 N, Range 5 E
FULL LEGAL DESCRIPTION: See Schedule A attached
----------
ASSESSOR'S TAX PARCEL NO.: 302705-1-028-0004; 302705-4-005-0005; and 302705-4-
006-0004
REFERENCE NOS. OF DOCUMENTS RELEASED OR ASSIGNED: N/A
- --------------------------------------------------------------------------------
LOAN NOS.: 186603-7 AND 3031697
LOAN MODIFICATION AGREEMENT
THIS AGREEMENT is made as of June 16, 1998, between BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, doing business as SEAFIRST BANK
("LENDER"), the successor in interest by merger to SEATTLE-FIRST NATIONAL BANK
("SEAFIRST"); ADVANCED TECHNOLOGY LABORATORIES, INC., a Washington corporation
("BORROWER"); and ATL ULTRASOUND INC., a Washington corporation, formerly known
as ADVANCED TECHNOLOGY LABORATORIES , INC., a Delaware corporation
("GUARANTOR").
-1-
<PAGE>
RECITALS:
A. Seafirst made a loan to Borrower in the original principal amount of
$11,500,000 (the "LOAN") evidenced by a Promissory Note dated December 28, 1994,
made by Borrower, payable to Seafirst or order (the "NOTE"). The Loan is
secured by a Deed of Trust, Security Agreement and Fixture Filing with
Assignment of Leases and Rents dated December 28, 1994 (the "DEED OF TRUST"),
made by Borrower as Grantor, for the benefit of Seafirst, which constitutes a
first lien encumbrance on the real property described on Schedule A attached to
----------
this Agreement, and the collateral described in the Deed of Trust or in any
uniform commercial code financing statement filed with respect thereto
(collectively the "PROPERTY"). The Deed of Trust is recorded in the real
property records of Snohomish County, Washington under Recording No. 9412290067.
The Note, the Deed of Trust and all other documents evidencing and securing the
Loan are collectively referred to in this Agreement as the "LOAN DOCUMENTS". In
addition to the Loan Documents, Borrower executed and delivered to Seafirst in
connection with the Loan, a Certificate and Indemnity Agreement Regarding
Building Laws and Hazardous Substances, dated as of December 28, 1994 (the
"CERTIFICATE AND INDEMNITY").
B. Guarantor guaranteed the payment and performance of Borrower's obligations
under the Loan Documents and the Certificate and Indemnity pursuant to a
separate Guaranty of Payment and Performance dated December 28, 1994 (the
"GUARANTY").
C. Lender is the present holder of the Note and of all of the rights and
interests of Seafirst under the Loan Documents, the Certificate and Indemnity
and the Guaranty. Borrower and Lender have agreed to make certain modifications
to the Loan Documents, and Lender has agreed to make an additional loan to
Borrower which will be secured by the Deed of Trust and guaranteed by Guarantor.
AGREEMENT:
In consideration of the mutual covenants contained in this Agreement,
Borrower, Lender and Guarantor agree as follows:
1. Modification to Loan Documents.
------------------------------
(a) Note. From and after the effective date of this Agreement, the Note
----
is amended as follows:
(i) The Variable Rate applicable to the Note will be adjusted to an
interest equal to the "LIBOR Index" (as defined in the Note) as of the effective
date of this
-2-
<PAGE>
Agreement, plus nine-tenths of one percentage point (.90%) per annum. Monthly
principal and interest payments at such Variable Rate will commence on July 20,
1998, and the next Interest Change Date for purposes of the Note will be
December 20, 1998.
(ii) Subparagraph 2(a)(ii) is amended to read as follows:
Before each Interest Change Date, if applicable, the Holder will calculate
the new Variable Rate which shall be equal to the Current Index, plus nine-
tenths of one percentage point (.90%) per annum. This new interest rate
will be the new Variable Rate until the next Interest Change Date.
(iii) The first sentence of subparagraph 2(b)(i) is amended to read as
follows:
If Maker elects to have a Fixed Rate apply to this Note, interest shall
accrue on the principal balance of this Note at a per annum rate equal to
Lender's reserve adjusted "FIXED RATE INDEX" as quoted by Lender on the
date the interest rate is fixed, for a period equivalent to the applicable
Fixed Rate Period, plus nine-tenths of one percentage point (.90%) per
annum.
(iv) Paragraph 3 is amended to provide that the required monthly
payments of principal and interest shall be due on the twentieth (20th) day of
each month during the term of the Note.
(v) Paragraph 16 is amended to read as follows:
16. CROSS DEFAULT. Maker, as borrower, Lender, as lender, and ATL
-------------
Ultrasound Inc., as guarantor, are parties to a Revolving Credit Loan
Agreement and Guaranty dated July 1, 1997, as amended from time to time
(the "LOAN AGREEMENT"). In addition, Lender is the current holder of a
Promissory Note dated June 3, 1998, in the original principal amount of
$17,000,000, also secured by the Deed of Trust, made by Maker and payable
to the order of Lender (the "ADDITIONAL NOTE "). Maker agrees if Maker or
ATL Ultrasound Inc. defaults under the Loan Agreement, or if Maker defaults
under the Additional Note, and in either case the default is not cured
prior to the expiration of the applicable cure period, if any, such default
will constitute a default under this Note and the other Loan Documents and
no additional notice of default shall be required under Paragraph 6 of this
Note.
(b) Deed of Trust. Paragraph 5(a) of Article I of the Deed of Trust
-------------
is hereby amended as follows:
-3-
<PAGE>
(a) Payment of the sum of ELEVEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($11,500,000), or so much thereof as may be advanced, with
interest thereon according to the terms of a Promissory Note dated
December 28, 1994, including all renewals, amendments, modifications,
extensions and substitutions therefor (the "EXISTING NOTE"), and
payment of the sum of SEVENTEEN MILLION DOLLARS ($17,000,000), or so
much thereof as may be advanced, with interest thereon according to
the terms of a Promissory Note dated June 3, 1998, including all
renewals, amendments, modifications, extensions and substitutions
therefor (the "ADDITIONAL NOTE"). The Existing Note and the Additional
Note are referred to collectively as the "NOTE". THE NOTE MAY CONTAIN
PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST RATE.
2. Representations and Warranties. Borrower and Guarantor represent and
------------------------------
warrant:
(a) Borrower and Guarantor have full legal power and authority to
enter into this Agreement, all necessary consents and approvals for the
execution and performance of this Agreement have been obtained, and once signed
by each of the parties, this Agreement will be the legal, binding and
enforceable obligation of Borrower and Guarantor.
(b) Borrower owns and is vested in title to all of the Property and,
except for security interests in the Property granted to Lender pursuant to the
Deed of Trust or the Loan Agreement, the lien of real estate taxes and
assessments not yet due, and other exceptions to title approved in writing by
Lender, there exists no lien, charge or encumbrance against the Property created
or arising subsequent to the recording date of the Deed of Trust.
(c) Borrower has no known defense, claim or setoff, legal or
equitable, to the full payment and performance of Borrower's obligations to
Lender under the Loan Documents or the Certificate and Indemnity, as the same
may be modified pursuant to this Agreement.
(d) Guarantor has no known defense, claim or setoff, legal or
equitable, to the full payment and performance of its obligations to Lender
under the Guaranty.
(e) Borrower and Guarantor have read this Agreement and all other
documents required by Lender in connection with this Agreement, are familiar
with their respective terms and conditions, and have had the opportunity for the
advice of counsel of
-4-
<PAGE>
their own selection in regard to the terms, meaning and effect of this Agreement
and all other such documents. Borrower and Guarantor further acknowledge they
have made and entered into this Agreement freely and voluntarily, without
duress, and in reliance of no promise or representation of Lender or by which
Lender is bound not expressly set forth in this Agreement.
3. Conditions. Lender's agreement to modify the Loan Documents and the
----------
Certificate and Indemnity as provided in this Agreement is subject to the
satisfaction of each of the following conditions by not later than June 15,
1998, time being of the essence. Each condition is for the exclusive benefit of
Lender, may be waived by Lender but any waiver must be in writing and signed by
Lender in order to be effective. The "EFFECTIVE DATE" of this Agreement shall
be the date all of the conditions set forth in this paragraph are met to
Lender's satisfaction or waived in writing by Lender.
(a) There are no uncured events of default under the Loan Documents or the
Certificate and Indemnity, or any event or condition which, with notice or the
passage of time or both would be an event of default under the Loan Documents or
the Certificate and Indemnity.
(b) Lender shall have received a modification endorsement or endorsements,
in form satisfactory to Lender, from the title insurance company insuring the
priority of the Deed of Trust, bringing the effective date of such title policy
current to the date of the recording of this Agreement, insuring that the
modifications provided for in this Agreement shall not impair the continued
validity, priority and enforceability of the Deed of Trust, increasing the
amount of the title insurance coverage by the amount of the Additional Note, and
insuring that the Additional Note shall have the same priority as the initial
advances made by Lender pursuant to the Loan Documents.
(c) This Agreement and all other documents and agreements required by
Lender as set forth in this Agreement shall have been fully signed, acknowledged
and delivered by Borrower and Guarantor, and recorded in the real property
records of Snohomish County, Washington.
4. Release. As additional consideration for the modifications of the Loan
-------
pursuant to this Agreement, each party hereby releases and forever discharges
the other, every participant in the Loan and each and every of their respective
employees, agents, directors, officers, subsidiaries, parent corporations and
affiliates (collectively the "RELEASED PARTIES") of and from all damage, loss,
claims, demands, liabilities, obligations, actions and causes of action
whatsoever which it may have or claim to have against the Released Parties or
any of them as of the date of this Agreement, whether presently known or
unknown, on account of or in any way concerning, arising out of or founded upon
the Loan including, but
-5-
<PAGE>
not limited to, all such loss or damage of any kind heretofore sustained, or
that may arise as a consequence of the dealings between the parties related to
the transactions contemplated by this Agreement up to and including the date of
this Agreement. The foregoing release and the covenants contained in this
paragraph are contractual and not a mere recital. The parties agree no liability
is admitted except Borrower's indebtedness to Lender under the Loan Documents
and the Certificate and Indemnity, and all agreements and understandings between
Borrower and Lender concerning the Loan are express and embodied in the Loan
Documents and the Certificate and Indemnity, as modified pursuant to this
Agreement.
5. Guaranty. Guarantor acknowledges and agrees its obligations under the
--------
Guaranty are in full force and effect and the modifications to the Loan
Documents, the Certificate and Indemnity and the Loan contained in this
Agreement do not in any way impair the continued validity of the Guaranty.
6. General.
-------
(a) Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the foregoing modification of the Loan and may
not be amended except in writing signed by all parties.
(b) Ratification. All of the Loan Documents and the Certificate and
------------
Indemnity, as modified pursuant to this Agreement, are ratified and affirmed and
shall be and remain in full force and effect. Borrower shall promptly pay and
perform as and when due all the Borrower's obligations under the Loan Documents,
the Certificate and Indemnity and this Agreement. This Agreement is not
intended to and shall not be construed to impair the validity, priority or
enforceability of the Deed of Trust or the other Loan Documents or the
Certificate and Indemnity.
(c) Cross Default. Any default by Borrower under this Agreement shall
-------------
constitute a default under the Loan Documents and the Certificate and Indemnity,
and each of them, and any default by Borrower under any Loan Document or the
Certificate and Indemnity shall constitute a default under this Agreement.
(d) Lender Expenses. Borrower shall pay all costs and expenses of Lender
---------------
incurred in connection with this Agreement, including without limitation
appraisal fees, title insurance charges, and charges of outside legal counsel.
(e) Governing Law. This Agreement shall be construed and enforced under
-------------
the laws of the State of Washington.
-6-
<PAGE>
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
Dated as of the day and year first written above.
LENDER:
SEAFIRST BANK
By /s/ Karla Kirkwood
________________________________________
Its Vice President
____________________________________
BORROWER:
ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation
By /s/ Pamela L. Dunlap
________________________________________
Its Sr. V.P., Finance and Admin., CFO
____________________________________
GUARANTOR:
ATL ULTRASOUND, INC., a Washington
corporation
By /s/ Pamela L. Dunlap
________________________________________
Its Sr. V.P., Finance and Admin., CFO
____________________________________
-7-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 17th day of June 1998, before me, a Notary Public in and for the State
of Washington, duly commissioned and sworn, personally appeared Karla Kirkwood,
to me known to be the Vice President of SEAFIRST BANK, the national banking
association named in and which executed the foregoing instrument; and he/she
acknowledged to me that he/she signed the same as the free and voluntary act and
deed of said national banking association for the uses and purposes therein
mentioned.
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
WITNESS my hand and official seal the day and year in this certificate above
written.
/s/ Lois R. Gunnison
--------------------------------
Signature
Lois R. Gunnison
[SEAL] --------------------------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Mukilteo.
My commission expires 6-19-98.
-8-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF SNOHOMISH )
On this 16th day of June, 1998, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Pamela L. Dunlap, known to me to be the Sr. V.P. & CFO of ADVANCED TECHNOLOGY
LABORATORIES, INC., a Washington corporation, the corporation that executed the
foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said corporation, for the purposes therein mentioned,
and on oath stated that he/she was authorized to execute said instrument.
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
/s/ Kevin J. Grady
----------------------------------
Signature
Kevin J. Grady
[SEAL] ----------------------------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle.
My commission expires 6/15/99.
-9-
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF SNOHOMISH )
On this 16th day of June, 1998, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Pamela L. Dunlap, known to me to be the Sr. V.P. & CFO of ATL ULTRASOUND, INC.,
a Washington corporation, the corporation that executed the foregoing
instrument, and acknowledged the said instrument to be the free and voluntary
act and deed of said corporation, for the purposes therein mentioned, and on
oath stated that he/she was authorized to execute said instrument.
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
/s/ Kevin J. Grady
---------------------------------
Signature
Kevin J. Grady
[SEAL] ---------------------------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle.
My commission expires 6/19/99.
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<PAGE>
EXHIBIT 10.4
LOAN NO. 3031697
GUARANTY OF PAYMENT AND PERFORMANCE
This Guaranty is made as of June 16th, 1998 by ATL ULTRASOUND, INC., a
Washington corporation, formerly known as ADVANCED TECHNOLOGY LABORATORIES,
INC., a Delaware corporation ("GUARANTOR"), to BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, doing business as SEAFIRST BANK, and its successors,
participants and assigns ("LENDER").
RECITALS:
A. Pursuant to a Promissory Note of even date executed by Borrower to the
order of Lender, Lender has agreed to make a loan (the "LOAN") to ADVANCED
TECHNOLOGY LABORATORIES, INC., a Washington corporation ("BORROWER"), in the
amount of Seventeen Million Dollars ($17,000,000). The Loan is secured by a
Deed of Trust, Security Agreement and Fixture Filing with Assignment of Leases
and Rents dated December 28, 1994, made by Borrower as Grantor, recorded in the
real property records of Snohomish County, Washington under Recording No.
9412790067, as amended by a Loan Modification Agreement of even date among
Lender, Borrower and Guarantor. In addition to the foregoing documents,
Borrower has executed and delivered to Lender in connection with the Loan
certain other documents, all of which are collectively referred to in this
Guaranty as the "LOAN DOCUMENTS"; except the term Loan Documents does not
include that certain Certificate and Indemnity Agreement Regarding Hazardous
Substances and Building Laws dated December 28, 1994 made by Borrower for the
benefit of Lender (the "CERTIFICATE AND INDEMNITY AGREEMENT").
B. Guarantor has agreed to unconditionally guarantee the full and punctual
payment and performance of the "GUARANTEED OBLIGATIONS" (defined below). As
used in this Guaranty, the term "GUARANTEED OBLIGATIONS" means all debts,
duties, undertakings, obligations, covenants and conditions to be paid or
performed by Borrower in connection with the Loan, including without limitation
all of Borrower's obligations under the Loan Documents, the Certificate and
Indemnity Agreement, and under each and every existing or future "swap"
transaction (i.e., any transactions governed by an ISDA master agreement)
between Lender and Borrower (or any other obligor of the Loan), in which this
Guaranty is expressly referred to as a credit support document, and any and all
extensions, renewals or modifications thereof, including the obligations to pay
as and when due principal, interest, attorneys' fees and all other debts of
Borrower arising under and by reason of the Loan Documents and the Certificate
and Indemnity Agreement.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Guarantor agrees as follows:
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<PAGE>
1. Guarantee. Guarantor unconditionally guarantees to and for the benefit of
---------
Lender the full, prompt and complete payment and performance by Borrower of the
Guaranteed Obligations. If any of Borrower's obligations, covenants, and
agreements under the Loan Documents or under the Certificate and Indemnity
Agreement are not paid or performed as and when such payment or performance is
due or required, on demand from Lender, Guarantor will pay or perform the same.
2. Independent Obligation. This Guaranty is an independent obligation of
----------------------
Guarantor, separate and distinct from the Guaranteed Obligations. A separate
action may be brought or prosecuted against Guarantor, whether or not any such
action is brought or prosecuted against Borrower or whether Borrower is joined
in any such action or actions. This Guaranty is an absolute guarantee of
payment and performance, and not a guarantee of collection. The obligations of
Guarantor under this Guaranty are direct and primary, regardless of the validity
or enforceability of the Loan Documents or the Certificate and Indemnity
Agreement or any renewal, extension or modification thereof. Guarantor shall
continue to be liable under this Guaranty even if all or part of the Guaranteed
Obligations become uncollectible by operation of law or otherwise.
3. Waivers. Guarantor waives (a) notice of Lender's acceptance of this
-------
Guaranty; (b) notice of any advances made by Lender pursuant to the Loan
Documents or the Certificate and Indemnity Agreement, or pursuant to any
extension, renewal or modification thereof; (c) any defense arising from or out
of the exercise by Lender of any right or remedy it may have with respect to the
Guaranteed Obligations; (d) grace, demand, presentment, notice of dishonor and
protest with respect to the Guaranteed Obligations; (e) any defense based upon
any change in the name, location, composition or structure of Borrower, or any
change in the type of business conducted by Borrower, or any other change in the
financial condition, identity or legal status of Borrower; (f) the benefit of
suretyship defenses generally; and (g) any defense based upon any failure by
Lender to obtain a similar guaranty from any other person or entity, or file a
creditor's claim in the estate of any person or entity, including Borrower,
whether in administration, bankruptcy or any other proceeding.
4. Rights of Lender. Lender shall not be bound to exhaust its recourse or
----------------
take any action against Borrower or against any other person or entity, or
proceed against any collateral or against any particular collateral, but Lender
may make such demands and take such actions as it deems advisable, and Lender,
without affecting the liability of any Guarantor under this Guaranty, may with
or without notice or consideration (i) release any other person or entity liable
for the Guaranteed Obligations; (ii) extend the maturity, modify the terms,
grant any indulgence or forbearance or postpone the time of payment of the
Guaranteed Obligations or otherwise amend or modify the terms of any agreement
or instrument giving rise to all or any of the Guaranteed Obligations; and (iii)
release all or any part of the existing or any future security for the
Guaranteed Obligations. All rights and remedies of Lender under this Guaranty,
at law or in equity are separate and cumulative and may be pursued separately,
successively, or concurrently, or not pursued,
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<PAGE>
without affecting or limiting any other right or remedy of Lender and without
affecting or impairing the liability of Guarantor under this Guaranty.
5. Waiver of Subrogation and Reimbursement Rights. To the fullest extent
----------------------------------------------
permitted by applicable law, Guarantor releases and waives any claim, right or
remedy which Guarantor may have against Borrower arising from this Guaranty
and/or from the performance by Guarantor of his, her or its obligations under
this Guaranty, including any claim, remedy or right of subrogation,
reimbursement, exoneration, contribution, indemnification or participation in
any claim, right or remedy of Lender against Borrower, or any security which
Lender now has or hereafter acquires, whether such claim, right or remedy arises
under contract, by statute, under common law or otherwise.
6. Subordination of Debt. Any present or future indebtedness of Borrower to
---------------------
Guarantor is hereby subordinated to the Guaranteed Obligations. Any payment of
such indebtedness of Borrower to Guarantor shall be collected, enforced and
received by Guarantor in trust for the benefit of Lender and promptly paid over
to Lender on account of the Guaranteed Obligations, but without reducing or
affecting in any manner the liability of such Guarantor under the other
provisions of this Guaranty.
7. Guaranty Survives Foreclosure. Lender, at its option and in its sole
-----------------------------
discretion, may proceed against any collateral securing the Guaranteed
Obligations by way of either judicial or non-judicial foreclosure and the
obligations of Guarantor under this Guaranty shall survive such foreclosure.
Guarantor understands a non-judicial foreclosure of any deed of trust securing
the Guaranteed Obligations could impair or eliminate any subrogation or
reimbursement rights Guarantor may have against Borrower; nevertheless Guarantor
hereby waives and relinquishes any defense based upon the loss of any such
reimbursement or subrogation rights and any other defense which may arise out of
RCW 61.24, as now or hereafter amended or any legislation in substitution or
replacement thereof, including without limitation any defense based upon the
Washington Anti-Deficiency Statute, RCW 61.24.100, as now or hereafter amended,
and any defense that may arise out of election of remedies, or discharge or
satisfaction of the Guaranteed Obligations pursuant to RCW 61.24.100. If any
deed of trust securing the Guaranteed Obligations is foreclosed judicially or
non-judicially before Lender proceeds against Guarantor under this Guaranty,
Guarantor's liability for the obligations secured by such deed of trust shall be
the deficiency resulting from the judicial or non-judicial sale; i.e., the
difference between the amount of the obligations secured by the deed of trust on
the day of the foreclosure sale (including without limitation principal, accrued
interest, attorneys' fees, late charges and costs of foreclosure) and the amount
of the successful bid at the foreclosure sale. Guarantor further waives the
right to object to the amount which may be bid by Lender at any foreclosure
sale.
8. Application of Payments. Lender may apply any payments received by it
-----------------------
from any source against any portion of the Guaranteed Obligations in such order
and priority as Lender may deem appropriate.
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<PAGE>
9. Continuing Guaranty. This Guaranty covers any and all of the Guaranteed
-------------------
Obligations, whether presently outstanding or arising subsequent to the date of
this Guaranty. This Guaranty shall continue until each and every Guaranteed
Obligation is paid and performed in full. If at any time payment or performance
of all or any part of the Guaranteed Obligations is rescinded or must otherwise
be restored or returned by Lender as a result of the insolvency, bankruptcy or
reorganization of Borrower or otherwise, this Guaranty shall be reinstated.
Guarantor hereby assigns to Lender all rights against Borrower, related to the
Guaranteed Obligations, which Guarantor may have in any proceedings under the
United States Bankruptcy Code or in any receivership or other insolvency
proceeding. This Guaranty is binding upon and enforceable against Guarantor and
its devisees, personal representatives, successors and assigns. This Guaranty is
intended for and shall be binding upon and inure to the benefit of Lender and
each and every person or entity who, by assignment, endorsement, participation
agreement or otherwise, succeeds to all or any part of Lender's rights under the
Guaranteed Obligations, irrespective whether such transfer is voluntary or
involuntary or occurs by operation of law.
10. Financial Statements. Except as otherwise agreed in writing by Lender,
--------------------
within ninety (90) days after the end of each of its fiscal years, Guarantor
shall provide Lender with a CPA audited financial statement showing its
financial condition as of the end of the most recent fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied.
Upon request, Guarantor will provide Lender with a copy of his, her or its
United States federal income tax return for the tax year most recently ended.
11. Governing Law; Jurisdiction; Venue. This Guaranty shall be governed by
----------------------------------
and construed in accordance with the laws of the State of Washington. Guarantor
hereby submits irrevocably to the non-exclusive jurisdiction and venue of any
state or federal court in the State of Washington selected by Lender in any
action relating to or arising out of the enforcement or interpretation of this
Guaranty and Guarantor hereby irrevocably agrees that all claims in respect to
any such action or proceeding may be heard and determined in such Washington
State Court or such United States District Court sitting in the State of
Washington and to all the courts to which an appeal may be taken from such
courts. Guarantor expressly waives, to the fullest extent it may effectively do
so under applicable law, any objection it may at any time have: (a) as to venue
in such courts; (b) that any action or proceeding therein has been brought in an
inconvenient forum; (c) that any such court lacks jurisdiction over it; or (d)
as to service of process upon it in accordance with applicable law.
12. Costs and Expenses. Whether or not suit is brought, Guarantor shall pay
------------------
on demand all costs and expenses, including reasonable attorneys' fees incurred
by or on behalf of Lender in connection with the enforcement against or
collection from Borrower of all or any of the Guaranteed Obligations, or any
security therefor, or in connection with the enforcement, interpretation or
defense of this Guaranty to the extent Lender is the prevailing party. Without
limiting the generality of the foregoing, if Borrower or Guarantor becomes the
subject of any bankruptcy or other insolvency proceeding, Guarantor shall pay
all reasonable costs and expenses incurred by Lender in connection with such
bankruptcy or insolvency proceeding.
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<PAGE>
13. Representations and Warranties. Guarantor represents and warrants to
------------------------------
Lender that it (a) is adequately informed of the financial condition of
Borrower; (b) has not relied on any financial information about Borrower
furnished by Lender; and (c) does not expect Lender to provide any such
information in the future. Furthermore, Guarantor acknowledges Lender would not
make the Loan to Borrower without this Guaranty, and Guarantor has reviewed the
Loan Documents and the Certificate and Indemnity and is otherwise fully familiar
with the Guaranteed Obligations.
14. Miscellaneous. The obligations of Guarantor under this Guaranty shall be
-------------
independent of the obligations of Borrower and any other persons or entities
guaranteeing the payment or performance of the Guaranteed Obligations. The
obligations and liabilities of Guarantor hereunder shall not be limited in any
manner by any nonrecourse or other provisions in the Loan Documents or in the
Certificate and Indemnity Agreement which may limit the liability or obligations
of Borrower with respect to the Guaranteed Obligations. This Guaranty may be
executed in multiple counterparts, each counterpart shall be an original, but
all counterparts together will constitute one and the same agreement.
15. DISPUTED OBLIGATIONS. ALL COMMUNICATIONS CONCERNING DISPUTED DEBTS AND
--------------------
OBLIGATIONS OF GUARANTOR UNDER THIS GUARANTY, INCLUDING WITHOUT LIMITATION
DISPUTES AS TO THE AMOUNT OF ANY PAYMENT, FEE OR CHARGE, AND INCLUDING AN
INSTRUMENT TENDERED AS FULL SATISFACTION OF A DISPUTED DEBT, MUST BE IN WRITING
AND MUST BE SENT TO THE FOLLOWING ADDRESS, OR TO SUCH OTHER ADDRESS AS LENDER
MAY HEREAFTER SPECIFY:
BANK OF AMERICA NT & SA
ATTENTION: COMMERCIAL MORTGAGE LOAN SERVICING MANAGER
333 S. BEAUDRY, 26TH FLOOR
LOS ANGELES, CA 90017
ANY SUCH COMMUNICATION SHOULD INCLUDE THE NAME OF GUARANTOR, THE APPLICABLE LOAN
NUMBER, A DESCRIPTION OF THE DISPUTE AND THE RELIEF OR REMEDY REQUESTED, AND AN
ADDRESS AND TELEPHONE NUMBER WHERE THE PERSON SENDING THE NOTICE CAN BE
CONTACTED.
NOTICES:
A. THIS GUARANTY AGREEMENT RESULTS IN YOUR WAIVER OF CERTAIN LEGAL RIGHTS AND
DEFENSES, INCLUDING WITHOUT LIMITATION YOUR SUBROGATION RIGHTS AND ANY DEFENSES
BASED ON THE WASHINGTON ANTI-DEFICIENCY JUDGMENT STATUTE, RCW 61.24.100, AND ANY
DEFENSES BASED ON THE LENDER'S ELECTION OF REMEDIES. IT IS RECOMMENDED THAT YOU
CONSULT YOUR OWN ATTORNEY BEFORE ENTERING INTO THIS AGREEMENT.
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<PAGE>
B. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
GUARANTOR:
ATL ULTRASOUND, INC., a Washington
corporation
By /s/ Pamela L. Dunlap
____________________________________
Its Sr. V.P., Finance and Admin., CFO
____________________________________
Address for Notices:
________________________________
________________________________
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<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF SNOHOMISH )
On this 16th day of June, 1998, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn personally appeared
Pamela L. Dunlap, known to me to be the Sr. V.P. & CFO of ATL ULTRASOUND, INC.,
the corporation that executed the foregoing instrument, and acknowledged the
said instrument to be the free and voluntary act and deed of said corporation,
for the purposes therein mentioned, and on oath stated that he/she was
authorized to execute said instrument.
I certify that I know or have satisfactory evidence that the person appearing
before me and making this acknowledgment is the person whose true signature
appears on this document.
WITNESS my hand and official seal hereto affixed the day and year in the
certificate above written.
/s/ Kevin J. Grady
-------------------------------------
Signature
Kevin J. Grady
-------------------------------------
Print Name
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle.
My commission expires 6/15/99.
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<PAGE>
EXHIBIT 10.5
LOAN NO. 3031697
PROMISSORY NOTE
$17,000,000
June 16, 1998
Seattle, Washington
FOR VALUE RECEIVED, the undersigned ("MAKER") promise(s) to pay to the order
of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, doing business as
SEAFIRST BANK ("LENDER"), at its principal office in Seattle, Washington, or at
such other place or places or to such other party as the "HOLDER" (defined
below) may from time to time designate in writing, the principal sum of
SEVENTEEN MILLION AND 00/100 DOLLARS ($17,000,000), or so much thereof as may be
advanced, in lawful money of the United States of America, together with
interest thereon, on the following agreements, terms and conditions. The term
"HOLDER" as used in this Note means Lender or any future holder of this Note,
and its successors and assigns.
1. TERM. The unpaid principal balance of this Note and all unpaid accrued
----
interest thereon and other sums payable by Maker in connection with this Note
shall be due and payable in full one hundred twenty (120) months from the first
day of the first calendar month following the initial advance by the Holder
under this Note (the "MATURITY DATE").
2. INTEREST. Interest shall commence to run on each advance under this Note
--------
from the date of the advance and will be computed on the unpaid principal
balance of this Note as it exists from time to time. Interest shall accrue on
the principal balance of this Note either at a variable interest rate as
provided in subparagraph 2(a) below (the "VARIABLE RATE"), or at a fixed
interest rate as provided in subparagraph 2(b) below (the "FIXED RATE"). If
Maker elects a Fixed Rate pursuant to subparagraph 2(b) below for a "Fixed Rate
Period" (defined below) less then full term of this Note (or the remainder
thereof, as applicable), after the expiration of the applicable Fixed Rate
Period, interest on this Note shall be calculated at a Variable Rate unless
Maker again elects to have interest calculated at a Fixed Rate pursuant to
subparagraph 2(b) below. The Holder still shall have no duty or obligation to
notify Maker that a Fixed Rate Period is about to expire and that the interest
rate on this Note is about to revert to the Variable Rate. After maturity, or
after default, interest shall accrue on the unpaid principal balance of this
Note at an annual rate equal to four percentage points (4%) per annum above the
interest rate otherwise applicable to this Note. Interest on this Note shall be
calculated using a 30-day month and a 360-day year.
(a) Variable Rate. Unless Maker elects to have interest calculated at the
-------------
Fixed Rate pursuant to subparagraph 2(b) below, interest shall accrue on the
principal balance of this Note at the Variable Rate. The initial Variable Rate
shall be equal to the "LIBOR INDEX" (defined below) as of the date of the
initial advance under this Note, plus nine-tenths of one percentage point (.90%)
per annum. The Variable Rate, if applicable, will change five (5) months after
the first payment date at the applicable Variable Rate, as stated in Paragraph 3
below, and every sixth (6th) month thereafter (each such date being referred to
in this Note as an "INTEREST CHANGE DATE").
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<PAGE>
(i) LIBOR INDEX - CURRENT INDEX - Changes in the Variable Rate will
be based on changes in the 180-day LIBOR as defined below (the "LIBOR INDEX").
If the LIBOR Index is no longer available, the Holder and Maker will choose a
new index based upon comparable information. The most recently available LIBOR
Index fifteen (15) Business Days before each Interest Change Date is the
"CURRENT INDEX".
(ii) CALCULATION OF VARIABLE RATE - Before each Interest Change
Date, if applicable, the Holder will calculate the new Variable Rate which shall
be equal to the Current Index, plus nine-tenths of one percentage point (.90%)
per annum. This new interest rate will be the new Variable Rate until the next
Interest Change Date.
(iii) LIBOR MEANS THE LONDON INTERBANK OFFER RATE, adjusted at the
Holder's option for governmentally mandated statutory reserves, deposit
insurance, regulatory capital, taxes and assessments, if any, and is the average
of the rates of interest, on a per annum basis, at which deposits in United
States dollars having a term of 180 days are offered by major banks in
immediately available funds to prime banks in the London Interbank market at
11:00 A.M. (London time) on the date of the initial advance, or the day which is
fifteen (15) Business Days prior to the applicable Interest Change Date, as
applicable. This rate is reported on Telerate, a national and international
medium which provides interest rate quotations daily, as quoted by the British
Bankers Association as Interest Settlement Rates on page 3750 (or such other
page as may replace it). Such interest rate quotation, as provided by Telerate,
shall be deemed conclusive and final with respect to LIBOR determinations for so
long as Telerate continues to make such interest rate reports. If Telerate or
the British Bankers Association report is no longer available for 180-day
maturities, a comparable publication or report containing such information
selected by the Holder and Maker will be used. If there is no such publication
or comparable publication containing such information, the 180-day LIBOR shall
be the average rate (rounded if necessary to the nearest one-thousandth of a
percent) at which dollar deposits having a maturity of 180 days are offered by
at least two major banks in an interbank market where Eurodollars are being
traded, to prime banks in immediately available funds on the LIBOR determination
date described above or as soon thereafter as such offer quotes can be obtained.
(iv) BUSINESS DAY means a day on which commercial banks are
generally open for business in Seattle, Washington and London, England.
(v) THE AMOUNT OF ADJUSTMENT for reserves, deposit insurance,
regulatory capital, taxes and assessments may change on any Interest Change Date
depending on such charges being assessed against the Holder at that time,
provided that the adjustments are of general application to similar obligations
held by the Holder and not specific to this Note. Such charges may change due to
various factors, including but not limited to, changes in the requirements for
reserves and capital adequacy promulgated by the Federal Reserve System of the
United States and/or other state and federal regulatory agencies, statutory
changes affecting the Holder, and/or imposition of taxes, FDIC fees and/or
assessments. Each determination of an adjustment amount shall be made by the
Holder in its reasonable discretion and shall be conclusive and binding upon
Maker absent manifest error by the Holder. If the circumstances giving rise to
an
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<PAGE>
adjustment pursuant to this subparagraph cease to exist, the Holder will make
an appropriate re-adjustment with respect to interest rate determinations
occurring thereafter.
(b) Fixed Rate. Prior to the date of the initial advance by Lender under
----------
this Note, Maker may elect by written notice (a "FIXED RATE NOTICE") to the
Holder to have interest on the entire principal amount of this Note calculated
at a Fixed Rate for a Fixed Rate Period, the duration of which is the entire
term of this Note or a lesser period of three (3) years, five (5) years or seven
(7) years. Further, so long as Maker is not in default under the terms of this
Note or any other documents or instruments executed by Maker in connection with
the loan (the "LOAN") evidenced by this Note (collectively with this Note, the
"LOAN DOCUMENTS"), Maker, at its option, may elect by a Fixed Rate Notice to the
Holder to have interest calculated on the entire unpaid principal balance of
this Note at a Fixed Rate calculated as provided below for a Fixed Rate Period,
the duration of which is the remainder of the term of this Note or a lesser
period of three (3) years, five (5) years or seven (7) years; provided no Fixed
Rate Period may extend beyond the Maturity Date. Notwithstanding any of the
foregoing, Maker's option to fix the interest rate on this Note is subject to
the availability to the Holder of matchfunding opportunities for a time period
equivalent to the applicable Fixed Rate Period. For purposes of this Note, the
term "Fixed Rate Period" means the period of time for which a Fixed Rate applies
as specified in a Fixed Rate Notice from Maker to the Holder.
(i) CALCULATION OF FIXED RATE - If Maker elects to have a Fixed
Rate apply to this Note, interest shall accrue on the principal balance of this
Note at a per annum rate equal to Lender's reserve adjusted "FIXED RATE INDEX"
as quoted by Lender on the date the interest rate is fixed, for a period
equivalent to the applicable Fixed Rate Period, plus nine-tenths of one
percentage point (.90%) per annum. The Fixed Rate Index may be adjusted at the
Holder's option to reflect governmentally mandated statutory reserves, deposit
insurance, regulatory capital, taxes and assessments, if any, as set forth in
subparagraph 2(a)(v) above.
(ii) DATE OF CONVERSION - The interest rate applicable to this
Note will be converted to the Fixed Rate on the date the Holder receives a Fixed
Rate Notice, provided the Fixed Rate Notice is received before noon, Seattle
time, on a Business Day. If a Fixed Rate Notice is received by Holder after
noon, Seattle time, on a Business Day, the interest rate applicable to this Note
will convert to a Fixed Rate on the next Business Day. For purposes of this
subparagraph 2(b)(ii) only, the term "BUSINESS DAY" means a day on which
commercial banks are generally open for business in Seattle, Washington.
3. PAYMENTS. Maker shall make monthly payments of principal and interest to
--------
the Holder in amounts sufficient to fully amortize the principal balance of this
Note over a twenty-five (25) year amortization period in substantially equal
monthly payments, based on the interest rate applicable to this Note, calculated
as provided below. Such monthly payments of principal and interest shall be due
on the twentieth (20th) day of each calendar month during the term of this Note,
commencing on the twentieth (20th) day of the first calendar month following the
month in which the Holder initially disburses funds under this Note, or if the
interest rate reverts to a Variable Rate after the expiration of a Fixed Rate
Period, on the twentieth (20th) day of the first calendar month following the
month in which the Fixed Rate Period expires. On the Maturity Date, the unpaid
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<PAGE>
principal balance of this Note, all unpaid accrued interest and all other sums
then due and owing pursuant to this Note or any other Loan Documents shall be
due and payable in full. Each payment shall be applied first, at Holder's
option, to any unpaid late charges or other sums payable by Maker under this
Note or any other Loan Document, then to interest to the due date of the
payment, and then to the principal balance of this Note. At the option of the
Holder, all payments under this Note, including payments at maturity, shall be
made in same day funds. The monthly payments required on this Note shall be
calculated as follows:
(a) Variable Rate Payments. If interest is accruing on this Note at a
----------------------
Variable Rate, the amount of the monthly payments shall be sufficient to fully
amortize the principal balance of this Note at the applicable Variable Rate, in
substantially equal monthly payments over the amortization period specified
above, or the balance thereof as applicable. AT OR PROMPTLY AFTER THE CLOSING OF
THE LOAN (OR AFTER THE EXPIRATION OF A FIXED RATE PERIOD, AS APPLICABLE), THE
HOLDER WILL PROVIDE MAKER WITH A CLOSING STATEMENT (OR OTHER WRITTEN NOTICE)
WHICH WILL CONFIRM THE VARIABLE RATE AND THE AMOUNT OF THE PRINCIPAL AND
INTEREST PAYMENTS DUE UNDER THIS NOTE. The monthly payment will change after
each Interest Change Date to an amount sufficient to repay the then unpaid
principal balance of this Note in full at the then current interest rate, in
substantially equal monthly payments over the balance of the amortization period
specified above. Until the payment is again changed, Maker shall pay the new
monthly payment each month beginning on the twentieth (20th) day of the first
calendar month after the applicable Interest Change Date. The Holder will mail
or deliver to Maker a notice of any changes in the Variable Rate applicable to
this Note, and any resulting changes in the monthly payments required under this
Note, prior to the date the first payment is due after the applicable Interest
Change Date.
(b) Fixed Rate Payments. If interest is accruing on this Note at a Fixed
-------------------
Rate, the amount of the monthly payments shall be in an amount sufficient to
fully amortize the principal balance of this Note at the applicable Fixed Rate,
in substantially equal monthly payments over the amortization period specified
above, or the remainder thereof, as applicable. THE APPLICABLE FIXED RATE AND
THE AMOUNT OF THE MONTHLY PRINCIPAL AND INTEREST PAYMENTS DUE UNDER THIS NOTE
SHALL BE CONFIRMED IN WRITING BY THE HOLDER (EITHER PURSUANT TO A CLOSING
STATEMENT OR OTHER WRITTEN NOTICE) AFTER THE RATE IS FIXED AND BEFORE THE DATE
THE FIRST PAYMENT AT THE FIXED RATE IS DUE.
4. LATE CHARGES; RETURNED ITEM FEE. If any payment due hereunder is not
-------------------------------
received by the Holder within fifteen (15) days following the due date, at the
option of the Holder without waiving such default or any of its remedies, a late
charge shall be added to the delinquent payment in the amount of four percent
(4%) of the full payment not timely paid. Any such late charge shall be due and
payable on demand, and the Holder, at its option, may (a) refuse any late
payment or any subsequent payment unless accompanied by the applicable late
charge, (b) add the late charge to the principal balance of this Note, (c) pay
any late charge with advances of the undisbursed proceeds of the Loan, if any,
or (d) treat the failure to pay the late charge as demanded as a default under
this Note. If a late charge is added to the principal balance of this Note, it
shall bear interest at the same rate as the principal balance of this Note. Any
payment to Holder by check, draft or other item shall be received by Holder
subject to collection and will constitute payment when collected not when
received. For each "nsf" or returned check, draft or other item,
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<PAGE>
in addition to any applicable late charge, Maker shall pay to the Holder on
demand a returned item fee in accordance with the Holder's schedule of such fees
then in effect.
5. PREPAYMENT. So long as interest is calculated on this Note at a Variable
----------
Rate, this Note may be prepaid in whole or in part at any time without the
payment of a prepayment fee. During any period when a Fixed Rate is applicable
to this Note, this Note may be prepaid only as set forth in Exhibit A attached.
---------
Partial prepayments, if permitted, shall not postpone nor reduce the amount of
the monthly payments required under this Note, provided the amount of the
required monthly payments will be recalculated at the end of the applicable
LIBOR period or Fixed Rate Period to reflect the reduction in the principal
balance of this Note.
6. DEFAULT. After a default under any of the Loan Documents, or if Maker
-------
fails to make any payment under this Note when due, the then Holder, at its
option, without notice to Maker (except as provided below), may declare the
entire principal balance of this Note and all unpaid accrued interest thereon
and other charges payable by Maker pursuant to this Note or any other Loan
Document, immediately due and payable in full, and the Holder may exercise any
and all other rights or remedies available to it under any Loan Document, at law
or in equity. Any additional interest due because of a default shall accrue
from the date of default and shall be paid as a condition to the curing of the
default. Notwithstanding the foregoing, the Holder will not accelerate the
Maturity Date (a) because of a monetary default by Maker under this Note or any
other Loan Document unless the default is not cured within ten (10) days
following the date on which the Holder mails or delivers written notice of the
default to Maker, or (b) because of a nonmonetary default by Maker under this
Note or any other Loan Document unless the default is not cured within thirty
(30) days following the date on which the Holder mails or delivers written
notice of the default to Maker. For purposes of this Note, the term "MONETARY
DEFAULT" means a failure by Maker to make any payment required pursuant to this
Note or any other Loan Document, and the term "NONMONETARY DEFAULT" shall mean a
failure by Maker to perform any obligation contained in this Note or any other
Loan Document, other than the obligation to make the payments provided for in
this Note or any other Loan Document. If the nonmonetary default is capable of
being cured and cannot reasonably be made within the thirty (30) day cure
period, the cure period shall be extended up to ninety (90) days so long as
Maker has commenced action to cure within the thirty (30) day cure period, and
in the Holder's reasonable opinion, Maker is proceeding to cure the default with
due diligence. None of the foregoing shall be construed to obligate the Holder
to forbear in any other manner from exercising its remedies and the Holder may
pursue any other rights or remedies which the Holder may have because of the
default.
7. CUMULATIVE REMEDIES. The rights and remedies of any Holder under this
-------------------
Note or any other Loan Document, or at law or in equity, shall be cumulative and
concurrent, may be pursued singly, successively or together against Maker, any
guarantor of this Note, or any security for this Note. A failure by any Holder
to exercise its option to accelerate this Note upon the occurrence of a default
or to exercise any other rights to which it may be entitled shall not constitute
a waiver of the right to exercise such option or any such rights in the event of
any subsequent default, whether of the same or a different nature.
-5-
<PAGE>
8. WAIVERS. Maker and all endorsers, guarantors and all other persons or
-------
entities who may become liable for all or any part of the obligations evidenced
by this Note, jointly and severally: waive diligence, presentment, protest and
demand, and also notice of protest, demand, non-payment, dishonor or maturity
and also recourse to suretyship defenses generally; and consent to any and all
renewals, extensions and modifications of the terms of this Note or any other
Loan Document, including the time for payment, and agree any such renewal,
extension or modification or the release or substitution of any security for the
indebtedness evidenced by this Note or any other indulgences, shall not affect
the liability of said parties for the indebtedness evidenced by this Note. Any
such renewals, extensions, modifications, releases or indulgences may be made
without notice to such parties.
9. COSTS AND EXPENSES. Whether or not suit is brought Maker shall pay on
------------------
demand all costs and expenses, including reasonable attorneys' fees and costs
incurred by or on behalf of the Holder in connection with this Note, including
without limitation costs incurred in the collection of this Note, in protecting
the security for this Note or in foreclosing or enforcing this Note or any other
Loan Document, or resulting from the Holder being made a party to any litigation
because of the existence of this Note or any other Loan Document to the extent
the Holder is the prevailing party. Without limiting the generality of the
foregoing, if Maker becomes the subject of any bankruptcy or insolvency
proceeding, Maker shall pay all reasonable fees and expenses incurred by the
Holder in connection with such bankruptcy or insolvency proceeding.
10. MAXIMUM INTEREST. Maker represents and warrants the proceeds of this
----------------
Note shall be used solely for commercial, investment and business purposes, and
not for personal, family or household purposes. Notwithstanding any other
provision of this Note or any other Loan Document, interest, loan fees and
charges payable by reason of the indebtedness evidenced by this Note shall not
exceed the maximum, if any, permitted by applicable law. If by virtue of
applicable law, sums in excess of such maximum would otherwise be payable, then
such excess sums shall be construed as having been immediately applied by the
Holder to the principal balance of this Note when received. If at the time any
such sum is received by the Holder, the principal balance of this Note has been
paid in full, such sums shall be promptly refunded by the Holder to Maker, less
any sums due to the Holder.
11. SECURITY. This Note is secured by a Deed of Trust, Security Agreement
--------
and Fixture Filing with Assignment of Leases and Rents (the "DEED OF TRUST")
made by Borrower, dated December 28, 1994, recorded in the real property records
of Snohomish County, Washington under recording no. 9412290067, as amended by a
Loan Modification Agreement of even date among Maker, Lender and ATL Ultrasound,
Inc. ("ATL"). The Deed of Trust encumbers certain real property of Maker
located in Snohomish County, Washington (the "PROPERTY"). Unless otherwise
specified in this Note, all notices given pursuant to this Note must be in
writing and will be effectively given if given in accordance with the terms of
the Deed of Trust.
12. GENERAL. This Note shall be binding upon Maker and Maker's successors
-------
and assigns. If Maker consists of more than one person or entity, all of such
persons and entities shall be jointly and severally liable for Maker's
obligations under this Note. This Note is governed by and shall be construed in
accordance with the laws of the State of Washington. Each person or
-6-
<PAGE>
entity executing this Note consents to the non-exclusive personal jurisdiction
and venue of the courts of the State of Washington and the United States federal
courts located therein, in any action relating to or arising out of the
enforcement or interpretation of this Note or any other Loan Document. Each such
person or entity further agrees not to assert in any such action that the
proceeding has been brought in an inconvenient forum.
13. ARBITRATION. Any dispute relating to this Note or the Loan (whether in
-----------
contract or tort) shall be settled by arbitration if requested by Maker, the
Holder or any other party to the dispute (such as a guarantor); provided, both
--------
Maker and the Holder must consent to a request for arbitration relating to an
obligation secured by real property. The arbitration proceedings shall be held
in Seattle, Washington in accordance with the commercial arbitration rules of
the American Arbitration Association, and the United States Arbitration Act
(i.e., Title 9, U.S.C.). There shall be one arbitrator who shall decide whether
an issue is arbitrable or whether any claim is barred by a statute of
limitations. Judgment on the arbitration award may be entered in any court
having jurisdiction. Commencement of a lawsuit shall not constitute a waiver of
the right of any party to request arbitration if the lawsuit is contested. Each
party shall have the right before, during and after the commencement of any
arbitration proceeding to exercise any of the following remedies, in any order
or concurrently: (i) self-help remedies such as setoff or repossession; (ii)
judicial or nonjudicial foreclosure against real or personal property
collateral; and (iii) provisional remedies including injunction, appointment of
receiver, attachment, claim and delivery and replevin. The exercise of any such
remedy shall not waive a party's right to request arbitration. Nothing in this
paragraph shall limit in any way any right the Holder may have to foreclose the
Deed of Trust judicially as a mortgage, or nonjudicially pursuant to the power
of sale.
14. DISPUTED OBLIGATIONS. ALL COMMUNICATIONS CONCERNING DISPUTED DEBTS AND
--------------------
OBLIGATIONS OF MAKER UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING
WITHOUT LIMITATION DISPUTES AS TO THE AMOUNT OF ANY PAYMENT, FEE OR CHARGE, AND
INCLUDING AN INSTRUMENT TENDERED AS FULL SATISFACTION OF A DISPUTED DEBT, MUST
BE IN WRITING AND MUST BE SENT TO THE FOLLOWING ADDRESS, OR TO SUCH OTHER
ADDRESS AS THE HOLDER MAY HEREAFTER SPECIFY:
BANK OF AMERICA NT & SA
ATTENTION: COMMERCIAL MORTGAGE LOAN SERVICING MANAGER
333 S. BEAUDRY, 26TH FLOOR
LOS ANGELES, CA 90017
ANY SUCH COMMUNICATION SHOULD INCLUDE THE NAME OF MAKER, THE APPLICABLE LOAN
NUMBER, A DESCRIPTION OF THE DISPUTE AND THE RELIEF OR REMEDY REQUESTED, AND AN
ADDRESS AND TELEPHONE NUMBER WHERE THE PERSON SENDING THE NOTICE CAN BE
CONTACTED.
15. LOAN FEE. In consideration of Lender's agreement to make the Loan, Maker
--------
shall pay Lender a loan fee in the amount of $42,500.00 (the "LOAN FEE"). The
Loan Fee shall be due and payable without condition on the date of the first
disbursement hereunder.
16. CROSS DEFAULT. Maker, as borrower, Lender, as lender, and ATL, as
-------------
guarantor, are parties to a Revolving Credit Loan Agreement and Guaranty dated
July 1, 1997, as amended
-7-
<PAGE>
from time to time (the "LOAN AGREEMENT"). In addition, Lender is the current
holder of a Promissory Note dated December 28, 1994, in the original principal
amount of $11,500,000, also secured by the Deed of Trust, made by Maker and
payable to the order of Seattle-First National Bank (the "EXISTING NOTE"). Maker
agrees if Maker or ATL defaults under the Loan Agreement, or if Maker defaults
under the Existing Note, and in either case the default is not cured prior to
the expiration of the applicable cure period, if any, such default will
constitute a default under this Note and the other Loan Documents and no
additional notice of default shall be required under Paragraph 6 of this Note.
NOTICE: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
MAKER:
ADVANCED TECHNOLOGY LABORATORIES,
INC., a Washington corporation
By /S/ Pamela L. Dunlap
___________________________
Its Sr. V.P., Finance and Admin., CFO
__________________________________
-8-
<PAGE>
EXHIBIT A
---------
PREPAYMENT
If the interest rate converts to the Fixed Rate the principal balance of this
Note may be prepaid in whole or in part, at any time provided (i) a prepayment
fee is paid as set forth below, (ii) each partial prepayment is in an amount of
$10,000 or more, and (iii) partial prepayments may be no more frequent than once
per month. THE PREPAYMENT FEE SHALL BE DUE AND PAYABLE WHETHER THE PREPAYMENT
IS BY VOLUNTARY PREPAYMENT, OPERATION OF LAW, ACCELERATION OR OTHERWISE. The
amount of the prepayment fee depends on the following:
1. The amount by which certain "REFERENCE RATES", as defined below, have
changed between the time this Note is prepaid and the date the interest rate
converts to the Fixed Rate.
2. A prepayment fee factor (see "PREPAYMENT FEE FACTOR SCHEDULE" below).
3. The amount of principal prepaid.
DEFINITION OF REFERENCE RATES
The "REFERENCE RATE" used to represent interest rate levels shall be the bond
equivalent yield of the average U.S. Treasury Securities having maturities
equivalent to the remaining period to maturity of the Loan or the last day of
the Fixed Rate Period, as applicable, rounded upward to the nearest month. The
"INITIAL REFERENCE RATE" shall be the Reference Rate assigned to the Loan by the
Holder at the time the interest rate converts to the Fixed Rate. The "FINAL
REFERENCE RATE" shall be the Reference Rate assigned to the Loan by the Holder
at the time of the prepayment.
The applicable Reference Rates shall be determined from the Federal Reserve
Statistical Release (Publication H.15) as displayed on Page 119 of the Dow Jones
Telerate Service (or such other page or service as may replace that page or
service for the purpose of displaying rates comparable to said U.S. Treasury
Securities). If the publishing of the foregoing Statistical Release is ever
discontinued, the applicable Reference Rate shall be based on the publication by
the Board of Governors of the United States Federal Reserve System in
replacement thereof, or if none, the publication which in the Holder's
discretion most nearly corresponds.
CALCULATION OF PREPAYMENT FEE
1. If the Initial Reference Rate is less than or equal to the Final Reference
Rate, there is no prepayment fee.
2. If the Initial Reference Rate is greater than the Final Reference Rate,
the prepayment fee shall be equal to the difference between the Initial
Reference Rate and the Final Reference Rate (expressed as a decimal), multiplied
by the appropriate factor from the Prepayment Fee Factor Schedule, multiplied by
the principal amount of the Loan being prepaid.
-9-
<PAGE>
EXAMPLE OF PREPAYMENT FEE CALCULATION
An amortizing loan with remaining principal of $250,000 is fully prepaid with
twenty-four (24) months remaining until maturity. An Initial Reference Rate of
9.000% was assigned to the loan at the time the loan was closed. The Final
Reference Rate (as determined by the current 24-month U.S. Treasury Rate on Page
119 of Telerate) is 7.500%. Rates therefore have dropped 1.500% since the loan
was closed and a prepayment fee applies. A prepayment fee factor of 1.3% is
determined from Table 1 below and the prepayment fee is computed as follows:
Prepayment Fee = (0.09 - 0.075) x (1.3) x ($250,000) = $4,875.00
PREPAYMENT FEE FACTOR SCHEDULES
TABLE 1 - FULLY AMORTIZING LOANS
<TABLE>
<CAPTION>
Proportion of Remaining
Principal Amount
Being Prepaid Months Remaining to Maturity or Expiration of the Applicable
Fixed Rate Period/1/
0 3 6 9 12 24 36 48 60 84 120 240 360
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90 - 100% 0 .21 .36 .52 .67 1.3 1.9 2.5 3.1 4.3 5.9 10.3 13.1
60 - 89% 0 .24 .44 .63 .83 1.6 2.4 3.1 3.9 5.4 7.5 13.2 17.0
30 - 59% 0 .28 .53 .78 1.02 2.0 3.0 4.0 5.0 7.0 9.9 18.5 24.4
0 - 29% 0 .31 .63 .92 1.22 2.4 3.7 5.0 6.3 9.0 13.4 28.3 41.8
</TABLE>
<TABLE>
<CAPTION>
TABLE 2 - PARTIALLY AMORTIZING LOANS
Proportion of Remaining
Principal Amount
Being Prepaid Months Remaining to Maturity or Expiration of the Applicable
Fixed Rate Period/1/
0 3 6 9 12 24 36 48 60 84 120 240 360
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90 - 100% 0 .26 .49 .71 .94 1.8 2.7 3.4 4.2 5.6 7.4 11.6 14.0
60 - 89% 0 .30 .59 .86 1.15 2.2 3.3 4.3 5.3 7.1 9.4 15.0 18.1
30 - 59% 0 .31 .63 .95 1.27 2.6 3.9 5.3 6.6 9.1 12.6 21.2 26.2
0 - 29% 0 .31 .63 .95 1.27 2.6 4.0 5.4 7.0 10.2 15.7 33.4 46.0
</TABLE>
/1/If the remaining Fixed Rate Period is between any two time periods shown
in the above schedules, interpolate between the corresponding factors to the
closest month.
The Holder of this Note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury Securities, or otherwise prove its
actual losses, as a condition to receiving a prepayment fee as calculated above.
Maker agrees this prepayment fee is the bargained-for consideration to the
Holder for permitting prepayment and the above is not a liquidated damages
provision. This prepayment fee provision is to be interpreted in a manner that
would make it enforceable to the fullest extent permitted by law, with any
portion of the fee that is unenforceable being stricken or otherwise changed to
cause the fee, as revised, to be enforced.
-10-
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between ATL Ultrasound, Inc., a Washington corporation
(the "Company") and _________ (the "Executive"), dated as of the 1st day of
January, 1997 (the "Start Date").
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in Section
2) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
-------------------
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (I) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
Start Date of this Agreement stated above and ending on the third anniversary of
such date; provided, however, that commencing on the date one year after the
Start Date, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), the Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that for all purposes of this Agreement any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member or the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
<PAGE>
-2-
(b) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of (i) 20% or more of either (A) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"), in the case of either (A) or (B) of this clause (i) which
acquisition is not approved in advance by a majority of the Incumbent Board, or
(ii) 33% or more of either (A) the Outstanding Company Common Stock or (B) the
Outstanding Company Voting Securities, in the case of either (A) or (B) of this
clause (ii), which acquisition is approved in advance by a majority of the
Incumbent Board; provided, however, that the following acquisitions shall not
constitute a Change of Control: (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (z)
any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of this
Section 2 are satisfied; or
(c) Approval by the shareholders of the Company of a reorganization, merger
or consolidation, in each case, unless, following such reorganization, merger or
consolidation, (i) more than 60% of, respectively, the then outstanding shares
of common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 33% or more of the Outstanding Company Common Stock or Outstanding
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 33% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other disposition, (A)
more than 60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
<PAGE>
-3-
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 33% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 33% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of the
members of the board of directors of such corporation were approved by a
majority of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition of
assets of the Company.
3. Employment Period. The Company hereby agrees to continue the Executive
-----------------
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period"), in the capacity of Senior Vice President
and Chief Financial Officer. The Company agrees that it will not take any
action, or make any inappropriate demands on the Executive or demands which may
be deemed to arbitrarily, unreasonably or unnecessarily interfere with the
performance of the services to be rendered by the Executive hereunder.
4. Terms of Employment. (a) Duties. (i) During the Employment Period,
------------------- ------
(A) the Executive's reporting requirements, authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office which is the
headquarters of the Company and is less than 5 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
------------ -------------
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid in equal installments on a monthly basis, at least equal to twelve
times the highest monthly base salary paid or payable to the Executive by the
Company and its affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed at least annually
and shall be increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally awarded in the
<PAGE>
-4-
ordinary course of business to other peer executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the average
annualized (for any fiscal year consisting of less than twelve full months or
with respect to which the Executive has been employed by the Company for less
than twelve full months) bonus paid or payable, including by reason of any
deferral, to the Executive by the Company and its affiliated companies in
respect of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs (the "Recent Average Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable employment expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
<PAGE>
-5-
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
-------------------------- -------------------
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment during the
-----
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
(i) a material breach by the Executive of the Executive's obligations under
Section 4(a) (other than as a result of incapacity due to physical or mental
illness) which is demonstrably willful and deliberate on the Executive's part,
which is committed in bad faith or without reasonable belief that such breach is
in the best interests of the Company and which is not remedied in a reasonable
period of time after receipt of written notice from the Company specifying such
breach or (ii) the conviction of the Executive of a felony involving moral
turpitude.
(c) Good Reason. The Executive's employment may be terminated during the
-----------
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities
<PAGE>
-6-
as contemplated by Sections 3 and 4(a) or any other action by the Company
which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than that described in Section 4(a)(i)(B);
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
ll(c), provided that such successor has received at least ten days prior
written notice from the Company or the Executive of the requirements of
Section 11(c).
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the six month period immediately following the first anniversary of the Change
of Control Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause or by
---------------------
the Executive for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b). For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for term nation of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 15 days after the giving
of such notice). The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other
------------------------------------------- ------------------
Than for Cause, Death or Disability. If, during the Employment Period, the
- -----------------------------------
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
<PAGE>
-7-
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the greater of (i) the Annual Bonus paid or payable,
including by reason of any deferral, to the Executive (and annualized
for any fiscal year consisting of less than twelve full months or for
which the Executive has been employed for less than twelve full
months) for the most recently completed fiscal year during the
Employment Period, if any, and (ii) the Recent Average Bonus (such
greater amount shall be hereinafter referred to as the "Highest Annual
Bonus"), and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (3) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in
clauses (1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the Highest Annual
Bonus; and
C. a separate lump-sum supplemental retirement benefit equal to
the difference between (1) the actuarial equivalent (utilizing for
this purpose the actuarial assumptions utilized with respect to the
ATL Ultrasound, Inc. Retirement Plan (or any successor plan thereto)
(the "Retirement Plan") during the 90-day period immediately preceding
the Effective Date) of the benefit payable under the Retirement Plan
and any supplemental and/or excess retirement plan of the Company and
its affiliated companies providing benefits for the Executive (the
"SERP") which the Executive would receive if the Executive's
employment continued at the compensation level provided for in
Sections 4(b)(i) and 4(b)(ii) for the remainder of the Employment
Period, assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less advantageous to
the Executive than those in effect during the 90-day period
immediately proceeding the Effective Date, and (2) the actuarial
equivalent (utilizing for this purpose the actuarial assumptions
utilized with respect to the Retirement Plan during the 90-day period
immediately preceding the Effective Date) of the Executive's actual
benefit (paid or payable), if any, under the Retirement Plan and the
SERP; and
(ii) for the remainder of the Employment Period, or such longer period
as any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
and 4(b)(vi) if the Executive's employment had not been terminated in
accordance with the most favorable plans, practices, programs or policies
of the Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the 90-day
period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer provided
<PAGE>
-8-
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility (such continuation of such benefits for the
applicable period herein set forth shall be hereinafter referred to as
"Welfare Benefit Continuation"). For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until the end of the Employment Period and to have retired on the
last day of such period; provided, however, that the Executive shall be
entitled to the more favorable of the retiree benefits in effect on the
Date of Termination or the retiree benefits in effect on the date that
would have been the last date of the Employment Period if the Executive had
remained employed; and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family
any other amounts or benefits required to be paid or provided or which the
Executive and/or the Executive's family is eligible to receive pursuant to
this Agreement and under any plan, program, policy or practice or contract
or agreement of the Company and its affiliated companies as in effect and
applicable generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations (which shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination) and the timely payment or provision
of the Welfare Benefit Continuation and Other Benefits.
(c) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations (which shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and Other Benefits.
(d) Cause; Other than for Good Reason. If the Executive's employment shall
---------------------------------
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. If the Executive terminates employment
during the Employment Period, other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
---------------------------
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program, of or any contract or agreement
<PAGE>
-9-
with the Company or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement; Resolution of Disputes. (a) The Company's obligation
---------------------------------------
to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and, except as provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay promptly upon invoice, to the full extent permitted by law, all legal fees
and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement).
(b) If there shall be any dispute between the Company and the Executive
(i) in the event of any termination of the Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
6(a) as though such termination were by the Company without Cause or by the
Executive with Good Reason; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
9. Certain Adjustments. (a) For purposes of this section, (i) A Payment
-------------------
shall mean any payment or distribution in the nature of compensation to or for
the benefit of Executive, whether paid or payable pursuant to this Agreement or
otherwise (including the vesting of stock options, the lapse of restrictions on
restricted stock and any other events that result in a "payment in the nature of
compensation" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code")); (ii) Agreement Payment shall mean a Payment paid
or payable pursuant to this Agreement (disregarding this Section 9); (iii) Net
After Tax Receipt shall mean the Present Value of a Payment net of all taxes
imposed on Executive with respect thereto under Sections 1 and 4999 of the Code
determined by applying the highest marginal rate under Section l of the Code
which applied to the Executive's taxable income for the immediately preceding
taxable year; (iv) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall
mean the largest aggregate amount of Payments which is less than the sum of all
Payments and if paid to the Executive would result in aggregate Net After Tax
Receipts which are equal to or greater than the Net After Tax Receipts which
would result if the Executive were paid an amount equal to the sum of the
aggregate Payments.
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that receipt of all Agreement Payments would subject
Executive to the excise tax under Section 4999 of the Code (together with any
<PAGE>
-10-
interest or penalties imposed thereon, "Excise Tax") a determination shall be
made whether there is a "Reduced Amount". If there is a Reduced Amount, the
aggregate Payments shall be reduced to such Reduced Amount.
(b) All determinations required to be made under this Section 9, including
whether there is a Reduced Amount, shall be made by KPMG Peat Marwick (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive may appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. If the Accounting Firm
determines that aggregate Payments should be reduced to the Reduced Amount, the
Company shall promptly give Executive notice to that effect and a copy of the
detailed calculation thereof. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
Executive such Agreement Payments as are then due to Executive under this
Agreement and shall promptly pay to or distribute for the benefit of Executive
in the future such Agreement Payments as become due to Executive under this
Agreement. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. While it is the intention of the Company and the
Executive to reduce the amounts payable or distributable to Executive hereunder
only if the aggregate Net After Tax Receipts to Executive would thereby be
increased, as a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by Accounting firm hereunder,
it is possible that amounts will not have been paid or distributed by the
Company to or for the benefit of Executive pursuant to this Agreement which
should not have been so paid or distributed ("Overpayment") or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of Executive pursuant to this Agreement could have been so paid or
distributed ("Underpayment"), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that Accounting Firm, based either
upon the assertion of a deficiency by the Internal Revenue Service against the
Company or Executive which Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such Overpayment paid
or distributed by the Company to or for the benefit of Executive shall be
treated for all purposes as a loan to Executive which Executive shall repay to
the Company together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by Executive to the
Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the event that
Accounting Firm, based upon controlling precedent or substantial authority,
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the applicable federal rate provided for in Section 7872(f)t2)
of the Code.
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
<PAGE>
-11-
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Washington, without reference to
principles of conflict of laws. This captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
------------------------
------------------------
------------------------
------------------------
<PAGE>
-12-
If to the Company:
-----------------
ATL Ultrasound, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective Date, may be terminated by either the Executive or
the Company at any time. Moreover, if prior to the Effective Date, the
Executive's employment with the Company terminates, then the Executive shall
have no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
_________________________________
[Executive]
ATL ULTRASOUND, INC.
By: _____________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JULY 3, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JULY 3, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUL-03-1998
<CASH> 46,375
<SECURITIES> 0
<RECEIVABLES> 116,424
<ALLOWANCES> 0
<INVENTORY> 97,339
<CURRENT-ASSETS> 277,992
<PP&E> 82,654
<DEPRECIATION> 0
<TOTAL-ASSETS> 365,884
<CURRENT-LIABILITIES> 104,071
<BONDS> 28,778
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 365,884
<SALES> 170,616
<TOTAL-REVENUES> 217,128
<CGS> 78,684
<TOTAL-COSTS> 107,918
<OTHER-EXPENSES> 99,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 676
<INCOME-PRETAX> 9,471
<INCOME-TAX> 1,838
<INCOME-CONTINUING> 7,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,633
<EPS-PRIMARY> .53
<EPS-DILUTED> .50
</TABLE>
