<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDERTHE SECURITIES ACT OF 1933
----------------
THERMA-WAVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3823 94-2782563
(PRIMARY STANDARD INDUSTRIALCLASSIFICATION CODE NUMBER)
(I.R.S.
(STATE OR OTHER EMPLOYERIDENTIFICATION
JURISDICTION OF NO.)
INCORPORATION OR
ORGANIZATION)
----------------
1250 RELIANCE WAY FREMONT, CALIFORNIA 94539 TELEPHONE: (510) 490-3663
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
ALLAN ROSENCWAIG, CHAIRMAN AND CHIEF COPY TO:
EXECUTIVE OFFICER THERMA-WAVE, INC.1250 DENNIS M. MYERS
RELIANCE WAYFREMONT, CALIFORNIA KIRKLAND & ELLIS
94539TELEPHONE: (510) 490-3663 200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(NAME, ADDRESS, INCLUDING ZIP CODE, AND (312) 861-2000
TELEPHONE NUMBER,INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(1)
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<S> <C> <C> <C> <C>
10 5/8% Senior Notes due
2004, Series B........ $115,000,000 100% $115,000,000 $34,848
</TABLE>
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(1) Calculated in accordance with Rule 457(f).
THE REGISTRANTS HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 24, 1997
PROSPECTUS
, 1997
THERMA-WAVE, INC.
OFFER TO EXCHANGE ITS SERIES B 10 5/8% SENIOR NOTES DUE 2004 FOR ANY AND ALL OF
ITS OUTSTANDING 10 5/8% SENIOR NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
Therma-Wave, Inc., a Delaware corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its Series B 10 5/8%
Senior Notes due 2004, (the "New Notes"), registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which this Prospectus is a part, for each $1,000 principal amount
of its outstanding 10 5/8% Senior Notes due 2004 (the "Old Notes"), of which
$115,000,000 principal amount is outstanding. The form and terms of the New
Notes are the same as the form and term of the Old Notes (which they replace),
except that the New Notes will bear a Series B designation and will have been
issued in a transaction that has been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not
contain certain provisions relating to liquidated damages which were included
in the terms of the Old Notes in certain circumstances relating to the timing
of the Exchange Offer. The New Notes will evidence the same debt as the Old
Notes (which they replace) and will be issued under and be entitled to the
benefits of an Indenture, dated as of May 15, 1997 (the "Indenture"), between
the Company and IBJ Schroder Bank & Trust Company, as trustee, governing the
Old Notes and the New Notes. The Old Notes were issued in connection with the
recapitalization of the Company (the "Recapitalization"), which was completed
on May 16, 1997. The Old Notes and the New Notes are sometimes referred to
herein collectively as the "Notes." See "The Exchange Offer" and "Description
of Notes."
The Notes bear interest at a rate of 10 5/8% per annum, payable semi-annually
on May 15 and November 15 of each year, commencing November 15, 1997. The Notes
will mature on May 15, 2004. On or after May 15, 2001, the Company may redeem
the Notes, in whole or in part, at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption. Notwithstanding the
foregoing, at any time on or before May 15, 2000, the Company may redeem up to
40% (provided that such percentage shall decrease to 35% if an Initial Public
Offering (as defined) has not been consummated on or prior to November 15,
1998) of the original aggregate principal amount of the Notes with the net
proceeds of one or more Equity Offerings (as defined) of the Company at a
redemption price equal to 110.625% of the principal amount thereof, plus
accrued and unpaid interest to the date of redemption; provided that at least
$69.0 million aggregate principal amount of the Notes remains outstanding after
each such redemption. In the event an Initial Public Offering is consummated
prior to May 15, 2000, the Company may be obligated to purchase Notes in
addition to Notes purchased pursuant to an optional redemption. Upon a Change
of Control (as defined), the Company will be required to make an offer to
purchase all of the outstanding Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest to the date of purchase. See
"Description of Notes."
The New Notes will be, as the Old Notes (which they replace) are, senior
unsecured obligations of the Company, and will, as the Old Notes (which they
replace), rank pari passu in right of payment to all existing and future senior
indebtedness of the Company, junior in right of payment to all secured
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company. As of April 6, 1997, after giving pro forma effect
to the Recapitalization, the aggregate principal indebtedness of the Company,
including the Notes, would have been approximately $115.5 million and
approximately $0.5 million of indebtedness of the Company would have been
secured indebtedness. In addition, as of April 6, 1997 on such a pro forma
basis, the Company would have had unused borrowing capacity under the Bank
Credit Facility (as defined) of $22.2 million and cash and cash equivalents of
approximately $16.9 million. See "Capitalization" and "Description of Notes."
The Indenture permits the Company to incur additional indebtedness, subject to
certain limitations.
(Cover continued on following page)
-----------
SEE "RISK FACTORS," BEGINNING ON PAGE 14, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
(Cover page continued)
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on 1997, unless
extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Old Notes were sold by the Company on May 16, 1997 to the
Initial Purchaser (as defined herein) in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchaser subsequently resold the Old Notes
to qualified institutional buyers in reliance upon Rule 144A under the
Securities Act and to a limited number of institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act).
Accordingly, the Old Notes may not be reoffered, resold or otherwise
transferred in the United States unless registered under the Securities Act or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The New Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement (as defined herein) entered into by the Company and the Initial
Purchaser in connection with the Initial Offering. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes. See "The Exchange Offer--Resale of the New
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of marketmaking activities or other
trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, they will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. The Old Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
However, there can be no assurance that an active market for the New Notes
will develop. See "Risk Factors--Absence of a Public Market Could Adversely
Affect the Value of Notes." Moreover, to the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Notes could be adversely affected.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the issuance of the New Notes being offered hereby. This Prospectus does not
contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Company and the
Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Exchange Offer Registration Statement, reference is
made to the exhibit for a more complete description of the document or matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Exchange Offer Registration Statement, including the
exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the Exchange Offer Registration Statement being declared
effective by the Commission, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Company to file periodic reports and other information with the Commission
will be suspended if the New Notes are held of record by fewer than 300
holders as of the beginning of any fiscal year of the Company other than the
fiscal year in which the Exchange Offer Registration Statement is declared
effective. The Company has agreed pursuant to the Indenture that, whether or
not it is required to do so by the rules and regulations of the Commission,
for so long as any of the Notes remain outstanding, it will furnish to the
holders of the Notes (within 15 days after it is or would have been required
to file with the Commission) and file with the Commission (unless the
Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company was required to file such
forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company was required to file such
reports. In addition, for so long as any of the Notes remain outstanding, the
Company shall provide to any holder of the Notes information reasonably
requested by such holder concerning the Company (including financial
statements) necessary in order to permit such holder to sell or transfer Notes
in compliance with Rule 144A under the Securities Act. The Company shall have
a reasonable period of time to provide the holder of a Note with such
information.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the Consolidated Financial Statements and notes thereto, appearing elsewhere in
this Prospectus. Unless the context requires otherwise, references to the
"Company" or "Therma-Wave" mean Therma-Wave, Inc. and its subsidiaries. Therma-
Wave(R), Therma-Probe(R) and Opti-Probe(R) are registered trademarks of the
Company. For an explanation of certain terms used in this Prospectus, reference
should be made to the Glossary beginning on page G-1. References to the
Company's fiscal year ("Fiscal Year") refer to the 52/53 week period ending on
the Sunday on or nearest preceding March 31 of each year for periods prior to
1997 and the Sunday on or following March 31 of each year for periods
thereafter. For example, the fiscal year ended April 6, 1997 is referred to
herein as "Fiscal 1997."
THE COMPANY
The Company is a worldwide leader in the development, manufacture, marketing
and service of process control metrology systems for use in the manufacture of
semiconductors. Semiconductor manufacturers use process control metrology
systems in their fabrication facilities ("fabs") to detect any process
deviations or problems in order to minimize the effects on manufacturing yield,
device performance and reliability. The Company's metrology systems are
principally used to measure two of the most important and pervasive
semiconductor fabrication process steps: ion implantation and thin film
deposition and removal. Ion implantation involves the implantation of ions into
selective areas of the silicon wafer, which alters the electrical properties of
the semiconductor. Thin film deposition and removal is a process by which
layers of conductive or insulating films are deposited on and removed from the
wafer to give the semiconductor the desired performance characteristics. For
Fiscal 1997 on a pro forma basis giving effect to the Recapitalization, the
Company generated net revenues and EBITDA (as defined) of $109.5 million and
$26.1 million, respectively. Since the introduction of its first product in
1985, the Company's revenues have increased at a compound annual growth rate
("CAGR") of approximately 36.7%.
The Company's process control metrology systems use proprietary and patented
technology to measure key dimensions and other physical properties of
semiconductor wafers. The Company holds 69 U.S. and foreign patents primarily
covering the technology utilized in its two major product lines: (i) the
Therma-Probe system and (ii) the Opti-Probe system. The Therma-Probe system,
introduced in 1985, utilizes the Company's proprietary thermal wave technology
and is the predominant nondestructive process control metrology system used to
measure the critical ion implantation process in the fabrication of
semiconductors. Since the introduction of the Therma-Probe, the Company
believes it has captured over 95% of the market for nondestructive ion
implantation measurement of product wafers and is installed in virtually every
major semiconductor fab worldwide. The Opti-Probe system, introduced in 1992,
significantly improved upon existing thin film metrology systems by
successfully integrating different measurement technologies into one system and
utilizing new proprietary optical technologies. The Company believes that the
Opti-Probe has captured over 30% of the thin film measurement market in less
than five years.
The Company markets and sells its products worldwide to virtually all major
semiconductor manufacturers, including Intel Corporation, Samsung Semiconductor
Inc., LG Semicon, Advanced Micro Devices, Inc., Siemens Microelectronics,
Lucent Technologies and NEC Semiconductor. The Company has developed and
consistently maintained strong customer relationships due to the technological
superiority of its products and strong customer support capabilities. In its 15
year history, the Company believes it has never lost a major customer. The
Company believes it is the dominant supplier of ion implant metrology systems
to virtually all major semiconductor manufacturers and has become the primary
supplier of thin film metrology systems to many of its customers. In addition,
the Company believes that its largest customers, such as Intel Corporation and
Samsung Semiconductor, are among the fastest growing manufacturers in the
semiconductor industry. The Company has a
1
<PAGE>
strong presence in all major international markets and, as a result, derived
approximately 59.7% of its net revenues from international sales in Fiscal
1997. In aggregate, the Company serves more than 60 customers worldwide, which
are located in over 14 different countries and manufacture many different types
of semiconductors for a broad range of applications.
Therma-Wave was established in 1982 by Dr. Allan Rosencwaig, the Company's
current Chairman, President and CEO and the principal developer of the field of
thermal wave physics. In Fiscal 1992, the Company was acquired by Toray
Industries, Inc. and Shimadzu Corporation. Through the Recapitalization, Bain
Capital, Inc. ("Bain Capital"), Sutter Hill Ventures ("Sutter Hill") and the
Company's senior management team collectively acquired securities representing
approximately 88% of the Company's outstanding voting power. As a result of the
Recapitalization, the Company's senior management team owns approximately 24%
of the outstanding common stock and hold options to acquire an additional 12%
of such common stock. Such equity ownership represents a significant economic
commitment to and participation in the continued success of the Company.
INDUSTRY OVERVIEW
The Company operates in the process control metrology systems market of the
semiconductor capital equipment industry. Dataquest, an independent
semiconductor industry research firm, reports that sales of process control
metrology systems and instruments were approximately $1.4 billion in 1996,
having increased at a CAGR of approximately 22.4% from 1991 to 1996. Within the
process control metrology market, the Company operates specifically in the ion
implant metrology and the thin film measurement segments. The Company estimates
that sales of ion implant metrology and thin film measurement systems for the
semiconductor industry were approximately $60 million and $209 million,
respectively, in 1996. Demand for process control metrology systems is driven
primarily by: (i) the capital expenditures of semiconductor manufacturers,
which, in turn, depend upon the current and anticipated market demand for
semiconductors and products utilizing semiconductors; and (ii) the increasing
complexity of the semiconductor manufacturing process as a result of the demand
for smaller, higher performance devices.
Increasing Demand for Semiconductors. The demand for semiconductors has
significantly increased over time. According to Dataquest, since 1991 the
global semiconductor market has expanded at a CAGR of 16.6% to approximately
$138.6 billion in 1996. Such growth is primarily the result of: (i) the
increased demand for faster, smaller and more efficient devices utilizing
semiconductors (including personal computers and telecommunications equipment)
with a greater range of functionality; (ii) the increased level of
semiconductor content in electronic products; and (iii) the increased use of
products utilizing semiconductors in broader geographical markets, particularly
in the previously closed or emerging markets in Southeast Asia, China and Latin
America. To meet this increased demand for semiconductors, manufacturers have
been required to make capital expenditures to increase their existing capacity
by constructing new fabs and expanding their existing fabs. In addition,
manufacturers must continually construct and equip new fabs to replace existing
fabs and production equipment that are rendered obsolete as a result of
improvements in semiconductor manufacturing processes arising from the need for
higher performance semiconductor devices. As a result of these factors, capital
equipment expenditures by semiconductor manufacturers have increased at a CAGR
of 27.2% from 1991 to 1996.
While the semiconductor industry has experienced long-term secular growth, it
is cyclical and has historically experienced periods of slower revenue growth
or decline, which have often resulted in a decrease in the level of capital
expenditures made by the semiconductor manufacturers. The semiconductor
industry experienced such a period in 1996, during which worldwide industry
revenues declined by an estimated 9.4%. As a result, it is anticipated that
there will be a decrease in the demand for semiconductor capital equipment
during some or all of 1997. Nonetheless, the semiconductor capital equipment
market is expected to continue its long-term growth as a result of the increase
in the demand for semiconductors.
2
<PAGE>
Growing Importance of Process Controls. Demand for process control metrology
systems is also increasing as a result of such systems becoming more critical
to the manufacture of semiconductors. Industries that use semiconductors are
demanding increasingly complex, higher performance devices leading to a more
complex semiconductor manufacturing process with an increasing number of
process steps. With the increase in wafer process complexity and resulting
increase in wafer value, process control metrology systems are becoming more
critical to the manufacture of semiconductors. For example, from 1991 to 1996,
the thin film measurement market has grown at a CAGR of 37.2% as compared to a
CAGR of 27.2% for the semiconductor capital equipment market as a whole. The
Company believes that increasing demand for semiconductors in general, combined
with the need for more comprehensive and sophisticated process control of
semiconductor device manufacturing, will result in increased demand for process
control metrology systems.
COMPETITIVE STRENGTHS
The Company attributes its success in the process control metrology market
and its significant opportunities for continued growth and profitability to its
ability to provide products and services that are superior in meeting the
requirements of semiconductor manufacturers. Management believes that the
Company has several competitive advantages, including:
. TECHNOLOGICALLY ADVANCED CAPABILITIES AND PRODUCTS. The Company believes
that its expertise in engineering, research and development enables it to
offer process control metrology systems with more advanced technical
capabilities and features than those offered by its competitors. These
features include superior measurement capabilities, resolution, accuracy,
repeatability and reliability. The Therma-Probe system employs a patented
optical technology to provide noncontact, noncontaminating ion implant
measurement capability, unlike many of the Company's competitors who use
invasive four-point probes to accomplish similar measurements. The Company's
Opti-Probe system is the only tool that combines three distinct measurement
technologies, two of which are patented by the Company. The Company believes
that its technologically superior products are critical to its success
because technical capability is a key criterion that most major
semiconductor manufacturers use in selecting capital equipment for their
fabs.
. LEADING MARKET SHARE. The Company is one of the world's leading
manufacturers of process control metrology equipment and systems. Therma-
Wave is the largest provider of nondestructive ion implant process control
metrology systems worldwide with over 95% of the market. The Therma-Probe
system has become the industry standard for ion implant process control
metrology and is installed in virtually every major semiconductor
fabrication facility. The Company is also a leading supplier of thin film
measurement metrology systems worldwide. The Company believes that its Opti-
Probe system has captured over 30% of the market in less than five years
since its introduction as a result of its technological superiority and the
enhanced return on investment to its customers. In Fiscal 1997, sales of the
Opti-Probe system increased by over 55.5% from the previous Fiscal Year due
to continued market share gains as well as market growth.
. STRONG AND DIVERSE CUSTOMER BASE. The Company markets and sells its products
worldwide to virtually all of the major semiconductor manufacturers,
including: (i) Intel Corporation, the largest microprocessor manufacturer
worldwide; (ii) Samsung Semiconductor Inc., the largest dynamic random
access memory ("DRAM") manufacturer; and (iii) Lucent Technologies, one of
the largest application specific semiconductor ("ASIC") manufacturers. The
Company believes that its top customers are among the fastest growing
manufacturers in the semiconductor industry. For example, the Company's top
nine customers for Fiscal 1997 have increased their capital equipment
expenditures at a CAGR of approximately 36% over the last five years, as
compared to a CAGR of approximately 27% for the semiconductor capital
equipment industry as a whole. In addition, the Company has a diverse
customer base in terms of both geographic location and the types of
semiconductors manufactured by its customers. In aggregate, the Company
serves more than 60 customers worldwide, which are located in over 14
different countries. In addition, no single customer accounted for more than
13% of the Company's net revenues in Fiscal 1997.
3
<PAGE>
. STRONG CUSTOMER RELATIONSHIPS. The Company believes that it has developed
and consistently maintained excellent customer relationships. In its 15 year
history, the Company believes that it has never lost a major customer. In
addition, the Company believes it is the dominant supplier of ion implant
metrology systems to virtually all major semiconductor manufacturers and has
become the primary supplier of thin film metrology systems to many of its
customers. Engineering, sales and management personnel collaborate with
customer counterparts to determine customers' needs and specifications. For
example, the model Opti-Probe 2600 was developed in cooperation with one of
the Company's major customers to address the need for a more capable thin
film measurement system.
. WORLDWIDE DISTRIBUTION AND STRONG CUSTOMER SUPPORT CAPABILITIES. The Company
has been at the forefront of addressing the increasing globalization of the
semiconductor industry. The Company has expended considerable resources in
creating a high-quality worldwide distribution network with highly trained
customer service and support organizations. For Fiscal 1997, the Company
generated international revenues of approximately $65.4 million,
representing 59.7% of net revenues for the period. The Company provides its
customers with comprehensive support and service before, during and after
delivery of its systems. The Company's engineers have extensive experience
and provide valuable assistance to the Company's customers, thereby
strengthening Therma-Wave's strong position with its customers. The Company
anticipates that it will continue to strengthen and expand its distribution
and customer service and support organizations worldwide, particularly in
Asia.
. EXPERIENCED AND SUCCESSFUL MANAGEMENT TEAM. The Company is led by an
experienced senior management team whose members average more than 14 years
in the semiconductor capital equipment manufacturing industry. Dr. Allan
Rosencwaig has over 15 years of experience in the industry. In addition, the
Company's top nine executives average over nine years with the Company.
Under the leadership of its existing management team, the Company's net
revenues have grown from $2.7 million in Fiscal 1985 to $109.5 million in
Fiscal 1997, representing a CAGR of 36.7%. As a result of Recapitalization,
the Company's senior management own approximately 24% of the outstanding
common stock and hold options to acquire an additional 12% of such common
stock. Such equity ownership represents a significant economic commitment to
and participation in the continued success of the Company.
BUSINESS AND GROWTH STRATEGY
The Company's business strategy is to continue its leadership and growth in
the process control metrology market and thereby increase market share and
maximize revenues and profitability. The Company's business and growth strategy
will include the following key initiatives:
. CAPITALIZE ON FAVORABLE INDUSTRY TRENDS. The Company believes that the
increasing demand for semiconductors should continue to drive significant
growth in the semiconductor capital equipment market. In addition, the
Company believes that the need for more comprehensive and sophisticated
process control of semiconductor device manufacturing will result in
increased demand for metrology systems. Management believes that the Company
is well positioned to take advantage of these favorable trends, given its
market leadership position, strong customer base, superior technology and
research and development expertise.
. MAINTAIN AND LEVERAGE STRONG CUSTOMER RELATIONSHIPS. The Company expects to
continue to strengthen its existing customer relationships and foster
working partnerships by providing technologically superior systems and high
levels of customer support. In its 15 year history, the Company believes it
has never lost a major customer. In addition, the Company believes it is the
dominant supplier of ion implant metrology systems to virtually all major
semiconductor manufacturers and has become the primary supplier of thin film
metrology systems to many of its customers. Furthermore, the Company intends
to continue to
4
<PAGE>
capitalize on its strong customer relationships, which have enabled it to
develop new products and applications through close collaboration with
customers. Such collaboration has often resulted in products and
applications which have a broader market appeal. For example, the Company
has sold its Opti-Probe 2600, developed in conjunction with one of its major
customers, to numerous other semiconductor manufacturers.
. INCREASE MARKET PENETRATION. The Company expects to increase its market
penetration based on its competitive strengths and superior product
offerings. In particular, the Company expects that the market share of its
Opti-Probe system will continue to increase as a result of its technological
advantages and superior return on investment to its customers. During Fiscal
1997, the Company has added seven major new customers for the Opti-Probe
system and believes that it has increased its market share in the thin film
measurement market by approximately 10 percentage points to capture over 30%
of such market. The Company believes that the Opti-Probe system offers
significant opportunities for increased revenues due to the size of the thin
film measurement market, which had aggregate sales of $209 million in 1996
and has grown at CAGR of 37.2% from 1991 to 1996.
. CONTINUE TO FOCUS ON TECHNOLOGICAL INNOVATION. The Company expects to
continue its emphasis on engineering and research and development in an
effort to anticipate and address technological advances in semiconductor
manufacturing. During its last five fiscal years, the Company has spent on
average approximately 14% of its net revenues on research and development
activities. Since its founding, the Company has been a leader in the
introduction of technological advances, including: (i) the development of
the most widely accepted metrology system for measuring ion implant dose on
product wafers; (ii) the introduction of the first product to successfully
combine different thin film measurement technologies in one system; (iii)
the development of proprietary technologies significantly improving on
existing thin film measurement capability; and (iv) the development of
advanced metrology software dealing with signal processing, data analysis
and pattern recognition. The Company intends to capitalize on its market
leadership position, advanced technologies and portfolio of 69 U.S. and
foreign patents to further broaden its existing high quality product lines.
Management believes that continued product innovation and investment in
research and development will help the Company increase its leadership
position and overall profitability.
. LEVERAGE EXISTING INFRASTRUCTURE. The Company believes that it has the
opportunity to improve its operating margins by leveraging its existing
infrastructure through increased sales. To support its worldwide growth, the
Company has expended considerable resources in establishing its
infrastructure, including a worldwide customer service and support
organization and a state-of-the-art manufacturing facility.
. PURSUE STRATEGIC ACQUISITIONS. The Company expects to capitalize on the
recent consolidation trend in the process control metrology and wafer
inspection industries by targeting strategic acquisitions. The Company
expects to review selective opportunities to acquire businesses which would
add to its portfolio of technologies and products.
The Company's executive offices are located at 1250 Reliance Way, Fremont,
California 94539. The Company's telephone number is (510) 490-3663.
THE RECAPITALIZATION
In pursuing the Recapitalization, Bain Capital considered, among other
things, the following investment considerations: (i) the favorable long-term
trends within the process control metrology market; (ii) the Company's dominant
position in the process control metrology segments; and (iii) the Company's
strong and experienced management team. Bain Capital believes that these
favorable investment considerations, together with increases in EBITDA
multiples for publicly-traded companies within the semiconductor capital
equipment industry since the execution of the letter of intent in August 1996,
made the Company an attractive investment opportunity for participants in the
Recapitalization.
5
<PAGE>
In connection with the Recapitalization, the Company: (i) redeemed from its
Existing Stockholders (as defined herein) approximately 86.6% of its
outstanding capital stock for $96.9 million; (ii) converted its remaining
outstanding capital stock to newly issued shares of preferred stock and common
stock; (iii) repaid substantially all of its outstanding borrowings of
approximately $27.1 million under existing loan agreements; and (iv) paid the
fees and expenses of approximately $11.0 million related to the
Recapitalization. In order to finance the Recapitalization, the Company: (i)
issued $115.0 million in aggregate principal amount of Notes in the Offering;
(ii) received an equity contribution of $20.0 million in cash from an investor
group comprised of investment funds associated with Bain Capital and their
related investors (collectively, the "Bain Capital Funds"), Sutter Hill and
members of the Company's senior management team (the "Management Investors");
and (iii) converted equity securities of its Existing Stockholders having a
value of $15.0 million into newly issued shares of preferred stock and common
stock (collectively with the equity investments to be made by the investors
described in item (ii), the "Equity Contribution"). In connection with their
participation in the Recapitalization, the Management Investors were also
granted certain equity-based incentives. As a result of the Recapitalization,
the Bain Capital Funds, Sutter Hill, the Management Investors and the Existing
Stockholders hold securities representing approximately 58%, 17%, 13% and 12%,
respectively, of the outstanding voting power of the Company. See "The
Recapitalization," "Management" and "Principal Stockholders."
THE INITIAL OFFERING
Notes..................... The Old Notes were sold by the Company on May 16,
1997 to BT Securities Corporation (the "Initial
Purchaser") pursuant to a Purchase Agreement dated
May 16, 1997 (the "Purchase Agreement"). The
Initial Purchaser subsequently resold the Old Notes
to qualified institutional buyers pursuant to Rule
144A under the Securities Act and to a limited
number of institutional "accredited investors" (as
defined in Rule 501(a)(1),(2),(3) or (7) under the
Securities Act).
Registration Rights Pursuant to the Purchase Agreement, the Company and
Agreement................ the Initial Purchaser entered into a Registration
Agreement, dated as of May 15, 1997 (the
"Registration Agreement"), which grants the holders
of the Old Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy
such exchange rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered........ $115,000,000 aggregate principal amount of Series B
10 5/8% Senior Notes due 2004 of the Company.
The Exchange Offer........ $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $115,000,000 aggregate
principal amount of Old Notes are outstanding. The
Company will issue the New Notes to holders on or
promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder which is an "affiliate"
6
<PAGE>
of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such New Notes. Each holder
accepting the Exchange Offer is required to
represent to the Company in the Letter of
Transmittal that, among other things, the New Notes
will be acquired by the holder in the ordinary
course of business and the holder does not intend
to participate and has no arrangement or
understanding with any person to participate in the
distribution of such New Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may
be a statutory underwriter. Each Participating
Broker-Dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resale of New Notes received in
exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading
activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, they
will make this Prospectus, as amended or
supplemented, available to any Participating
Broker-Dealer for use in connection with any such
resale (provided that the Company has received
notice from any Participating Broker-Dealer of its
status as a Participating Broker-Dealer within 30
days after the Expiration Date). See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Notes
could not rely on the position of the staff of the
Commission enunciated in no-action letters and, in
the absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction. Failure to comply with
such requirements in such instance may result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date...........
5:00 p.m., New York City time, on , 1997 unless
the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
7
<PAGE>
Accrued Interest on the
New Notes and the Old Each New Note will bear interest from its issuance
Notes.................... date. Holders of Old Notes that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the New Notes. Such interest will be paid with the
first interest payment on the New Notes to the
persons who are registered holders of the New
Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the
New Notes.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer--Conditions."
Procedures for Tendering Each holder of Old Notes wishing to accept the
Old Notes................ Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof or transmit an Agent's Message (as defined)
in connection with a book-entry transfer, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or such
Agent's Message, together with the Old Notes and
any other required documentation to the Exchange
Agent (as defined herein) at the address set forth
herein. By executing the Letter of Transmittal or
Agent's Message, each holder will represent to the
Company that, among other things, the New Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such New Notes, whether or not
such person is the holder, that neither the holder
nor any such other person (i) has any arrangement
or understanding with any person to participate in
the distribution of such New Notes, (ii) is
engaging or intends to engage in the distribution
of such New Notes, or (iii) is an "affiliate," as
defined under Rule 405 of the Securities Act, of
the Company. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--Procedures for
Tendering."
Untendered Old Notes......
Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
Consequences of Failure
to Exchange.............. The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
8
<PAGE>
Shelf Registration If any holder of the Old Notes (other than any such
Statement................ holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has provided information regarding such
holder and the distribution of such holder's Old
Notes to the Company for use therein, the Company
has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use its best efforts to cause it to
be declared effective by the Commission as promptly
as practical on or after the consummation of the
Exchange Offer. The Company has agreed to maintain
the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the Old
Notes held by any such holders.
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
The Company will keep the Exchange Offer open for
not less than twenty business days in order to
provide for the transfer of registered ownership.
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of New The Company will accept for exchange any and all
Notes.................... Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Use of Proceeds...........
There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
9
<PAGE>
IBJ Schroder Bank & Trust Company.
Exchange Agent............ THE NEW NOTES
General................... The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they
replace) except that (i) the New Notes bear a
Series B designation, (ii) the New Notes will be
issued in a transaction that has been registered
under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, and
(iii) the holders of New Notes will not be entitled
to certain rights under the Registration Rights
Agreement, including the provisions providing for
liquidated damages in certain circumstances
relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is
consummated. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer." The New Notes will
evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture. See
"Description of Notes." The Old Notes and the New
Notes are referred to herein collectively as the
"Notes."
Maturity Date.............
May 15, 2004
Interest and Payment May 15 and November 15 of each year, commencing
Dates.................... November 15, 1997.
Optional Redemption.......
The New Notes are redeemable, in whole or in part,
at the option of the Company on or after May 15,
2001, at the redemption prices set forth herein
plus accrued and unpaid interest to the date of
redemption. In addition, at any time on or before
May 15, 2000, the Company, at its option, may
redeem up to 40% (provided that such percentage
shall decrease to 35% if an Initial Public Offering
has not been consummated on or prior to November
15, 1998), of the aggregate principal amount of the
Notes originally issued with the net proceeds of
one or more Equity Offerings at the redemption
prices set forth herein plus accrued and unpaid
interest to the date of redemption; provided that
at least $69.0 million aggregate principal amount
of the Notes remains outstanding immediately after
such redemption. "Description of Notes--
Redemption--Optional Redemption."
Mandatory Redemption...... In the event an Initial Public Offering is
consummated prior to May 15, 2000, the Company
shall be obligated to make an offer to purchase
Notes in addition to Notes purchased pursuant to an
optional redemption with the Net Cash Proceeds
thereof, subject to certain conditions. See
"Description of Notes--Redemption--Mandatory
Redemption Following Initial Public Offering."
Change of Control......... Upon a Change of Control, the Company will be
obligated to make an offer to repurchase all of the
outstanding New Notes at a price equal to 101% of
the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to
the date of repurchase. See "Description of Notes--
Change of Control."
10
<PAGE>
Ranking................... The New Notes will be, as the Old Notes (which they
replace) are, senior unsecured obligations of the
Company and will rank pari passu with any present
and future senior indebtedness of the Company. The
New Notes will be, as the Old Notes (which they
replace) are, effectively subordinated in right of
payment to all existing and future secured
indebtedness and will be senior in right of payment
to all existing and future subordinated
indebtedness of the Company. As of April 6, 1997,
on a pro forma basis after giving effect to the
Recapitalization, the Company would have had
approximately $115.5 million of secured
indebtedness outstanding. In addition, as of April
6, 1997 on such pro forma basis, the Company would
have had unused borrowing capacity under the Bank
Credit Facility of $22.2 million.
Certain Covenants.........
The Indenture contains certain covenants for the
benefit of the holders of the Notes that, among
other things, limit the ability of the Company and
any of its Restricted Subsidiaries (as defined
herein) to: (i) enter into certain transactions
with affiliates, (ii) pay dividends or make certain
other restricted payments, (iii) consummate certain
asset sales, (iv) enter into certain transactions
with affiliates, (v) incur indebtedness that is
senior in right of payment to the Notes, (vi) incur
liens, (vii) impose restrictions on the ability of
a subsidiary to pay dividends or make certain
payments to the Company and its subsidiaries,
(viii) merge or consolidate with any other person
or (ix) sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of
the assets of the Company.
RISK FACTORS
Prospective investors should carefully consider the factors set forth under
"Risk Factors," as well as the other information set forth in this Prospectus
before tendering the Old Notes in exchange for the New Notes. Such risks
include, among others, that: (i) the Company has a high level of indebtedness
and its ability to service such debt is dependent on its future operating
performance; (ii) the Company is restricted by the terms of its indebtedness;
(iii) the Company is dependent on the semiconductor industry, which experienced
a downturn in 1996; (iv) the Company relies, in part, on patent, trade secret
and trademark law to protect the technology used in its principal products; (v)
the Company's operations are characterized by relatively high fixed costs; (vi)
the semiconductor capital equipment industry is highly competitive; (vii) two
customers accounted for approximately 13% and 10% of the Company's net revenues
in Fiscal 1997; (viii) approximately 50% of the Company's sales are made
through independent sales representatives; (ix) international sales accounted
for approximately 59.7% of the Company's total revenues for Fiscal 1997; (x)
the semiconductor capital equipment industry as a whole is characterized by
rapidly changing technology and industry standards; (xi) the Company's systems
typically have lengthy sales cycles; (xii) certain of the components and
subassemblies included in the Company's systems are obtained from a single
source or a limited group of suppliers; and (xiii) the Company produces all of
its products in a single manufacturing facility located in Fremont, California.
11
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following summary historical financial data as of March 31, 1996 and
April 6, 1997 and for the Fiscal Years ended April 2, 1995, March 31, 1996 and
April 6, 1997 were derived from the audited consolidated financial statements
of the Company included elsewhere in this Prospectus. The summary historical
financial data as of March 28, 1993, March 27, 1994 and April 2, 1995 and for
the Fiscal Years ended March 28, 1993 and March 27, 1994 was derived from the
audited consolidated financial statements of the Company not included in this
Prospectus. The information contained in this table should be read in
conjunction with "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and accompanying notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR (1)
---------------------------------------------
1993 (2) 1994 1995 1996 1997
-------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.................... $14,250 $20,770 $55,675 $79,293 $109,493
Cost of revenues................ 10,561 11,262 25,024 35,027 49,795
-------- ------- ------- ------- --------
Gross margin.................... 3,689 9,508 30,651 44,266 59,698
Research and development........ 5,372 3,586 5,942 10,072 13,050
Selling, general and
administrative................. 7,508 9,092 13,299 18,704 22,004
Amortization of goodwill and
purchased intangibles.......... 1,912 1,912 1,912 1,912 1,275
-------- ------- ------- ------- --------
Operating income (loss)......... (11,103) (5,082) 9,498 13,578 23,369
Interest expense................ 1,320 1,543 1,998 1,722 1,621
Interest income................. (145) (331) (102) (247) (346)
Other (income) expense, net..... 345 125 115 138 (14)
-------- ------- ------- ------- --------
Income (loss) before provision
for income taxes............... (12,623) (6,419) 7,487 11,965 22,108
Provision for income taxes...... -- -- -- 4,684 9,007
-------- ------- ------- ------- --------
Net income (loss)............... ($12,623) ($6,419) $7,487 $7,281 $13,101
======== ======= ======= ======= ========
OTHER FINANCIAL DATA:
EBITDA (3)...................... ($7,936) ($2,117) $12,496 $17,185 $27,113
Cash provided by (used in)
operating activities........... (9,797) (6,006) 451 5,867 11,860
Cash used in investing
activities..................... (1,456) (299) (2,048) (4,965) (1,575)
Cash provided by (used in)
financing activities........... 9,003 6,304 7,630 (1,278) (851)
Depreciation and amortization... 3,167 2,965 2,998 3,607 3,744
Capital expenditures............ 1,036 60 1,616 4,361 1,091
Ratio of earnings to fixed
charges (4).................... N/A N/A 4.4x 6.9x 11.4x
BALANCE SHEET DATA:
Working capital (excluding cash
and current maturities of long-
term debt) .................... $2,793 $4,955 $15,409 $21,237 $25,901
Total assets.................... 22,368 23,039 45,081 53,056 68,620
Long-term debt (including
current maturities and net
of cash)....................... 30,091 35,421 22,039 21,136 10,710
Shareholders' equity (net
capital deficiency)............ (18,191) (22,845) (379) 6,903 20,145
</TABLE>
- --------
(1) The Company's Fiscal Year refers to the 52/53 week period ending on the
Sunday on or nearest preceding March 31 of each year for periods prior to
1997 and the Sunday on or following March 31 of each year for periods
thereafter.
(2) In Fiscal 1993, the Company's results were affected by several factors that
reduced the Company's overall operating income and EBITDA. The Company's
financial results included: (i) an increase in selling, general and
administrative expenses primarily as a result of the expansion of the
Company's Japanese subsidiary; (ii) a decrease in gross margin associated
with a discontinued product line; and (iii) an increase in research and
development expenses associated with the development of the Opti-Probe
system.
(3) "EBITDA" is defined herein as income before income taxes, plus
depreciation, amortization, net interest expense and other non-operating
(income) expenses, net. EBITDA is presented because the Company believes it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.
(4) For purposes of computing this ratio, earnings consists of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and the estimated interest portion of rent expense. Earnings were
insufficient to cover fixed charges by $11.1 million and $4.7 million for
the Fiscal Years ended March 28, 1993 and March 27, 1994, respectively.
12
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data give effect to the
Recapitalization as if it had occurred as of the beginning of the period
presented for the income statement and other data, and as of the last day of
the period presented for the balance sheet data. The summary unaudited pro
forma statement of operations data and other data do not (i) purport to
represent what the Company's results of operations actually would have been if
the Recapitalization had actually occurred as of such dates or what such
results will be for any future periods or (ii) give effect to certain non-
recurring charges of $11.0 million expected to result from the
Recapitalization, including a management compensation charge related to the
sale of a portion of the Company's voting securities. The Old Notes surrendered
in exchange for the New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any
increase or decrease in the indebtedness of the Company. As such, no effect has
been given to the Exchange Offer in the pro forma financial data included
herein. The information contained in this table should be read in conjunction
with "Unaudited Pro Forma Financial Data," "Selected Historical Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements and accompanying notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR ENDED
APRIL 6, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
INCOME STATEMENT DATA:
Net revenues............................................ $109,493
Cost of revenues........................................ 49,795
--------
Gross margin............................................ 59,698
Research and development................................ 13,050
Selling, general and administrative..................... 23,004
Amortization of goodwill and purchased intangibles...... 1,275
--------
Operating income........................................ 22,369
Interest expense........................................ 13,940
Interest income......................................... (346)
Other (income) expense, net............................. (14)
--------
Income before provision for income taxes................ 8,789
Provision for income taxes.............................. 3,581
--------
Net income.............................................. $ 5,208
========
OTHER FINANCIAL DATA:
EBITDA (1).............................................. $ 26,113
Net cash interest expense (2)........................... 11,709
Depreciation and amortization........................... 3,744
Capital expenditures.................................... 1,091
Ratio of earnings to fixed charges (3).................. 1.6x
Ratio of net debt to EBITDA (4)......................... 3.8x
Ratio of EBITDA to net cash interest expense (2)........ 2.2
<CAPTION>
PRO FORMA
APRIL 6, 1997
----------------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 16,920
Working capital (excluding cash and current maturities
of long-term debt)..................................... 25,901
Total assets............................................ 79,799
Long-term debt (including current maturities and net of
cash).................................................. 98,597
Net capital deficiency.................................. (70,572)
</TABLE>
- --------
(1) "EBITDA" is defined herein as income before income taxes, plus
depreciation, amortization, net interest expense and other non-operating
(income) expenses, net. EBITDA is presented because the Company believes it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.
(2) Net cash interest expense represents interest expense, less the
amortization of deferred financing fees of $1.6 million and interest income
totalling $0.7 million from an assumed investment of available pro forma
cash and cash equivalents totalling $12.0 million at a current money market
rate of 5.5% per annum for Fiscal 1997. Excluding such interest income of
$0.7 million, the ratio of EBITDA to cash interest expense for Fiscal 1997
on a pro forma basis would have been 2.1 to 1.0.
(3) For purposes of computing this ratio, earnings consists of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and the estimated interest portion of rent expense.
(4) Net debt is total debt of $115.5 million less cash and cash equivalents of
$16.9 million. The ratio of total debt to EBITDA for the pro-forma Fiscal
Year ended April 6, 1997 would have been 4.4 to 1.0.
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RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before tendering
the Old Notes for the New Notes. This Prospectus contains forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those identified below as
well as those discussed elsewhere in this Prospectus.
RISKS ASSOCIATED WITH A HIGH LEVEL OF INDEBTEDNESS AND ABILITY TO SERVICE DEBT
The Company incurred substantial indebtedness in connection with the
Recapitalization. At April 6, 1997, the Company's long-term indebtedness would
have been $115.5 million and its net capital deficiency (including mandatorily
redeemable preferred stock) would have been $56.7 million, in each case on a
pro forma basis after giving effect to the Recapitalization as if it had
occurred on such date. In addition, as of April 6, 1997 on such pro forma
basis, the Company would have had unused borrowing capacity of $22.2 million.
In addition, subject to the restrictions in the Bank Credit Facility (as
defined herein) and the Indenture, the Company may incur additional
indebtedness, including secured indebtedness, from time to time to finance
acquisitions, capital expenditures, working capital or for other purposes.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations must be
dedicated to the repayment of indebtedness and will not be available for other
purposes; (ii) the Company's future ability to obtain additional debt financing
for working capital, capital expenditures, acquisitions or other purposes may
be limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and general economic
conditions and its ability to withstand a prolonged downturn in the
semiconductor industry. Certain of the Company's competitors currently operate
on a less leveraged basis and have significantly greater operating and
financing flexibility than the Company.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. The Company anticipates that
its operating cash flow, together with borrowings under the Bank Credit
Facility, will be sufficient to meet its operating expenses and to service its
debt requirements as they become due. However, if the Company is unable to
generate sufficient cash flow from operations to service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such
as reducing or delaying capital expenditures, selling assets, restructuring or
refinancing its indebtedness, or seeking additional equity capital. There can
be no assurance that any of these strategies could be effected on satisfactory
terms, if at all. In addition, in the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Secured Indebtedness has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture restricts, among other things, the Company's ability to: incur
additional indebtedness; incur liens; pay dividends or make certain other
restricted payments; consummate certain asset sales; enter into certain
transactions with affiliates; incur indebtedness that is subordinate in right
of payment to any indebtedness and not subordinated in right of payment to the
Notes; impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to the Company; merge or consolidate with any other
person; or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. See "Description of Notes--
Certain Covenants." In addition, the Bank Credit Facility contains other and
more restrictive covenants and will prohibit the Company from prepaying its
indebtedness (including the Notes). The Bank Credit Facility also requires the
Company to maintain specified financial ratios and satisfy certain financial
condition tests. The Company's ability to meet those financial ratios and tests
can be affected by events beyond its control, and there can be no assurance
that the Company will meet those tests. A breach of any of these
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covenants could result in a default under the Bank Credit Facility and/or the
Indenture. If an event of default should occur under the Bank Credit Facility,
the lenders can elect to declare all amounts of principal outstanding under the
Bank Credit Facility, together with all accrued interest, to be immediately due
and payable. If the Company were unable to repay those amounts, the lenders
could proceed against the collateral granted to them to secure that
indebtedness. If the Bank Credit Facility indebtedness were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient to
repay in full that indebtedness and the other indebtedness of the Company,
including the Notes. Substantially all the assets of the Company were pledged
as security under the Bank Credit Facility. See "Description of Bank Credit
Facility."
DEPENDENCE ON SEMICONDUCTOR INDUSTRY; CURRENT INDUSTRY CONDITIONS
The Company's business depends in large part upon the capital expenditures of
semiconductor manufacturers, which, in turn, depend upon the current and
anticipated market demand for semiconductors and products utilizing
semiconductors. The semiconductor industry is cyclical and has historically
experienced periodic downturns, which have often resulted in a decrease in the
semiconductor industry's demand for capital equipment, including process
control metrology systems. There is typically a six to twelve month lag between
changes in the semiconductor industry and the related impact on the level of
capital expenditures. In most cases, the resulting decrease in capital
expenditures has been more pronounced than the precipitating downturn in
semiconductor industry revenues. The semiconductor industry experienced a
downturn in 1996, during which industry revenues declined by an estimated 9.4%.
As a result, it is anticipated that there will be a decrease in the level of
capital expenditures during some or all of 1997. Dataquest forecasts that sales
of semiconductor capital equipment will decrease by approximately 18% in 1997.
Although there are indications that the semiconductor industry is beginning to
recover, there can be no assurance that the industry will continue to improve
nor can there be any assurance that the industry will not experience other,
possibly more severe and prolonged downturns in the future. The anticipated
decrease in the level of capital expenditures by the semiconductor industry
could have a material adverse effect on the Company's business, financial
condition and results of operation. In addition, the need for continued
investment in research and development and extensive ongoing customer service
and support capability will limit the Company's ability to reduce its expenses
during a downturn in the semiconductor industry. See "--Risks Associated with
Fixed Costs" and "Industry Overview."
RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY
The Company's future success and competitive position depend in part upon its
ability to obtain and maintain certain proprietary technology used in its
principal products, and the Company relies, in part, on patent, trade secret
and trademark law to protect that technology. The Company has obtained a number
of patents relating to its two key products, the Opti-Probe and Therma-Probe
systems. The Company owns 24 U.S. patents with expiration dates ranging from
1999 to 2013 and has filed applications for two additional U.S. patents. In
addition, the Company owns 45 foreign patents with expiration dates ranging
from 1999 to 2013 and has filed applications for additional foreign patents.
There can be no assurance that any of the Company's pending patent
applications will be approved, that the Company will develop additional
proprietary technology that is patentable, that any patents owned by or issued
to the Company will provide the Company with competitive advantages or that
these patents will not be challenged by any third parties. Furthermore, there
can be no assurance that third parties will not design around the Company's
patents. Any of the foregoing results could have a material adverse effect on
the Company's business or the Company's financial condition.
In addition to patent protection, the Company relies upon trade secret
protection for its confidential and proprietary information and technology. The
Company routinely enters into confidentiality agreements with its employees.
However, there can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach or that the
Company's confidential and proprietary information and technology will not be
independently developed by or become otherwise known by third parties.
The commercial success of the Company will also depend, in part, on its
ability to avoid infringing or misappropriating any patents or other
proprietary rights owned by third parties. If the Company is found to infringe
or misappropriate a third party's patent or other proprietary rights, the
Company could be required to
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pay damages to the third party, alter its products or processes, obtain a
license from the third party or cease certain activities, including making or
selling certain products. If the Company is required to do any of the
foregoing, there can be no assurances that the Company will be able to do so
on commercially favorable terms, if at all. The Company's inability to do any
of the foregoing on commercially favorable terms could have a material adverse
impact on the Company's business or the Company's financial condition.
Litigation may be necessary to enforce any patents issued to or licensed to
the Company or to determine the scope and/or validity of a third party's
patent or other proprietary rights. Any such litigation, regardless of
outcome, could be expensive and time consuming and, as discussed above, could
subject the Company to significant liabilities or require the Company to cease
using certain technology and, consequently, could have a material adverse
effect on the Company's business or the Company's financial condition.
The Company is currently the plaintiff in certain patent infringement suits
filed against Jenoptik GmbH ("Jenoptik"), a German competitor, in the United
States and Germany claiming infringement of certain of the Company's patents
relating to the ion implant measurement technology utilized by the Company's
Therma-Probe system. In both of these actions, Jenoptik denies infringement
and has alleged that such patents are invalid. A material adverse effect on
the Company's business or the financial condition could occur if one or more
of the Company's U.S. patents and/or European patents are found to be invalid.
See "Business--Legal Proceedings."
RISKS ASSOCIATED WITH FIXED COSTS
The Company's operations are characterized by relatively high fixed costs
due to the need for continued investment in research and development and
extensive ongoing customer service and support capability. In addition,
because of the Company's emphasis on research and development and
technological innovation, there can be no assurance that the fixed costs
associated with the Company's manufacturing processes will not increase in the
future. Therefore, the Company's operating results could be adversely affected
depending on the level of revenues relative to fixed costs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
COMPETITION
The semiconductor capital equipment industry is highly competitive. The
Company faces substantial competition in each of the markets it serves from
established competitors, some of which have greater financial, engineering,
manufacturing and marketing resources than the Company. Many of the Company's
competitors are investing heavily in the development of new products aimed at
applications currently served by the Company. The Company's competitors in
each product area can be expected to continue to improve the design and
performance of their products and to introduce new products with competitive
prices and performance characteristics. Although the Company has not
historically been forced to reduce its prices, there can be no assurance that
competitive pressures will not necessitate price reductions, adversely
affecting operating results, in the future. Although the Company believes that
it has certain technical and other advantages over its competitors,
maintaining such advantages will require a continued high level of investment
by the Company in research and development and sales and marketing. There can
be no assurance that the Company will have sufficient resources to continue to
make such investments or that the Company will be able to make the
technological advances necessary to maintain such competitive advantages.
The market for the Company's products is characterized by rapidly changing
technology and evolving industry standards. There can be no assurance that the
current technology base within the Company can be advanced to address all
customer needs. In addition, the Company believes that once a device
manufacturer has selected a particular vendor's capital equipment, that
manufacturer generally relies upon that vendor's equipment for that specific
production line application and, to the extent possible, subsequent
generations of that vendor's systems. Accordingly, it may be difficult to
achieve significant sales to a particular customer once another vendor's
capital equipment has been selected by that customer unless there are
compelling reasons to do so, such as significant performance or cost
advantages.
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CONCENTRATION OF CUSTOMERS
During Fiscal 1997, sales to Intel Corporation and Samsung Semiconductor
Inc. accounted for approximately 13% and 10%, respectively, of the Company's
net revenues, and sales to the Company's top twenty customers in the aggregate
accounted for approximately 78% of the Company's net revenues. As customers
seek to establish closer relationships with their suppliers, the Company
expects that its customer base will continue to become more concentrated. If,
for any reason, any of its key customers were to purchase significantly less
of the Company's products in the future, such decreased level of purchases
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Customers."
RELIANCE ON MANUFACTURERS' SALES REPRESENTATIVES
Approximately 50% of the Company's sales are made through manufacturers'
sales representatives, including all of the Company's sales to customers
located in Japan and Taiwan. The activities of these representatives are not
within the control of the Company, and they may sell products manufactured by
other manufacturers. In addition, in some locations the Company's
manufacturing sales representatives also provide field service to the
Company's customers. A reduction in the sales efforts or financial viability
of such manufacturers' sales representatives, or a termination of the
Company's relationship with such representatives, could adversely affect the
Company's sales, financial results and ability to support its customers.
Although management believes that it maintains good relations with its sales
representatives, there can be no assurance that such relationships will
continue. See "Business--Sales and Marketing."
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales accounted for approximately 59.7% of the Company's total
revenues for Fiscal 1997. The Company anticipates that international sales
will continue to account for a significant portion of its revenue in the
foreseeable future. International sales are subject to certain risks,
including unexpected changes in regulatory requirements, tariffs and other
market barriers, political and economic instability, potentially adverse tax
consequences, natural disasters, outbreaks of hostilities, difficulties in
accounts receivable collection, extended payment terms, difficulties in
managing foreign sales representatives and difficulties in staffing and
managing foreign branch operations. Since a substantial majority of the
Company's international sales are denominated in U.S. dollars, sales to
international customers may be affected by fluctuations in the U.S. dollar,
which could increase the sales price in local currencies of the Company's
products. The Company is also subject to the risks associated with the
imposition of legislation and import and export regulations. The Company
cannot predict whether tariffs, quotas, duties, taxes or other changes or
restrictions will be implemented by the United States or other country upon
the import or export of the Company's products in the future. In addition, the
laws of certain countries in which the Company's products are or may be sold
may not provide the Company's products and intellectual property rights with
the same degree of protection as the laws of the United States. There can be
no assurance that these factors will not have a material adverse effect on the
Company's business, financial condition or results of operations.
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
The semiconductor capital equipment industry as a whole is characterized by
rapidly changing technology and industry standards, along with frequent new
product introductions. The Company's success in these markets will depend upon
its ability to design, develop, manufacture, assemble, test, market and
support new products and enhancements on a timely and cost-effective basis.
Failure to do so could harm the Company's competitive position. There can be
no assurance that the Company will successfully identify new product
opportunities and develop and bring new products to market in a timely and
cost-effective manner, or that products or technologies developed by others
will not render the Company's products or technologies obsolete or
noncompetitive. A fundamental shift in technology in the Company's product
markets could have a material adverse effect on the Company, particularly in
light of the fact that the Company derives substantially all of its revenues
from sales of its two products, the Opti-Probe and Therma-Probe systems.
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LENGTHY SALES CYCLE
Sales of the Company's systems depend, in significant part, upon the
decision of a prospective customer to increase its existing capacity by either
constructing new fabs or expanding its existing fabs, either of which
typically involves a significant capital commitment. In view of the
significant investment involved in a system purchase, the Company may
experience delays in obtaining purchase orders while the customer plans for
such expansion and evaluates and receives approvals for the purchase of the
Company's systems. Due to these and other factors, the Company's systems
typically have lengthy sales cycles during which the Company may expend
substantial funds and management effort. In addition, lengthy sales cycles
subject the Company to a number of significant risks, including inventory
obsolescence and fluctuations in operating results over which the Company has
little or no control.
DEPENDENCE ON SUPPLIERS
Certain of the components and subassemblies included in the Company's
systems are obtained from a single source or a limited group of suppliers.
Although the Company seeks to reduce dependence on those sole and limited
source suppliers, the partial or complete loss of certain of these sources
could have at least a temporary adverse effect on the Company's results of
operations and damage customer relationships. Further, a significant increase
in the price of one or more of these components could adversely affect the
Company's results of operations.
RISKS ASSOCIATED WITH A SINGLE MANUFACTURING FACILITY
The Company produces all of its products in its manufacturing facility
located in Fremont, California. The Company's manufacturing processes are
highly complex and require sophisticated and costly equipment. As a result,
any prolonged disruption in the operations of the Company's manufacturing
facility, whether due to technical or labor difficulties, destruction of or
damage to this facility or other reasons, could have a material adverse effect
on the Company's financial condition or results of operations. See "Business--
Facilities."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, customer
support, finance and manufacturing personnel, certain of whom would be
difficult to replace. The loss of the services of certain of these executives
could have an adverse effect on the Company. There can be no assurance that
the services of such personnel will continue to be available to the Company.
The Company entered into employment agreements with certain members of its
senior management team in connection with the Recapitalization. In addition,
the Company believes that its success depends on its ability to attract and
retain additional qualified employees and that the failure to recruit such
other skilled personnel could have a material adverse effect on the Company.
See "Management--Employment Agreements."
ENVIRONMENTAL LIABILITIES; OTHER GOVERNMENTAL REGULATIONS
The Company is subject to various federal, state, local and foreign
environmental laws and regulations relating to the discharge, storage,
treatment, handling, and disposal of certain materials, substances and water
used in or resulting from its operations and the remediation of contamination
associated with releases of hazardous substances both at the Company's
facilities and at offsite disposal locations. The Company's operations are
also governed by laws and regulations relating to workplace safety and worker
health which, among other things, regulate employee exposure to hazardous
substances in the workplace. The nature of the Company's operations expose it
to the risk of liabilities or claims with respect to environmental and
workplace health and safety matters, and there can be no assurance that
material costs will not be incurred in connection with such liabilities or
claims.
Based on information currently available to management, management believes
that the cost of compliance with existing environmental and health and safety
laws and regulations (and liability for known environmental conditions) will
not have a material adverse effect on the Company's business, financial
condition or results of operations. However, management cannot predict which
environmental or health and safety legislation or
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regulations will be enacted in the future or how existing or future laws or
regulations will be enforced, administered or interpreted, nor can it predict
the amount of future expenditures which may be required in order to comply
with such environmental or health and safety laws or regulations or the
respond to such environmental claims.
CONTROLLING STOCKHOLDERS
The Bain Capital Funds hold approximately 58% of the Company's outstanding
voting stock. In addition, the Bain Capital Funds and substantially all of the
Company's other stockholders have entered into a stockholders and/or voting
agreement regarding, among other things, the voting of such stock. By virtue
of such stock ownership and these agreements, the Bain Capital Funds has the
power to control all matters submitted to stockholders of the Company, to
elect a majority of the directors of the Company and to exercise control over
the business, policies and affairs of the Company. The interests of the Bain
Capital Funds as equity holders may differ from the interests of holders of
the Notes. See "Certain Relationships and Related Transactions--Stockholders
Agreement."
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, each holder of Notes will have the right to
require the Company to repurchase its Notes at 101% of the principal amount
thereof plus accrued and unpaid interest outstanding, if any, to the date of
repurchase. The source of funds for any such repurchase will be the Company's
available cash or cash generated from operating or other sources, including
borrowing, sales of assets, sales of equity or funds provided by a new
controlling person. A Change of Control will likely trigger an event of
default under the Bank Credit Facility which would permit the lenders thereto
to accelerate collection of the debt under the Bank Credit Facility. However,
there can be no assurance that sufficient funds will be available at the time
of any Change of Control to make any required repurchases of Notes tendered
and to repay debt under the Bank Credit Facility. Any future credit agreements
or other agreements relating to secured indebtedness to which the Company may
become party may contain similar restrictions and provisions. See "Description
of Notes" and "Description of Bank Credit Facility."
RISKS ASSOCIATED WITH FRAUDULENT CONVEYANCE LIABILITY
In connection with the Recapitalization, the Company incurred substantial
indebtedness, including the indebtedness under the Notes. If under relevant
federal and state fraudulent conveyance statutes in a bankruptcy,
reorganization or rehabilitation case or similar proceeding or a lawsuit by or
on behalf of unpaid creditors of the Company, a court were to find that, at
the time the Notes were issued, (i) the Company issued the Notes, with the
intent of hindering, delaying or defrauding current or future creditors or
(ii)(A) the Company received less than reasonably equivalent value or fair
consideration for issuing the Notes, and (B) the Company, (1) was insolvent or
was rendered insolvent by reason of the Recapitalization and/or such related
transactions, (2) was engaged, or about to engage, in a business or
transaction for which its assets constituted unreasonably small capital, (3)
intended to incur, or believed that it would incur, debts beyond its ability
to pay as such debts matured (as all of the foregoing terms are defined in or
interpreted under such fraudulent conveyance statutes) or (4) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment, the judgment is
unsatisfied), such court could avoid or subordinate the Notes to presently
existing and future indebtedness of the Company and take other action
detrimental to the holders of the Notes, including, under certain
circumstances, invalidating the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however, the Company would be considered insolvent if,
at the time it incurs the indebtedness constituting the Notes, either (i) the
fair market value (or fair saleable value) of its assets is less than the
amount required to pay its total existing debts and liabilities (including the
probable liability on contingent liabilities) as they become absolute and
matured or (ii) it is incurring debts beyond its ability to pay as such debts
mature.
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The Company's Board of Directors (as constituted following the
Recapitalization) and management believe that at the time of its issuance of
the Notes, the Company (i) will (A) be neither insolvent nor rendered
insolvent thereby, (B) have sufficient capital to operate its business
effectively and (C) be incurring debts within its ability to pay as the same
mature or become due and (ii) will have sufficient resources to satisfy any
probable money judgment against it in any pending action. In reaching the
foregoing conclusions, the Company has relied upon its analysis of internal
cash flow projections and estimated values of assets and liabilities of the
Company. There can be no assurance, however, the such analysis will prove to
be correct or that a court passing on such questions would reach the same
conclusions.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
New Notes by holders who are entitled to participate in this Exchange Offer.
The holders of Old Notes (other than any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who are
not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement with respect to such Old Notes. The New Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the New Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchaser has advised the Company that
it currently intends to make a market in the New Notes, but it is not
obligated to do so and may discontinue such market making at any time. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer and the pendency of the Shelf Registration Statement. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Notes or as to the liquidity of the trading market for the New Notes.
If a trading market does not develop or is not maintained, holders of the New
Notes may experience difficulty in reselling the New Notes or may be unable to
sell them at all. If a market for the New Notes develops, any such market may
be discontinued at any time.
If a public trading market develops for the New Notes, future trading prices
of such securities will depend on many factors including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal or
Agent's Message and all other required documents. Therefore, holders of the
Old Notes desiring to tender such Old Notes in exchange for New Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty
to give notification of defects or irregularities with respect to the tenders
of Old Notes for exchange. Old Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer."
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RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including,
without limitation, statements concerning the Company's operations, economic
performance and financial condition, including in particular statements
relating to the Company's business and growth strategy. These forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The words "believe, " "expect,"
"anticipate" and other similar expressions generally identify forward-looking
statements. Holders are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. These forward-
looking statements are based largely on the Company's current expectations and
are subject to a number of risks and uncertainties, including, without
limitation, those identified under "Risk Factors" and elsewhere in this
Prospectus and other risks and uncertainties indicated from time to time in
the Company's filings with the Securities and Exchange Commission. Actual
results could differ materially from these forward-looking statements. In
addition, important factors to consider in evaluating such forward-looking
statements include changes in external market factors, changes in the
Company's business or growth strategy or an inability to execute its strategy
due to changes in its industry or the economy generally, the emergence of new
or growing competitors and various other competitive factors. In light of
these risks and uncertainties, there can be no assurance that the matters
referred to in the forward-looking statements contained in this Prospectus
will in fact occur.
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THE RECAPITALIZATION
Bain Capital began discussions with the Company's existing stockholders
regarding a potential transaction in April 1996 and executed a letter of intent
regarding such a transaction in August 1996. The letter of intent, among other
things, outlined the general terms of the transaction and established the
Company's equity value for purposes of a transaction. In pursuing the
Recapitalization, Bain Capital considered, among other things, the following
investment considerations: (i) the favorable long-term trends within the
process control metrology market; (ii) the Company's dominant position in the
process control metrology segments; and (iii) the Company's strong and
experienced management team. Bain Capital believes that these favorable
investment considerations, together with increases in EBITDA multiples for
publicly-traded companies within the semiconductor capital equipment industry
since the execution of the letter of intent, make the Company an attractive
investment opportunity for participants in the Recapitalization.
On December 18, 1996, the Bain Capital Funds and Toray Industries, Inc.,
Toray Industries (America), Inc. (collectively, "Toray") and Shimadzu
Corporation ("Shimadzu" and, collectively with Toray, the "Existing
Stockholders") and the Company entered into a Recapitalization Agreement (the
"Recapitalization Agreement"). Pursuant to the Recapitalization Agreement: (i)
the Company redeemed from the Existing Stockholders approximately 86.6% of
their existing shares of the common stock of the Company (the "Old Common
Stock"); (ii) the Bain Capital Funds and Sutter Hill purchased from the Company
shares of Old Common Stock; (iii) the Existing Stockholders converted all of
their shares of Old Common Stock not otherwise redeemed for newly authorized
and issued shares of Series A Voting Convertible Preferred Stock, par value
$0.01 per share ("Preferred Stock"), Class L Common Stock, par value $0.01 per
share ("Class L Common") and Class A Common Stock, par value $0.01 per share
("Class A Common") of the Company; and (iv) the Bain Capital Funds and Sutter
Hill converted all of their shares of Old Common Stock for newly authorized and
issued shares of Class L Common and Class A Common. As part of the
Recapitalization, the Company also: (i) repaid substantially all of its
outstanding borrowings under existing loan agreements and (ii) paid fees and
expenses related to the Recapitalization.
The Company used approximately $150.0 million to complete the
Recapitalization, including the payment of related fees and expenses. In order
to finance the Recapitalization, the Company: (i) issued $115.0 million in
aggregate principal amount of Notes in the Offering; (ii) received an equity
contribution of $20.0 million in cash from the Bain Capital Funds, Sutter Hill
and the Management Investors; and (iii) converted equity securities received
from its Existing Stockholders having a value of $15.0 million into shares of
Preferred Stock and Common Stock. Upon completion of the Recapitalization, the
Company would have had cash and cash equivalents of approximately $16.9 million
on a pro forma basis as of April 6, 1997.
In connection with the Recapitalization, the Management Investors: (i)
purchased an aggregate of 1,226,331 shares of Class A Common and 136,258 shares
of Class L Common; (ii) purchased an aggregate of 1,343,750 shares of Class B
Common Stock, par value $0.01 per share (the "Class B Common"), which is
subject to quarterly vesting over a five-year period; and (iii) received
options to purchase an aggregate of 1,343,750 shares of Class B Common. See
"Management--Stock Plans."
The foregoing transactions are collectively referred to herein as the
"Recapitalization." The Class A Common, Class B Common and Class L Common are
sometimes referred to herein collectively as the "Common Stock."
22
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the New Notes offered hereby. In
consideration for issuing the New Notes contemplated in this Prospectus, the
Company will receive Old Notes in like principal amount, the form and terms of
which are the same as the form and terms of the New Notes (which replace the
Old Notes), except as described herein.
The gross proceeds of $115.0 million from the issuance of the Old Notes,
together with the Equity Contribution, were used to consummate the
Recapitalization and pay the related fees and expenses. See "The
Recapitalization."
The following table illustrates the sources and uses of funds for the
Recapitalization:
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Notes............................................... $115.0
Equity Contribution(1).............................. 35.0
------
Total Sources..................................... $150.0
======
USES OF FUNDS:
Redemption of Old Common Stock...................... $96.9
Repayment of existing indebtedness(2)............... 27.1
Converted shares(3)................................. 15.0
Estimated fees and expenses(4)...................... 11.0
------
Total Uses........................................ $150.0
======
</TABLE>
- --------
(1) The Equity Contribution of $35.0 million was comprised of: (i) $20.0
million in cash from an investor group initially comprised of the Bain
Capital Funds, Sutter Hill and the Management Investors and (ii) equity
securities that had a value of $15.0 million owned by the Existing
Stockholders, which were converted into shares of Preferred Stock and
Common Stock in connection with the Recapitalization.
(2) The Company's existing indebtedness consists of: (i) an aggregate of $23.1
million of unsecured borrowings under four separate loan agreements, all of
which bear interest at variable rates equal to the federal funds rate plus
0.5% (approximately 6.3% as of April 6, 1997) and (ii) approximately $4.0
million of unsecured borrowings under a renewable note. The renewable note,
guaranteed by Toray, is due on May 31, 1997 and bears interest at 1.625%.
See Note 3 to Notes to Consolidated Financial Statements.
(3) Pursuant to the Recapitalization Agreement, the Existing Stockholders
converted all of their shares of Old Common Stock not otherwise redeemed
into shares of Preferred Stock and Common Stock. See "Principal
Stockholders."
(4) The fees and expenses consist of placement fees, commitment fees, financial
advisory fees and legal, accounting and other professional fees. Bain
Capital received compensation for their services in the Recapitalization.
See "Certain Relationships and Related Transactions--Advisory Agreement."
23
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
capitalization of the Company on a historical basis as of April 6, 1997 and on
a pro forma basis after giving effect to the Recapitalization as if it had
occurred on April 6, 1997. The Old Notes surrendered in exchange for the New
Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase or decrease in the
indebtedness of the Company. As such, no effect has been given to the Exchange
Offer in this capitalization table. This table should be read in conjunction
with the "Selected Historical Financial Data" and "Unaudited Pro Forma
Financial Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 6, 1997
-------------------------
ACTUAL PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents...................... $ 16,741 $ 16,920
=========== ===========
Long-term debt (including current maturities):
Bank Credit Facility (1)..................... $ -- $ --
Senior Notes................................. -- 115,000
Other notes payable and capital lease
obligations................................. 27,451 517
----------- -----------
Total long-term debt....................... 27,451 115,517
Mandatorily redeemable preferred stock......... -- 13,800
Shareholders' equity:
Old Common Stock............................. 45 --
Class A Common............................... -- 90
Class B Common............................... -- 13
Class L Common............................... -- 10
Additional paid-in capital................... 60,465 21,471
Accumulated deficit.......................... (38,927) (90,386)
Notes receivable from shareholders........... -- (302)
Accumulated foreign currency translation
adjustments................................. (1,438) (1,438)
----------- -----------
Total shareholders' equity (net capital
deficiency)............................... 20,145 (70,542)
----------- -----------
Total capitalization....................... $ 47,596 $ 58,775
=========== ===========
</TABLE>
- --------
(1) The Bank Credit Facility has a total of $30.0 million available on a
revolving basis, of which $7.8 million has been used to issue letters of
credit outstanding upon closing of the Recapitalization. See "Description
of Bank Credit Facility."
24
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Pro Forma Condensed Statement of Income for the Fiscal Year
ended April 6, 1997 gives pro forma effect to the Recapitalization, as if it
had occurred on the beginning of such period. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet at April 6, 1997 gives effect to the
Recapitalization as if it had occurred on that date. The Old Notes surrendered
in exchange for the New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any
increase or decrease in the indebtedness of the Company. As such, no effect has
been given to the Exchange Offer in the pro forma financial data included
herein. The Unaudited Pro Forma Condensed Statement of Income does not (i)
purport to represent what the Company's results of operations would have been
if the Recapitalization had occurred as of the date indicated or what such
results will be for any future periods or (ii) give effect to certain non-
recurring charges which resulted from the Recapitalization including a
management compensation charge related to the sale of a portion of the
Company's voting securities. The Unaudited Pro Forma Financial Data are based
upon assumptions that the Company believes are reasonable and should be read in
conjunction with the Consolidated Financial Statements and accompanying notes
thereto included in this Prospectus.
THERMA-WAVE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED APRIL 6, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net revenues................................ $109,493 $109,493
Cost of revenues............................ 49,795 49,795
-------- --------
Gross margin................................ 59,698 59,698
Operating expenses:
Research and development.................. 13,050 13,050
Selling, general and administrative....... 22,004 $ 1,000 (1) 23,004
Amortization of goodwill and purchased
intangibles.............................. 1,275 1,275
-------- -------- --------
Operating income............................ 23,369 (1,000) 22,369
Interest expense............................ 1,621 12,319 (2) 13,940
Interest income............................. (346) (346)
Other (income) expense, net................. (14) (14)
-------- -------- --------
Income (loss) before provision for income
taxes...................................... 22,108 (13,319) 8,789
Provision for income taxes.................. 9,007 (5,426)(3) 3,581
-------- -------- --------
Net income.................................. $ 13,101 $ (7,893) $ 5,208
======== ======== ========
OTHER DATA:
EBITDA(4)................................... $ 27,113 $ (1,000)(1) $ 26,113
======== ======== ========
Ratio of earnings to fixed charges(5)....... 11.4x -- 1.6x
</TABLE>
See accompanying notes
25
<PAGE>
THERMA-WAVE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FISCAL YEAR ENDED APRIL 6, 1997
(DOLLARS IN THOUSANDS)
(1) Represents the annual management fee to be paid to Bain Capital for
consulting and financial services to be provided to the Company. See
"Certain Relationships and Related Transactions--Advisory Agreement."
(2) The increase to pro forma interest expense as a result of the
Recapitalization is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 6, 1997
-------------
<S> <C>
Historical interest expense................................... $1,621
-------
Cash interest related to the Notes - (at 10 5/8%)............. 12,219
Commitment fee on unused portion of Bank Credit Facility at 150
0.50%........................................................ -------
Cash interest expense......................................... 12,369
Amortization of debt issuance costs ($11.0 million over a 7
year amortization period).................................... 1,571
-------
Interest expense from Recapitalization debt requirements...... 13,940
-------
Net increase.................................................. $12,319
=======
</TABLE>
(3) Reflects the income tax adjustment required to result in a pro forma income
tax provision based on: (i) the Company's historical tax provision using
historical amounts and (ii) the direct tax effects of the pro forma
adjustments described herein.
(4) "EBITDA" is defined herein as income before income taxes, plus
depreciation, amortization, net interest expense and other non-operating
(income) expense, net. EBITDA is presented because the Company believes it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.
(5) For purposes of computing this ratio, earnings consists of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and the estimated interest portion of rent expense.
26
<PAGE>
THERMA-WAVE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 6, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO
ACTUAL ADJUSTMENTS FORMA
------- ----------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $16,741 $77,066 (2) $16,920
(96,900)(3)
20,000 (4)
13 (5)
Accounts receivable, net of allowance for
doubtful accounts............................. 21,532 21,532
Inventories.................................... 17,427 17,427
Deferred taxes................................. 5,556 5,556
Other current assets........................... 383 383
------- ------- -------
Total current assets......................... 61,639 179 61,818
Net property and equipment..................... 5,843 5,843
Patents, net of accumulated amortization....... 481 481
Security deposits and other.................... 657 657
Deferred financing costs....................... -- 11,000 (2) 11,000
------- ------- -------
Total assets................................. $68,620 $11,179 $79,799
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (NET
CAPITAL DEFICIENCY)
Current liabilities:
Short-term notes payable....................... $ 3,834 ($3,834)(2) $ --
Accounts payable............................... 4,076 4,076
Accrued expenses............................... 13,846 13,846
Deferred service revenue....................... 1,075 1,075
Capital lease obligations due within one year.. 88 88
------- ------- -------
Total current liabilities.................... 22,919 (3,834) 19,085
Notes payable.................................. 23,100 (23,100)(2) --
Senior notes................................... -- 115,000 (2) 115,000
Capital lease obligations due after one year... 429 429
Deferred taxes................................. 1,685 1,685
Deferred rent and other........................ 342 342
------- ------- -------
Total liabilities............................ 48,475 88,066 136,541
Mandatorily redeemable preferred stock......... -- 13,800 (3) 13,800
Shareholders' equity (net capital deficiency):
Common stock................................... 45 (45)(3) --
-- (4)
Common stock--Class A.......................... -- 5 (3) 90
85 (4)
Common stock--Class B.......................... -- 13 (5) 13
Common stock--Class L.......................... -- 1 (3) 10
9 (4)
Additional paid-in capital..................... 60,465 1,733 (1) 21,471
(60,935)(3)
19,906 (4)
302 (5)
Accumulated deficit............................ (38,927) (1,733)(1) (90,386)
(49,726)(3)
Notes receivable from shareholders............. -- (302)(5) (302)
Accumulated foreign currency translation
adjustments................................... (1,438) (1,438)
------- ------- -------
Total shareholders' equity (net capital
deficiency)................................. 20,145 (90,687) (70,542)
------- ------- -------
Total liabilities and shareholders' equity
(net capital deficiency).................... $68,620 $11,179 $79,799
======= ======= =======
</TABLE>
27
<PAGE>
THERMA-WAVE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 6, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
following unaudited pro forma adjustments:
(1) Represents the compensation paid directly by the Existing Stockholders to
certain members of management for effecting the Recapitalization totalling
$2,888. As a result, compensation expense net of an estimated statutory
effective income tax rate of 40% was recorded with an offsetting credit to
additional paid-in-capital.
(2) Reflects the incurrence of debt, the repayment of the Company's existing
indebtedness and payment of fees and expenses to effect the
Recapitalization as follows:
<TABLE>
<CAPTION>
$115,000
Gross proceeds from the Initial Offering......................... --------
<S> <C>
Repayment of existing indebtedness:
Short term notes payable........................................ (3,834)
Notes payable................................................... (23,100)
--------
(26,934)
--------
Payment of fees and expenses..................................... (11,000)
--------
Net cash increase............................................... $77,066
========
</TABLE>
(3) Represents the redemption of 45.5 million shares or 86.6% of the
outstanding capital stock of the Company owned by the Existing Stockholders
for $96,900 in cash and the conversion of the remaining shares outstanding
with an aggregate value of $15,000 to: (i) 748,739 shares of mandatorily
redeemable, convertible preferred stock with a liquidation value of
$13,800; (ii) 519,286 shares of Class A Common; and (iii) 57,699 shares of
Class L Common (the aggregate value of the Class A and L Common is $1,200).
(4) Reflects the purchase of Old Common Stock in exchange for consideration of
$20,000 and the immediate conversion of those shares into approximately 8.5
million shares of Class A Common and approximately 1.0 million shares of
Class L Common.
(5) Represents the sale of 1,343,750 shares of Class B Common to the Management
Investors in exchange for cash of $13 and a recourse note receivable of
$302. See "Management--Stock Plans" contained elsewhere in this Prospectus
for description of restrictions relating to this stock.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data as of March 31, 1996 and
April 6, 1997 and for the Fiscal Years ended April 2, 1995, March 31, 1996 and
April 6, 1997 have been derived from the Company's consolidated financial
statements, which were audited by Ernst & Young LLP, and are included
elsewhere in this Prospectus. The selected historical financial data as of
March 28, 1993, March 27, 1994 and April 2, 1995 and for the Fiscal Years
ended March 27, 1994 and March 28, 1993 were derived from the consolidated
financial statements of the Company, which were audited by Ernst & Young LLP
and which do not appear elsewhere in this Prospectus. The selected historical
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and accompanying notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR (1)
---------------------------------------------
1993 1994 1995 1996 1997
-------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............... $14,250 $20,770 $55,675 $79,293 $109,493
Cost of revenues........... 10,561 11,262 25,024 35,027 49,795
-------- ------- ------- ------- --------
Gross margin............... 3,689 9,508 30,651 44,266 59,698
Operating expenses:
Research and development.. 5,372 3,586 5,942 10,072 13,050
Selling, general and
administrative........... 7,508 9,092 13,299 18,704 22,004
Amortization of goodwill
and purchased
intangibles.............. 1,912 1,912 1,912 1,912 1,275
-------- ------- ------- ------- --------
Total operating expenses... 14,792 14,590 21,153 30,688 36,329
-------- ------- ------- ------- --------
Operating income (loss).... (11,103) (5,082) 9,498 13,578 23,369
Interest expense........... 1,320 1,543 1,998 1,722 1,621
Interest income............ (145) (331) (102) (247) (346)
Other (income) and expense,
net....................... 345 125 115 138 (14)
-------- ------- ------- ------- --------
Income (loss) before
provision for income
taxes..................... (12,623) (6,419) 7,487 11,965 22,108
Provision for income taxes. -- -- -- 4,684 9,007
-------- ------- ------- ------- --------
Net income (loss).......... ($12,623) ($6,419) $7,487 $7,281 $13,101
======== ======= ======= ======= ========
OTHER FINANCIAL DATA:
EBITDA(2).................. ($7,936) ($2,117) $12,496 $17,185 $ 27,113
Cash provided by (used in)
operating activities...... (9,797) (6,006) 451 5,867 11,860
Cash used in investing
activities................ (1,456) (299) (2,048) (4,965) (1,575)
Cash provided by (used in)
financing activities...... 9,003 (6,304) 7,630 (1,278) (851)
Depreciation and
amortization.............. 3,167 2,965 2,998 3,607 3,744
Capital expenditures....... 1,036 60 1,616 4,361 1,091
Ratio of earnings to fixed
charges(3)................ N/A N/A 4.4x 6.9x 11.4x
BALANCE SHEET DATA:
Working capital (excluding
cash and current
maturities of long-term
debt) .................... $2,793 $4,955 $15,409 $21,237 $ 25,901
Total assets............... 22,368 23,039 45,081 53,056 68,620
Long-term debt (including
current maturities and net
of cash).................. 30,091 35,421 22,039 21,136 10,710
Shareholders' equity (net
capital deficiency)....... (18,191) (22,845) (379) 6,903 20,145
</TABLE>
- --------
(1) The Company's Fiscal Year refers to the 52/53 week period ending on the
Sunday on or nearest preceding March 31 of each year for periods prior to
1997 and the Sunday on or following March 31 of each year for periods
thereafter.
(2) "EBITDA" is defined herein as income before income taxes, plus
depreciation, amortization, net interest expense and other non-operating
(income) expense, net. EBITDA is presented because the Company believes it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.
(3) For purposes of computing this ratio, earnings consists of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and the estimated interest portion of rent expense. Earnings were
insufficient to cover fixed charges by $11.1 million and $4.7 million for
the Fiscal Years ended March 28, 1993 and March 27, 1994, respectively.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a worldwide leader in the development, manufacture, marketing
and service of process control metrology systems for use in the manufacture of
semiconductors. The Company's process control metrology systems are principally
used to measure ion implantation and thin film deposition and removal. The
Company has developed two major lines of process control metrology systems: (i)
the Therma-Probe system and (ii) the Opti-Probe system. The Therma-Probe
system, introduced in 1985, utilizes the Company's proprietary thermal wave
technology and is the predominant nondestructive process control metrology
system used to measure the critical ion implantation process on product wafers
in the fabrication of semiconductors. Since its introduction, the Therma-Probe
has captured over 95% of the market for ion implantation on product wafers and
is installed in virtually every major semiconductor fabrication facility
worldwide. The Opti-Probe system, introduced in 1992, significantly improved
upon existing thin film metrology systems by successfully integrating different
measurement technologies into one system and utilizing proprietary optical
technologies. The Company believes that the Opti-Probe has captured over 30% of
the thin film measurement market in less than five years.
From its inception in 1982 through March 1985, the Company invested primarily
in research and product development. In that time, the Company introduced its
first Therma-Probe system which was first shipped to customers for beta-testing
in Fiscal 1985 and first shipped commercially in Fiscal 1986. The Company
introduced its Opti-Probe system in Fiscal 1992. The Company's subsequent
growth is attributable to increased levels of capital expenditures by the
semiconductor industry, increased market penetration of the Opti-Probe system
and continued success of the Therma-Probe system.
The Company was acquired by Toray and Shimadzu in Fiscal 1992. As a result,
the Company has subsequently incurred substantial interest expense and
amortization expense from goodwill and purchased intangibles.
The Company's operations are characterized by relatively high fixed costs due
to the need for continued investment in research and development and extensive
ongoing customer service and support capability. As a result, changes in net
revenues tend to have a larger corresponding impact on EBITDA and operating
income levels. Other factors that may have an influence on the Company's
operating results include the timing of the receipt of orders from major
customers, product mix, competitive pricing pressures, the relative proportions
of domestic and international sales, the Company's ability to design,
manufacture and introduce new products on a cost effective and timely basis,
the delay between incurrence of expenses to further develop marketing and
service capabilities and realization of any benefits from such improved
capabilities, and the introduction of new products by the Company's
competitors.
30
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes Therma-Wave's historical results of
operations as a percentage of net revenues for the periods indicated. The
following data should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (1)
---------------------------
APRIL 2, MARCH 31, APRIL 6,
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............ 100.0% 100.0% 100.0%
Cost of revenues........ 44.9 44.2 45.5
----- ----- -----
Gross margin............ 55.1 55.8 54.5
Research and development
expenses............... 10.7 12.7 11.9
Selling, general and
administrative
expenses............... 23.9 23.6 20.1
Amortization of goodwill
and purchased
intangibles............ 3.4 2.4 1.2
----- ----- -----
Operating income (loss). 17.1 17.1 21.3
Interest expense........ 3.6 2.1 1.5
Interest income......... (0.2) (0.3) (0.4)
Other expense, net...... 0.3 0.2 0.0
----- ----- -----
Income before provision
for
income taxes........... 13.4 15.1 20.2
Provision for income
taxes.................. -- 5.9 8.2
----- ----- -----
Net income.............. 13.4% 9.2% 12.0%
===== ===== =====
OTHER DATA:
EBITDA.................. 22.4% 21.7% 24.8%
===== ===== =====
</TABLE>
- --------
(1) The Company's Fiscal Year refers to the 52/53 week period ending on the
Sunday on or nearest preceding March 31 of each year for periods prior to
1997 and the Sunday on or following March 31 of each year for periods
thereafter.
FISCAL YEAR ENDED APRIL 6, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
Net Revenues. Net revenues for the Fiscal Year ended April 6, 1997 increased
by $30.2 million, or 38.1%, to $109.5 million from $79.3 million for the
Fiscal Year ended March 31, 1996. This increase in the Company's net revenues
is primarily attributable to the increased market penetration of the Opti-
Probe and the overall expansion of the semiconductor industry. Of the increase
in net revenues, 85.4% was attributable to increases in Opti-Probe sales and
11.1% was attributable to increases in Therma-Probe sales. International sales
for the Fiscal Year ended April 6, 1997, increased to $65.4 million, or 59.7%
of net revenues, from $45.8 million, or 57.8% of net revenues, for the
comparable period ended March 31, 1996. The Company expects international
sales to continue to represent a substantial portion of net revenues.
Gross Margin. Gross margin for the Fiscal Year ended April 6, 1997 increased
by $15.4 million, or 34.9% to $59.7 million from $44.3 million for the Fiscal
Year ended March 31, 1996. This increase is primarily attributable to
increased shipments of both the Therma-Probe and Opti-Probe systems. As a
percentage of net revenues, gross margin for the Fiscal Year ended April 6,
1997 decreased to 54.5% from 55.8% for the comparable period ended March 31,
1996. This decrease in gross margin as a percentage of net revenues is due to
a change in product mix, which was partially offset by operating leverage
associated with increased sales volumes and improved average selling prices.
Research and Development Expenses ("R&D"). R&D for the Fiscal Year ended
April 6, 1997 increased by $3.0 million, or 29.6%, to $13.1 million from $10.1
million for the Fiscal Year ended March 31,
31
<PAGE>
1996 due to an increase in the number of employees in the R&D department. R&D
as a percentage of net revenues for the Fiscal Year ended April 6, 1997
decreased to 11.9% from 12.7% for the comparable period ended March 31, 1996.
The decrease in R&D as a percentage of net revenues is primarily attributable
to net revenues increasing at a higher rate than R&D. The Company expects that
the level of spending on R&D will continue to increase because it believes
that technical leadership is essential to its success and is committed to a
high level of research and development.
Selling, General and Administrative Expenses ("SG&A"). SG&A for the Fiscal
Year ended April 6, 1997 increased by $3.3 million, or 17.6%, to $22.0 million
from $18.7 million for the Fiscal Year ended March 31, 1996 due to an increase
in headcount in relevant departments and increased commission expense on a
larger net revenue base. SG&A as a percentage of net revenues for the Fiscal
Year ended April 6, 1997 decreased to 20.1% from 23.6% for the comparable
period ended March 31, 1996. The decrease in SG&A as a percentage of net
revenues is primarily due to the relatively fixed nature of SG&A, with the
exception of sales representative commission expenses.
Operating Income. Operating income for the Fiscal Year ended April 6, 1997
increased by $9.8 million, or 72%, to $23.4 million from $13.6 million for the
Fiscal Year ended March 31, 1996. As a percentage of net revenues, operating
income for the Fiscal Year ended April 6, 1997 increased to 21.3% from 7.1%
for the comparable period ended March 31, 1996.
Interest Expense. Interest expense for the Fiscal Year ended April 6, 1997
decreased by $0.1 million, or 5.9%, to $1.6 million from $1.7 million for the
comparable period ended March 31, 1996. As a percentage of net revenues,
interest expense for the Fiscal Year ended April 6, 1997 was 1.5% as compared
to 2.1% for the comparable period ended March 31, 1996.
Provision for Income Taxes. Income taxes for the Fiscal Year ended April 6,
1997 increased by $4.3 million, or 92.3%, to $9.0 million from $4.7 million
for the comparable period ended March 31, 1996. In addition to higher
earnings, this increase was also caused by an increase in the effective tax
rate to 40.7% from 39.1% for the comparable period ended March 31, 1996. The
lower effective rate for the Fiscal Year ended March 31, 1996 reflects
utilization of net operating loss carry-forwards.
Net Income. For the reasons stated above, net income for the Fiscal Year
ended April 6, 1997 increased $5.8 million, or 79.9%, to $13.1 million from
$7.3 million.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED APRIL 2, 1995
Net Revenues. Net revenues for the Fiscal Year ended March 31, 1996
increased by $23.6 million, or 42.4%, to $79.3 million from $55.7 million for
the Fiscal Year ended April 2, 1995. This increase in the Company's net
revenues is primarily attributable to the increased market penetration of the
Opti-Probe system and an overall increase in the number of units sold as a
result of the overall expansion of the semiconductor industry. Of the increase
in net revenues, 83.2% was attributable to increases in Opti-Probe sales and
7.6% was attributable to increases in Therma-Probe sales. International sales
for the Fiscal Year ended March 31, 1996 increased to $45.8 million, or 57.8%
of net revenues, from $32.5 million, or 58.5% of net revenues for the
comparable period ended April 2, 1995.
Gross Margin. Gross margin for the Fiscal Year ended March 31, 1996
increased by $13.6 million, or 44.4%, to $44.3 million from $30.7 million for
the Fiscal Year ended April 2, 1995. This increase in primarily attributable
to increased shipments of Opti-Probe systems. As a percentage of net revenues,
gross margin for the Fiscal Year ended March 31, 1996 increased to 55.8% from
55.1% for the comparable period ended April 2, 1995. This improvement in gross
margin as a percentage of net revenues is due to operating leverage associated
with increased sales volumes and improved average sales prices, partially
offset by a change in product mix.
Research and Development Expenses. R&D for the Fiscal Year ended March 31,
1996 increased by $4.2 million, or 69.5%, to $10.1 million from $5.9 million
for the Fiscal Year ended April 2, 1995. R&D as a percentage of net revenues
for the Fiscal Year ended March 31, 1996 increased to 12.7% from 10.7% for the
comparable period ended April 2, 1995. The increase in R&D resulted from
continued investments by the Company in both new product development and
product enhancements.
32
<PAGE>
Selling, General and Administrative Expenses. SG&A for the Fiscal Year ended
March 31, 1996 increased by $5.4 million, or 40.6%, to $18.7 million from $13.3
million for the Fiscal Year ended April 2, 1995. The increase in SG&A is
primarily attributable to increased costs associated with additional sales
support personnel. As percentage of net revenues for the Fiscal Year ended
March 31, 1996, SG&A decreased to 23.6% from 23.9% for the comparable period
ended April 2, 1995.
Operating Income. Operating income for the Fiscal Year ended March 31, 1996
increased $4.1 million, or 43.0%, to $13.6 million from $9.5 million for the
Fiscal Year ended April 2, 1995. As a percentage of net revenues, operating
income for the Fiscal Year ended March 31, 1996 remained constant at 17.1%.
Interest Expense. Interest expense for the Fiscal Year ended March 31, 1996
decreased by $0.3 million, or 13.8%, to $1.7 million from $2.0 million for the
Fiscal Year ended April 2, 1995. As a percentage of net revenues, interest
expense for the Fiscal Year ended March 31, 1996 was 2.1% as compared to 3.6%
for the Fiscal Year ended April 2, 1995. This decrease is a result of lower
average borrowing levels.
Provision for Income Taxes. Income taxes for the Fiscal Year ended March 31,
1996 were $4.7 million while no provision for income taxes was necessary for
the comparable period ended April 2, 1995. The Company utilized net operating
loss carry-forwards for Federal, state and foreign income tax purposes and was
not required to provide for income taxes for the Fiscal Year ended April 2,
1995.
Net Income. For the reasons stated above, net income for the Fiscal Year
ended March 31, 1996 decreased by $0.2 million, or 2.8%, to $7.3 million from
$7.5 million for the Fiscal Year ended April 2, 1995.
QUARTERLY RESULTS OF OPERATIONS
The Company has experienced and expects to continue to experience significant
fluctuations in its quarterly results. The Company's expense levels are based,
in part, on expectations of future revenues. If revenue levels in a particular
quarter do not meet expectations, operating results are adversely affected. A
variety of factors could have an influence on the level of the Company's
revenues in a particular quarter. These factors include general economic
conditions, specific economic conditions in the semiconductor industry, the
timing of the receipt of orders from major customers, customer cancellations or
delay of shipments, specific feature requests by customers, production delays
or manufacturing inefficiencies, exchange rate fluctuations, management
decisions to commence or discontinue product lines, the Company's ability to
design, introduce and manufacture new products on a cost effective and timely
basis, the introduction of new products by the Company or its competition, the
timing of research and development expenditures, and expenses attendant to
acquisitions, strategic alliances and the future development of marketing and
service capabilities.
The following table sets forth the Company's unaudited operating results for
its last eight quarters. The information for each of the quarters is unaudited
but includes all adjustments, consisting only of normal recurring adjustments,
which management considers necessary for presentation thereof.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
1996 FISCAL YEAR ENDED APRIL 6, 1997
-------------------------------- -------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............ $17,845 $18,299 $16,197 $26,952 $28,715 $31,034 $24,206 $25,538
Operating income........ 3,847 2,982 465 6,284 6,426 8,803 4,462 3,678
Net income (loss)....... 2,166 1,468 (88) 3,735 3,503 4,923 2,400 2,275
OTHER DATA:
EBITDA.................. $4,622 $3,773 $1,277 $7,513 $7,475 $9,892 $5,492 $4,254
Backlog................. 18,111 22,163 32,627 56,883 46,953 35,024 35,535 41,787
</TABLE>
33
<PAGE>
BACKLOG
At April 6, 1997, the Company's backlog was $41.8 million compared to $56.9
million at March 31, 1996. The Company's backlog consists of product orders for
which a customer purchase order has been received and accepted and which is
scheduled for shipment within six months. Orders that are scheduled for
shipment beyond the six-month window are not included in backlog until they
fall within the six-month window. Orders are subject to rescheduling or
cancellation by the customer, usually without penalty. Backlog also consists of
recurring fees payable under support contracts with the Company's customers and
orders for spare parts and billable service. Because of possible changes in
product delivery schedules and cancellation of product orders and because the
Company's sales will sometimes reflect orders shipped in the same quarter that
they are received, the Company's backlog at any particular date is not
necessarily indicative of actual sales for any succeeding period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are for working capital,
consisting primarily of accounts receivable and inventories, capital
expenditures and debt service. Historically, the Company has funded its
activities principally from working capital, capital infusions from Toray and
Shimadzu and working capital lines of credit. In the Fiscal Years ended April
2, 1995 and March 27, 1994, Toray and Shimadzu invested $15.0 million and $2.0
million, respectively, for additional shares of the Company's common stock.
Cash flow provided by operating activities was $11.9 million, $5.9 million
and $0.5 million for the Fiscal Years ended April 6, 1997, March 31, 1996 and
April 2, 1995, respectively. The improvement in cash flow provided by operating
activities in Fiscal 1997 compared to Fiscal 1996 is due to higher net income.
The improvement in cash flow provided by operating activities in Fiscal 1996
compared with Fiscal 1995 is primarily due to a lower investment in working
capital, principally accounts receivable.
Capital expenditures were $1.1 million for the Fiscal Year ended April 6,
1997, $4.4 million for the Fiscal Year ended March 31, 1996 and $1.6 million
for the Fiscal Year ended April 2, 1995. During Fiscal 1996, the Company spent
approximately $4.4 million in capital expenditures the majority of which was
associated with the Company's move into its new facilities. The Company expects
to make additional capital expenditures of approximately $4.5 million during
the next twelve months to acquire additional capital equipment.
The Initial Offering enabled the Company to finance the Recapitalization. In
connection with the Recapitalization, the Company: (i) issued $115.0 million in
aggregate principal amount of the Notes; and (ii) received the Equity
Contribution of $35.0 million. See "The Recapitalization" and "Use of
Proceeds."
In connection with the Recapitalization, the Company entered into the Bank
Credit Facility. The Bank Credit Facility provides for borrowings of up to
$30.0 million for working capital and other general corporate purposes, and
bears interest, at the Company's option, at (i) the Base Rate (as defined in
the Bank Credit Facility) plus 1.75% or (ii) the Eurodollar Rate (as defined in
the Bank Credit Facility) plus 3.00%. The Company's borrowings under the Bank
Credit Facility are secured by substantially all of the Company's assets and a
pledge of substantially all of the capital stock of the Company's domestic
subsidiaries and 65% of the capital stock of the Company's foreign
subsidiaries. The Bank Credit Facility matures on the fifth anniversary of the
Recapitalization. Subsequent to the Recapitalization, the Company used $7.8
million of the available borrowings under the Bank Credit Facility to issue
letters of credit. See "Description of Bank Credit Facility."
The Company's principal sources of funds following the Recapitalization are
anticipated to be cash flows from operating activities, borrowings under the
Bank Credit Facility and estimated cash on hand of $16.7 million (as of April
6, 1997). The Company believes that these funds will provide the Company with
sufficient liquidity and capital resources for the Company to meet its current
and future financial obligations, including the payment of principal and
interest on the Notes, as well as to provide funds for the Company's working
capital, capital expenditures and other needs. No assurance can be given,
however, that this will be the case. Depending upon its rate of growth and
profitability, the Company may require additional equity or debt financing to
meet its
34
<PAGE>
working capital requirements or capital equipment needs. There can be no
assurance that additional financing will be available when required or, if
available, will be on terms satisfactory to the Company. The Company's future
operating performance and ability to service or refinance the Notes and to
repay, extend or refinance the Bank Credit Facility will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control. See "Risk Factors."
Foreign exchange rate fluctuations have historically not had a significant
impact on the Company's result of operations. Generally, sales to foreign
markets outside of Japan have been invoiced and paid in U. S. Dollars and sales
to Japanese customers have been invoiced and paid in Japanese Yen. See "Risk
Factors--Risks Associated with International Sales."
INFLATION
The impact of inflation on the Company's business has not been material for
the Fiscal Years ended April 6, 1997, March 31, 1996 and April 2, 1995.
35
<PAGE>
INDUSTRY OVERVIEW
SEMICONDUCTOR INDUSTRY
Semiconductors are the critical components used in an increasing number of
electronic products and systems. Continuous improvements in semiconductor
process and design technologies have led to smaller, more complex and more
reliable semiconductor devices at a lower cost per function. As device
performance has increased and size and cost have decreased, semiconductors have
expanded beyond their original primary applications in computer systems to
applications in telecommunications systems, automotive products, consumer
products and industrial automation and control systems. In addition, product
users and designers have demanded semiconductors with increased functionality,
higher levels of performance, greater reliability and shorter design cycle
times, all in smaller packages at lower costs. These improved capabilities have
resulted in increased semiconductor content as a percentage of the cost of
electronic products. According to a study published by Texas Instruments, the
value of semiconductors as a percentage of the cost of electrical devices has
increased from approximately 5% in the 1970s to approximately 16% in 1996. The
demand for electronic products has also expanded geographically with the
emergence of new markets, particularly in Asia, which has led to a
corresponding expansion in the demand for semiconductors. According to
Dataquest, since 1991 the global semiconductor market has expanded at a CAGR of
approximately 16.6% to approximately $138.6 billion in 1996.
SEMICONDUCTOR INDUSTRY CAPITAL EXPENDITURES
To meet the increased demand for semiconductors, manufacturers have been
required to make capital expenditures to increase their existing capacity by
constructing new fabs and expanding their existing fabs. In addition,
manufacturers must continually construct and equip new fabs to replace existing
fabs and production equipment that are rendered obsolete as a result of
improvements in semiconductor performance characteristics and the semiconductor
manufacturing process. Due to the pace at which these improvements occur, a new
fab is generally able to produce state-of-the-art semiconductors for only a
relatively short period of time, typically less than five years. As a result,
the semiconductor industry is characterized by relatively high levels of
capital expenditures. For example, over the last 15 years, semiconductor
manufacturers have made capital expenditures representing approximately 23% of
their annual revenues. As a result of the increased demand for semiconductors
and the capital intensive nature of semiconductor manufacturing, capital
expenditures by manufacturers have increased at a CAGR of 27.2% from 1991 to
1996.
The level of capital expenditures made by semiconductor manufacturers is
dependent upon the current and anticipated market demand for semiconductors and
products utilizing semiconductors. The semiconductor industry is cyclical and
has historically experienced periods of slower revenue growth or decline. These
periods have often resulted in decreases in the level of capital expenditures
made by the semiconductor manufacturers. Conversely, periods of rapid revenue
growth in the semiconductor industry have often been followed by increases in
the level of capital expenditures. There is typically a six to twelve month lag
between changes in the semiconductor industry and the related impact on the
level of capital expenditures. In most cases, the resulting changes in capital
expenditures has been more pronounced than the precipitating change in
semiconductor industry revenues. To illustrate these relationships, the
following table sets forth for the periods indicated: (i) worldwide
semiconductor market revenues and (ii) worldwide semiconductor capital
expenditures:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996
----- ----- ----- ----- ----- ------ ------ ------
(DOLLARS IN BILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Semiconductor industry
revenues............... $59.2 $59.3 $64.5 $70.5 $87.5 $112.5 $153.1 $138.6
Percentage change...... 7.6% 0.2% 8.6% 9.3% 24.2% 28.5% 36.1% (9.4%)
Semiconductor industry
capital expenditures... $12.3 $13.2 $13.1 $11.6 $14.3 $22.1 $38.4 $43.7
Percentage change...... 26.5% 7.3% (0.6%) (11.8%) 23.6% 54.1% 73.9% 13.8%
</TABLE>
- --------
Source: Dataquest, January, 1997.
36
<PAGE>
Capital expenditures by the semiconductor industry increased by approximately
13.8% in 1996. The semiconductor industry, however, experienced a downturn in
1996, during which industry revenues declined by an estimated 9.4%. As a
result, it is anticipated that there will be a decrease in the level of capital
expenditures during some or all of 1997. Dataquest forecasts that sales of
semiconductor capital equipment will decrease by approximately 18% in 1997.
Nonetheless, the semiconductor capital equipment market is expected to continue
its long-term growth as a result of the increase in demand for semiconductors.
PROCESS CONTROL METROLOGY MARKET
The Company operates in the expanding process control metrology systems
market of the semiconductor capital equipment industry. Semiconductor
manufacturers use process control metrology systems in their fabs to detect any
process deviations or problems as quickly as possible so as to minimize their
effects on manufacturing yield, device performance and reliability. Process
control metrology systems are critical for yield enhancement and cost reduction
because they allow error/defect detection in real-time before there can be a
significant impact on yield. Higher yields increase the revenue a manufacturer
can obtain for each semiconductor wafer processed. Furthermore, equipment that
helps a manufacturer to increase yield quickly when new semiconductor products
are introduced enables the manufacturer to offer products in volume at the time
when they are likely to generate the greatest profits.
From 1991 to 1996, Dataquest reports that sales of process control metrology
systems and instruments have increased at a CAGR of 22.4% to approximately $1.4
billion in 1996. Within the process control metrology market, the Company
operates specifically in the ion implant and the thin film measurement
metrology segments. The Company estimates that sales of ion implant metrology
and thin film measurement systems for the semiconductor industry were
approximately $60 million and $209 million, respectively, in 1996. Demand for
process control metrology systems is driven primarily by: (i) capital
expenditures of semiconductors manufacturers, which, in turn, depend on the
current and anticipated market demand for semiconductors and products utilizing
semiconductors and (ii) the increasing complexity of the semiconductor
manufacturing process as a result of the demand for smaller, higher performance
devices. The Company believes that increasing demand for semiconductors in
general, combined with the need for more comprehensive and sophisticated
process control of semiconductor manufacturing, will result in increased demand
for process control metrology systems.
Increasing Demand for Semiconductors. The demand for semiconductors has
significantly increased over time. Since 1991, the semiconductor market has
expanded at a CAGR of approximately 16.6%. According to Dataquest, sales of
semiconductors generated aggregate revenues of approximately $138.6 billion in
1996, are projected to grow by 12.7% to approximately $156.2 billion in 1997
and to reach approximately $300 billion by the year 2000. This market expansion
is due primarily to: (i) the increased demand for faster, smaller and more
efficient devices utilizing semiconductors (including personal computers and
telecommunications equipment) with a greater range of functionality; (ii) the
increased level of semiconductor content in electronic products; and (iii) the
increased use of products utilizing semiconductors in broader geographical
markets. For example, over 20% of the worldwide semiconductor capacity is
currently consumed in the Asia/Pacific market, compared to a negligible
quantity only a decade ago. Existing and new markets with significant growth
potential include Southeast Asia, China, Latin America and Eastern Europe. New
applications for semiconductors, both in traditional semiconductor markets,
such as data-processing computers, consumer electronics, automotive electronics
and office equipment, and in new and growing semiconductor markets, such as
personal computers, telecommunications, portable computers and the Internet,
have increased the level of semiconductor content in electronic products and
systems.
Growing Importance of Process Controls. Industries that use semiconductors
are demanding increasingly complex, higher performance devices. As a result,
semiconductors continue to become more complex, with smaller feature sizes and
larger circuit device sizes. Fabrication of these devices requires increasing
the number of process steps and reducing feature sizes, necessitating narrower
process tolerances which makes it more difficult to maintain acceptable yields.
These factors, together with the industry migration toward larger wafer
37
<PAGE>
sizes, have led to a substantial increase in the manufacturers' per wafer
investment, which in turn has caused these manufacturers to intensify their
efforts to maintain acceptable yields. As a result, manufacturers demand
equipment that provides superior process results and yields and which can also
accommodate larger wafers. With the increase in wafer process complexity, the
increase in wafer value as wafers become larger, and the requirements for
greater yield and productivity, process control metrology systems are becoming
more critical to the manufacture of semiconductors. In addition, the total
costs for constructing and equipping an advanced fabrication facility can be in
excess of $1.5 billion, a substantial portion of which represents the cost of
capital equipment used to process the wafers. Process control metrology
systems, which typically represent a small percentage of the total investment,
enable manufacturers to leverage these expensive facilities and improve their
return on investment.
38
<PAGE>
BUSINESS
The Company is a worldwide leader in the development, manufacture, marketing
and service of process control metrology systems for use in the manufacture of
semiconductors. Semiconductor manufacturers use process control metrology
systems in their fabs to detect any process deviations or problems in order to
minimize the effects on manufacturing yield, device performance and
reliability. The Company's metrology systems are principally used to measure
two of the most important and pervasive semiconductor fabrication process
steps: ion implantation and thin film deposition and removal. Ion implantation
involves the implantation of ions into selective areas of the silicon wafer,
which alters the electrical properties of the semiconductor. Thin film
deposition and removal is a process by which layers of conductive or insulating
films are deposited on and removed from the wafer to give the semiconductor the
desired performance characteristics. For the Fiscal 1997 on a pro forma basis
giving effect to the Recapitalization, the Company generated net revenues and
EBITDA of $109.5 million and $26.1 million, respectively. Since the
introduction of its first product in 1985, the Company's revenues have
increased at a CAGR of approximately 36.7%.
The Company's process control metrology systems use proprietary and patented
technology to measure key dimensions and other physical properties of
semiconductor wafers. The Company holds 69 U.S. and foreign patents primarily
covering the technology utilized in its two major product lines: (i) the
Therma-Probe system and (ii) the Opti-Probe system. The Therma-Probe system,
introduced in 1985, utilizes the Company's proprietary thermal wave technology
and is the predominant nondestructive process control metrology system used to
measure the critical ion implantation process in the fabrication of
semiconductors. Since the introduction of the Therma-Probe, the Company
believes it has captured over 95% of the market for nondestructive ion
implantation measurement of product wafers and is installed in virtually every
major semiconductor fab worldwide. The Opti-Probe system, introduced in 1992,
significantly improved upon existing thin film metrology systems by
successfully integrating different measurement technologies into one system and
utilizing new proprietary optical technologies. The Company believes that the
Opti-Probe has captured over 30% of the thin film measurement market in less
than five years.
The Company markets and sells its products worldwide to virtually all major
semiconductor manufacturers, including Intel Corporation, Samsung Semiconductor
Inc., LG Semicon, Advanced Micro Devices, Inc., Siemens Microelectronics,
Lucent Technologies and NEC Semiconductor. The Company has developed and
consistently maintained strong customer relationships due to the technological
superiority of its products and strong customer support capabilities. In its 15
year history, the Company believes it has never lost a major customer. The
Company believes it is the dominant supplier of ion implant metrology systems
to virtually all major semiconductor manufacturers and has become the primary
supplier of thin film metrology systems to many of its customers. In addition,
the Company believes that its largest customers, such as Intel Corporation and
Samsung Semiconductor, are among the fastest growing manufacturers in the
semiconductor industry. The Company has a strong presence in all major
international markets and, as a result, derived approximately 59.7% of its net
revenues from international sales in Fiscal 1997. In aggregate, the Company
serves more than 60 customers worldwide, which are located in over 14 different
countries and manufacture many different types of semiconductors for a broad
range of applications.
Therma-Wave was established in 1982 by Dr. Allan Rosencwaig, the Company's
current Chairman, President and CEO and the principal developer of the field of
thermal wave physics. In Fiscal 1992, the Company was acquired by Toray and
Shimadzu. Through the Recapitalization, Bain Capital, Sutter Hill and the
Management Investors collectively acquired securities representing
approximately 88% of the Company's outstanding voting power. As a result of the
Recapitalization, the Management Investors own approximately 24% of the
outstanding Common Stock and hold options to acquire an additional 12% of such
Common Stock. Such equity ownership represents a significant economic
commitment to and participation in the continued success of the Company.
39
<PAGE>
COMPETITIVE STRENGTHS
The Company attributes its success in the process control metrology market
and its significant opportunities for continued growth and profitability to its
ability to provide products and services that are superior in meeting the
requirements of semiconductor manufacturers. Management believes that the
Company has several competitive advantages, including:
. TECHNOLOGICALLY ADVANCED CAPABILITIES AND PRODUCTS. The Company believes
that its expertise in engineering, research and development enables it to
offer process control metrology systems with more advanced technical
capabilities and features than those offered by its competitors. These
features include superior measurement capabilities, resolution, accuracy,
repeatability and reliability. The Therma-Probe system employs a patented
optical technology to provide noncontact, noncontaminating ion implant
measurement capability, unlike many of the Company's competitors who use
invasive four-point probes to accomplish similar measurements. The Company's
Opti-Probe system is the only tool that combines three distinct measurement
technologies, two of which are patented by the Company. The Company believes
that its technologically superior products are critical to its success
because technical capability is a key criterion that most major
semiconductor manufacturers use in selecting capital equipment for their
fabs.
. LEADING MARKET SHARE. The Company is one of the world's leading
manufacturers of process control metrology equipment and systems. Therma-
Wave is the largest provider of nondestructive ion implant process control
metrology systems worldwide with over 95% of the market. The Therma-Probe
system has become the industry standard for ion implant process control
metrology and is installed in virtually every major semiconductor
fabrication facility. The Company is also a leading supplier of thin film
measurement metrology systems worldwide. The Company believes that its Opti-
Probe system has captured over 30% of the market in less than five years
since its introduction as a result of its technological superiority and the
enhanced return on investment to its customers. In Fiscal 1997, sales of the
Opti-Probe system increased by over 55% from the previous Fiscal Year due to
continued market share gains as well as market growth.
. STRONG AND DIVERSE CUSTOMER BASE. The Company markets and sells its products
worldwide to virtually all of the major semiconductor manufacturers,
including: (i) Intel Corporation, the largest microprocessor manufacturer
worldwide; (ii) Samsung Semiconductor Inc., the largest DRAM manufacturer;
and (iii) Lucent Technologies, one of the largest ASIC manufacturers. The
Company believes that its top customers are among the fastest growing
manufacturers in the semiconductor industry. For example, the Company's top
nine customers for Fiscal 1997 have increased their capital equipment
expenditures at a CAGR of approximately 36% over the last five years, as
compared to a CAGR of approximately 27% for the semiconductor capital
equipment industry as a whole. In addition, the Company has a diverse
customer base in terms of both geographic location and the types of
semiconductors manufactured by its customers. In aggregate, the Company
serves more than 60 customers worldwide, which are located in over 14
different countries. In addition, no single customer accounted for more than
13% of the Company's net revenues in Fiscal 1997.
. STRONG CUSTOMER RELATIONSHIPS. The Company believes that it has developed
and consistently maintained excellent customer relationships. In its 15 year
history, the Company believes that it has never lost a major customer. In
addition, the Company believes it is the dominant supplier of ion implant
metrology systems to virtually all major semiconductor manufacturers and has
become the primary supplier of thin film metrology equipment to many of its
customers. Engineering, sales and management personnel collaborate with
customer counterparts to determine customers' needs and specifications. For
example, the model Opti-Probe 2600 was developed in cooperation with one of
the Company's major customers to address the need for a more capable thin
film measurement system.
. WORLDWIDE DISTRIBUTION AND STRONG CUSTOMER SUPPORT CAPABILITIES. The Company
has been at the forefront of addressing the increasing globalization of the
semiconductor industry. The Company has expended considerable resources in
creating a high-quality worldwide distribution network with highly trained
customer service and support organizations. For Fiscal 1997, the Company
generated international revenues of approximately $65.4 million,
representing 59.7% of net revenues for the period. The Company
40
<PAGE>
provides its customers with comprehensive support and service before, during
and after delivery of its systems. The Company's engineers have extensive
experience and provide valuable assistance to the Company's customers,
thereby strengthening Therma-Wave's strong position with its customers. The
Company anticipates that it will continue to strengthen and expand its
distribution and customer service and support organizations worldwide,
particularly in Asia.
. EXPERIENCED AND SUCCESSFUL MANAGEMENT TEAM. The Company is led by an
experienced senior management team whose members average more than 14 years
in the semiconductor capital equipment manufacturing industry. Dr. Allan
Rosencwaig has over 15 years of experience in the industry. In addition, the
Company's top nine executives average over nine years with the Company.
Under the leadership of its existing management team, the Company's net
revenues have grown from $2.7 million in Fiscal 1985 to $109.5 million in
Fiscal 1997, representing a CAGR of 36.7%. As a result of the
Recapitalization, the Company's senior management own approximately 24% of
the outstanding Common Stock and hold options to acquire an additional 12%
of such Common Stock. Such equity ownership represents a significant
economic commitment to and participation in the continued success of the
Company.
BUSINESS AND GROWTH STRATEGY
The Company's business strategy is to continue its leadership and growth in
the process control metrology market and thereby increase market share and
maximize revenues and profitability. The Company's business and growth strategy
will include the following key initiatives:
. CAPITALIZE ON FAVORABLE INDUSTRY TRENDS. The Company believes that the
increasing demand for semiconductors should continue to drive significant
growth in the semiconductor capital equipment market. In addition, the
Company believes that the need for more comprehensive and sophisticated
process control of semiconductor device manufacturing will result in
increased demand for metrology systems. Management believes that the Company
is well positioned to take advantage of these favorable trends, given its
market leadership position, strong customer base, superior technology and
research and development expertise.
. MAINTAIN AND LEVERAGE STRONG CUSTOMER RELATIONSHIPS. The Company expects to
continue to strengthen its existing customer relationships and foster
working partnerships by providing technologically superior systems and high
levels of customer support. In its 15 year history, the Company believes it
has never lost a major customer. In addition, the Company believes it is the
dominant supplier of ion implant metrology systems to virtually all major
semiconductor manufacturers and has become the primary supplier of thin film
metrology systems to many of its customers. Furthermore, the Company intends
to continue to capitalize on its strong customer relationships, which have
enabled it to develop new products and applications through close
collaboration with customers. Such collaboration has often resulted in
products and applications which have a broader market appeal. For example,
the Company has sold its Opti-Probe 2600, developed in conjunction with one
of its major customers, to numerous other semiconductor manufacturers.
. INCREASE MARKET PENETRATION. The Company expects to increase its market
penetration based on its competitive strengths and superior product
offerings. In particular, the Company expects that the market share of its
Opti-Probe system will continue to increase as a result of its technological
advantages and superior return on investment to its customers. During Fiscal
1997, the Company has added seven major new customers for the Opti-Probe
system and believes that it has increased its market share in the thin film
measurement market by approximately 10 percentage points to capture over 30%
of such market. The Company believes that the Opti-Probe system offers
significant opportunities for increased revenues due to the size of the thin
film measurement market, which had aggregate sales of $209 million in 1996
and has grown at CAGR of 37.2% from 1991 to 1996.
. CONTINUE TO FOCUS ON TECHNOLOGICAL INNOVATION. The Company expects to
continue its emphasis on engineering and research and development in an
effort to anticipate and address technological advances in semiconductor
manufacturing. During its last four fiscal years, the Company has spent on
average approximately 14% of its net revenues on research and development
activities. Since its founding, the
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Company has been a leader in the introduction of technological advances,
including: (i) the development of the most widely accepted metrology system
for measuring ion implant dose on product wafers; (ii) the introduction of
the first product to successfully combine different thin film measurement
technologies in one system; (iii) the development of proprietary
technologies significantly improving on existing thin film measurement
capability; and (iv) the development of advanced metrology software dealing
with signal processing, data analysis and pattern recognition. The Company
intends to capitalize on its market leadership position, advanced
technologies and portfolio of 69 U.S. and foreign patents to further broaden
its existing high quality product lines. Management believes that continued
product innovation and investment in research and development will help the
Company increase its leadership position and overall profitability.
. LEVERAGE EXISTING INFRASTRUCTURE. The Company believes that it has the
opportunity to improve its operating margins by leveraging its existing
infrastructure through increased sales. To support its worldwide growth, the
Company has expended considerable resources in establishing its
infrastructure, including a worldwide customer service and support
organization and a state-of-the-art manufacturing facility.
. PURSUE STRATEGIC ACQUISITIONS. The Company expects to capitalize on the
recent consolidation trend in the process control metrology and wafer
inspection industries by targeting strategic acquisitions. The Company
expects to review selective opportunities to acquire businesses which would
add to its portfolio of technologies and products.
PRODUCTS AND TECHNOLOGY
Therma-Wave currently offers two major lines of process control metrology
systems to address a wide range of customer process control needs. The
Company's Therma-Probe system was introduced in 1985 as the Company's initial
product line, and its Opti-Probe system was introduced in 1992. Both product
lines feature the Company's proprietary and patented measurement technologies
and offer robotic wafer handling, advanced vision processing, sophisticated but
user-friendly software and high throughput and reliability. The modular design
of the hardware and software enable continuous product enhancement as new
advances are made.
Therma-Probe System
A key process step in the fabrication of semiconductors is the implantation
of ions into selective areas of the silicon wafer, which alters the electrical
properties of the silicon semiconductors. Control of the accuracy and
uniformity of the ion implant dose is critical to device performance and yield.
Ion implantation is generally performed several times during the early phases
of the fabrication cycle. As a result, there is typically a three to eight week
time lag between the implant steps and the first electrical measurements that
indicate whether the ion implant process was properly executed. Failure to
identify improper ion implantation can be extremely costly to a semiconductor
manufacturer if the fabrication cycle is permitted to continue. To test whether
the ion implant was properly executed on a timely basis, semiconductor
manufacturers historically used a four-point probe, which measured electrical
resistance and required physical contact between the probe and the silicon
wafer surface. As a result of the high probability of contamination of the
silicon wafer from contact with the probe, this procedure was only used on a
limited number of test wafers. As compared to product wafer monitoring, test
wafer monitoring adds considerable cost to the manufacturing process and will
often fail to identify processing problems inherent with product wafers.
The Therma-Probe system is the predominant ion implant metrology system
capable of measuring in a noncontact, non-contaminating manner directly on
product wafers and immediately after the ion implantation process, both the
implant dose and its uniformity across the wafer with a high degree of
precision. In addition, the Therma-Probe system has unparalleled sensitivity
for the most critical implants. By the end of 1996, more than 340 Therma-Probe
systems had been installed in virtually every major semiconductor fab
worldwide. A typical semiconductor fab uses Therma-Probe systems to monitor and
control critical implant steps. In addition, all major manufacturers of ion
implant equipment utilize Therma-Probe systems to help develop and qualify
their ion implanters. The Company believes that the Therma-Probe has captured
over 50% of the market for ion
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implant measurement and over 95% of the market for nondestructive ion
implantation measurements on product wafers. Over the last ten years, revenues
from the sale of Therma-Probe systems have grown at a CAGR of 20.6%. The
selling price for a current model of the Therma-Probe system ranges from
$650,000 to $900,000.
The Company believes that its Therma-Probe system offers particular
technological advantages and features that distinguish it from the ion implant
metrology systems offered by its competitors:
Proprietary Technology. To provide noncontact, non-contaminating ion
implant measurements on product wafers, the Company's Therma-Probe system
employs highly focused but low power laser beams to generate and detect
thermal wave signals in the silicon wafer that can be correlated to the
implant dose. The thermal wave technology used to measure the ion implant
dose in the silicon wafer is a highly proprietary and extensively patented
technology of the Company. The Company believes that these patents help to
maintain its competitive position.
Ease of Use and Reliability. The Company has packaged its thermal wave
technology into an easy-to-use and reliable process control metrology
system. This system is configured specifically for use by semiconductor
device manufacturers and features automated wafer handling, automated data
collection and statistical data processing and data management.
Installed Base. Virtually all major semiconductor manufacturers use
Therma-Probe systems to monitor and control their ion implant processes. In
addition, all major manufacturers of ion implant equipment utilize Therma-
Probe systems to help develop and qualify their implanters. Additionally,
the Company's engineers have extensive experience in addressing many
different types of ion implant applications and provide valuable assistance
to the Company's customers, thereby strengthening Therma-Wave's strong
position with its customers. The Company believes that its significant
installed base of Therma-Probe systems acts as a barrier to entry for its
current and potential competitors in the ion implant measurement market.
Continuous Improvement. Although the Company enjoys over 95% of the
industry sales of nondestructive ion implant metrology systems for product
wafers, it continues to develop, manufacture and market new and improved
Therma-Probe models to enhance system capability and the return on
investment to the customer. For example, the Company recently introduced
the TP-500 model, which provides enhanced performance, improved software,
advanced image processing and improved reliability.
Opti-Probe System
The majority of the 100 to 300 process steps required to fabricate
semiconductors on the silicon wafer involve the deposition and removal of a
variety of insulating and conducting thin films. Thin film metrology measures
the thickness and material properties of these thin films and, because it is
used to measure a large number of process steps, is one of the most important
metrology systems utilized at semiconductor fabs. The most widely used
technologies to measure the thickness and properties of thin films have
historically been reflection spectrophotometry and ellipsometry. Increasingly,
these systems have been unable to meet the process control metrology demands of
the semiconductor industry. For example, the industry is rapidly moving toward
measuring product wafers rather than test wafers, both because of the inability
to control the manufacturing processes adequately using test wafers alone, and
the costs associated with the processing of nonproductive test wafers.
Measurements on product wafers, however, must be performed in small test areas
and spectrophotometers and ellipsometers both require fairly large measurement
areas. Additionally, increasing demands for improved precision and
repeatability require the ability to measure thicknesses that range from
extremely thin (a hundred million times smaller than a centimeter) to films
that are hundreds of thousand times thicker. Reflection spectrophotometers are
most suitable for measuring thicker films, whereas ellipsometers are most
suitable for measuring very thin films. Thus, neither system is individually
capable of accurate and reliable measurements over the full range of film
thicknesses. Further, the industry is now using many films whose optical
properties are functions of the actual deposition conditions. Obtaining an
accurate measurement of the thickness of these thin films requires the ability
to make simultaneous measurements of both thickness and optical
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properties. Reflection spectrophotometers and most ellipsometers have very
limited capabilities for simultaneous measurements of thickness and optical
parameters.
The Opti-Probe system was developed by the Company to address the limitations
of conventional thin film metrology systems. The Opti-Probe system, introduced
in 1992, combines the thin film metrology capabilities of spectrophotometers
and ellipsometers into a single integrated system and utilizes two new
proprietary measurement technologies to enhance their capabilities. By the end
of 1996, the Company believes that the Opti-Probe system had captured over 30%
of the thin film measurement market, an increase of approximately 10 percentage
points over the previous year. The Company expects that its Opti-Probe system
will continue to increase market share as a result of its technological
superiority and the enhanced return on investment to the customer. Since 1992,
revenues from the sale of Opti-Probe systems have grown at a CAGR of 169.9%.
The selling price for a current model of the Opti-Probe system ranges from
$400,000 to $600,000.
The Company believes that its Opti-Probe system offers particular
technological advantages and features that distinguish it from traditional thin
film metrology systems:
Proprietary Technology. Conventional spectrophotometers and ellipsometers
are unable to meet the current and future requirements of the semiconductor
fabs. These requirements include the ability to measure in very small areas
on product wafers, high precision and repeatability for very thin as well
as thick films, and the ability to simultaneously measure thickness and
optical parameters on one or more films. To help provide these
capabilities, the Company has developed and patented two new proprietary
optical measurement technologies and combined them with conventional
measurement technologies in one measurement system. Because of the wealth
of data that can be obtained from these combined optical technologies, it
is possible to perform measurements on the thickness and optical parameters
of one or more films simultaneously. In addition, since the Company's
proprietary technologies employ a highly focused laser beam, it is possible
to perform measurements with a spot size that is the smallest in the
industry. Although the Company's competitors have now introduced systems
that combine elements of spectrophotometry and ellipsometry in one system,
the Company believes that its particular combination of technologies
results in a superior product.
Ease of Use and Reliability. Therma-Wave's Opti-Probe system is regarded
as easy-to-use and highly reliable as compared to the thin film measurement
systems of its competitors. This system is configured specifically for use
by semiconductor device manufacturers and features automated wafer
handling, advanced image processing, automated data collection and
statistical data processing and data management.
Proprietary Software. The Company believes that not only is its hardware,
the Opti-Probe system, superior to the competition, but so also is its
software. During the fabrication of semiconductors, many different films
and film stacks, consisting of several layers of different films, are
deposited and selectively removed from the silicon wafer. This in turn
means that hundreds of film measurement data analysis algorithms
("recipes") must be developed and stored in the computer of a thin film
metrology system. Thus the full benefit of a thin film metrology system to
the customer is a result of a combination of superior measurement
capability and superior recipe development. The Company has a staff of over
fifty experienced applications scientists and engineers stationed worldwide
near all major customers who provide full applications support to develop
new recipes as the device manufacturing processes change.
Continuous Improvement. While the Company has achieved rapid market share
growth in the thin film metrology market with its current Opti-Probe
systems, it continues to develop, manufacture and market new and improved
models. For example, the Company has recently introduced the OP-2600DUV
model which extends the spectrophotometer range of the Opti-Probe further
into the ultra-violet region of the optical spectrum. The Company believes
that it now provides the semiconductor industry with a thin film metrology
tool that operates further into the ultra-violet spectrum than the
competition. This is of paramount importance since device manufacturers are
now developing patterning technology utilizing optical radiation in this
ultra-violet region. In addition, the Company has recently introduced the
3000 series Opti-Probe systems that provide the same superior measurement
capability of the 2000 series but with increased speed, thus enhancing the
systems' productivity.
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CUSTOMERS
Therma-Wave sells its products to leading semiconductor manufacturers
throughout the world, including Intel Corporation, Samsung Semiconductor Inc.,
LG Semicon, Advanced Micro Devices, Inc., Siemens Microelectronics, Lucent
Technologies and NEC Semiconductor. Sales to Samsung Semiconductor Inc. and
Intel Corporation represented approximately 10% and 13%, respectively, of the
Company's net revenues for Fiscal 1997 and approximately 15% and 17%,
respectively, for Fiscal 1996. The Company's top twenty customers accounted for
approximately 78% of its net revenues in Fiscal 1997 and 81% in Fiscal 1996.
The Company provides its customers with comprehensive support and service
before, during and after delivery of its systems. Prior to shipment, Therma-
Wave's support personnel typically assist the customer in site preparation and
inspection and typically provide customers with training at the Company's
facilities or at the customer's location. The Company's customer training
programs include instructions in the maintenance of the Company's systems and
in system hardware and software tools for optimizing the performance of the
Company's systems. The Company's field support personnel work with the
customers' employees to install the system and demonstrate system readiness. In
addition, the Company maintains a group of highly skilled applications
scientists to respond to customer process needs worldwide when a higher level
of technical expertise is required.
The Company generally warrants its products for a period of up to 12 months
from system acceptance for materials and labor to repair the product and to
provide training and applications support. Installation and initial training
are customarily included in the price of the system. After the warranty period,
customers may enter into support agreements covering both field service and
field applications support. The Company's field service engineers may also
provide customers with call out repair and maintenance services on a fee basis.
The Company's applications engineers and scientists are also available to work
with the customers on recipe development for a fee. The Company also trains
customer employees, for a fee, to perform routine service and provides
telephone consultation services.
SALES AND MARKETING
The Company utilizes a combination of 10 in-house sales staff and 12
manufacturers' sales representatives to sell its products to end users. The
Company sells products typically on 80% to 90% net 30-day terms with the
remainder due after customer acceptance. Some foreign customers are required to
deliver a letter of credit payable in U.S. dollars upon system shipment.
Therma-Wave maintains sales offices and regional sales representatives
throughout the world. In the United States, the Company maintains sales offices
in California, Oregon, Pennsylvania and Texas. The Company also utilizes
manufacturers' sales representatives to cover those regions of the United
States with too few customers to support a direct sales effort. In Asia, the
Company maintains sales and support offices in Japan, Korea and Taiwan. The
Japanese and Taiwanese offices work with manufacturers' sales representatives
to sell the Company's products to customers in Japan and Taiwan, while the
Korean office sells to customers directly. The Company also works with
manufacturers' sales representatives in Singapore, Malaysia, Thailand and
China. In Europe, the Company maintains sales offices in France and the United
Kingdom and works with manufacturers' sales representatives throughout the rest
of Europe.
In addition, the Company provides direct customer support in most parts of
the world. In some locations, field service is still provided by the same
manufacturers' sales representative that handles the sales function, but
applications support is provided by the Company's employees in the territory.
In the United States, field service and applications engineers are located in
customer support offices in Arizona, California, Colorado, Florida,
Massachusetts, New Mexico, Oregon, Pennsylvania and Texas. Certain dedicated
site-specific field service and applications engineers are contracted by
certain customers such as Intel Corporation. In Asia, the Company provides
customer support through its offices in Japan, Taiwan, Korea and Singapore. In
Europe, the Company maintains a customer support office in the United Kingdom
to support customers there and to assist the field service engineers of its
European manufacturers sale representatives in the rest of Europe. Applications
personnel to support continental Europe are stationed in France and Germany.
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ENGINEERING; RESEARCH AND DEVELOPMENT
The process control metrology market is characterized by continuous
technological development and product innovations. The Company believes that
continued and timely development of new products and enhancements to existing
products is necessary to maintain its competitive position. Accordingly, the
Company devotes a significant portion of its personnel and financial resources
to engineering, research and development programs. The Company seeks to
maintain its close relationships with customers to make improvements in its
products which respond to customers' needs. For example, the model Opti-Probe
2600 was developed in cooperation with one of the Company's major customers to
address the need for a more capable thin film measurement system.
The Company's ongoing engineering and research and development efforts can be
classified into three categories: new products; feature enhancements (such as
features to improve precision, speed and automation); and customer-driven
product enhancements (such as new measurement recipes or algorithms). The
Company has research and engineering staffs which work both in developing new
products and features and in responding to the particular needs of customers.
Engineering and research and development expenses were $13.1 million in
Fiscal 1997, $10.1 million in Fiscal 1996, and $5.9 million in Fiscal 1995, or
12%, 13% and 11% of net revenues for those periods, respectively. The Company
expects that engineering and research and development expenditures will
continue to represent a substantial percentage of net revenues for the
foreseeable future.
MANUFACTURING
The Company's manufacturing strategy is to produce high-quality, cost
effective systems and assemblies. The Company currently performs the majority
of its system assembly activities in-house. In order to lower production costs
in the future, the Company intends to perform only those manufacturing
activities that add significant value or that require unique technology or
specialized knowledge. In the future, the Company expects to rely increasingly
on subcontractors and turnkey suppliers to fabricate components, build
assemblies and perform other activities that can be undertaken more cost
effectively than by the Company.
The Company's principal manufacturing activities include assembly and test
work, all of which are conducted at the Company's facility in Fremont,
California. Assembly includes inspection, subassembly and final assembly. Test
includes modular testing, system integration and final test. Components and
subassemblies, such as lasers, robots and stages, are acquired from third party
vendors and integrated into the Company's finished systems. While the Company
uses standard components and subassemblies wherever possible, most mechanical
parts, metal fabrications and critical components are engineered and
manufactured to Company specifications. Certain of the components and
subassemblies are obtained from a limited group of suppliers, and occasionally
from a single source supplier. The Company has not entered into any formal
agreements with such limited source suppliers, other than long-term purchase
orders and, in some cases, volume pricing agreements. Those specific parts
coming from a limited group of suppliers are monitored by management to ensure
that adequate supplies are available to maintain manufacturing schedules and to
reduce the Company's dependence on these suppliers, should supply lines for any
of these parts be interrupted. The partial or complete loss of such suppliers
could increase the Company's manufacturing costs or delay product shipments
while the Company qualifies new suppliers and could also require the Company to
redesign products, thereby having a material adverse effect on the Company's
results of operations and customer relationships. Further, a significant
increase in the price of one or more of the components supplied by such
suppliers could adversely affect the Company's financial position and results
of operations.
The Company schedules production based upon firm customer commitments and
anticipated orders during the planning cycle. The Company has structured its
production process and facility to be driven by both orders and forecasts and
has adopted a modular system architecture to increase assembly efficiency and
test flexibility. The Company's cycle times for its products are currently
three to four months. The Company believes that these
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cycle times will improve as the Company continues to place increased emphasis
on manufacturing capability in its new product design.
The Company conducts the assembly of certain optical components and final
testing of its systems in clean-room environments where personnel are properly
clothed. This procedure is intended to reduce the amount of particulates and
other contaminants in the final assembled system and to test the Company's
products against customers' acceptance criteria prior to shipment. Following
the final test, the completed system is packaged within triple vacuum sealed
bags to maintain a high level of cleanliness during shipment and installation.
As part of the ongoing quality program, all machines are monitored by Therma-
Wave during the installation process.
COMPETITION
The market for semiconductor capital equipment is highly competitive. The
Company faces substantial competition from established companies in each of the
markets that is serves, some of which have greater financial, engineering,
manufacturing and marketing resources than the Company. Significant competitive
factors in the market for metrology systems include system performance, ease of
use, reliability, return on investment to the customer, and technical service
and support. The Company believes it competes favorably on the basis of these
factors in each of the Company's served markets. The Company competes with both
larger and smaller United States and Japanese companies in the markets it
serves. European companies are generally not significant competitors in the
Company's served markets.
The Company's Therma-Probe system competes primarily with other metrology
systems designed to measure ion implant dosage, particularly destructive four-
point probe measurement systems including those manufactured by Tencor
Instruments, Kokusai Electric Ltd. and Bio-Rad Semiconductor Systems. The
Therma-Probe system is the semiconductor industry's predominant noncontact,
nondestructive ion implant monitor for product wafers. Jenoptik has recently
begun to manufacture and market its TWIN and TWIN SC systems, each of which
nondestructively measures ion implant doses on product wafers using thermal
wave technology. The Company has filed patent infringement suits against
Jenoptik in both the U.S. and Germany alleging that manufacture by Jenoptik of
these products infringes on several of the Company's patents. See "--Legal
Proceedings." The Company's Opti-Probe system primarily competes with thin film
metrology systems manufactured by the Prometrix division of Tencor Instruments,
Rudolph Technologies, Nanometrics and Dai Nippon Screen.
PATENTS AND PROPRIETARY RIGHTS
The Company believes that the success of its business depends more on the
technical competence, creativity and marketing abilities of its employees,
rather than on the protection derived from its patents and other proprietary
rights. Nevertheless, the Company's success will depend, at least in part, on
its ability to obtain and maintain patents and proprietary rights to protect
its technology.
The Company has a policy of seeking patents where appropriate on inventions
concerning new products and improvements as part of its ongoing engineering,
research and development activities. The Company has acquired a number of
patents relating to its two key products, the Opti-Probe and Therma-Probe
systems. The Company owns 24 U.S. patents with expiration dates ranging from
1999 to 2013 and has filed applications for two additional U.S. patents. In
addition, the Company owns 45 foreign patents with expiration dates ranging
from 1999 to 2013 and has filed applications for 9 additional foreign patents.
There can be no assurance that any of the Company's pending patent
applications will be approved, that the Company will develop additional
proprietary technology that is patentable, that any patents owned by or issued
to the Company will provide the Company with competitive advantages or these
patents will not be challenged by any third parties. Furthermore, there can be
no assurance that third parties will not design around the Company's patents.
Any of the foregoing results could have a material adverse effect on the
Company's business or financial condition.
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In addition to patent protection, the Company relies upon trade secret
protection for its confidential and proprietary information and technology. The
Company routinely enters into confidentiality agreements with its employees.
However, there can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach or that the
Company's confidential and proprietary information and technology will not be
independently developed by or become otherwise known by third parties.
The Company also owns seven U.S. trademark registrations and has filed
applications for two trademark registrations in Japan as well as an intent to
use trademark application for the U.S.
FACILITIES
The Company's executive offices and manufacturing, engineering, research and
development operations are located in a 102,000 square foot building in
Fremont, California with approximately 800 square feet of Class 100 "clean
rooms" for customer demonstrations and approximately 10,000 square feet of
Class 1000 "clean rooms" for manufacturing. This facility is occupied under a
lease expiring in 2006 at an aggregate annual rental expense of approximately
$1.0 million. The Company has the option of extending this lease for another 15
years after 2006. In addition, the Company has a three-year option on a six-
acre lot adjacent to its current facility. The Company owns substantially all
of the equipment used in its facilities. The Company believes that its existing
facilities and capital equipment are adequate to meet its current requirements
and that suitable additional or substitute space is readily available as
needed.
The Company also leases sales and customer support offices in Arizona,
California, Florida, Massachusetts, Texas, Japan, Korea, and Taiwan.
EMPLOYEES
As of April 6, 1997, the Company employed 340 persons, including 58 in
engineering, research and development, 82 in manufacturing, 147 in customer
support, 21 in sales and marketing and 32 in executive and administrative
functions. Many of the Company's employees are highly-trained, holding advanced
post-graduate degrees in science and engineering. None of the Company's
employees are represented by a labor union or covered by a collective
bargaining agreement. The Company considers its employee relations to be good.
The Company has low employee turnover and has been able to attract and retain a
highly talented group of managers, designers and engineers which has enabled it
to continually improve its products and customer service and support.
LEGAL PROCEEDINGS
On July 19, 1994, the Company filed a patent infringement suit against
Jenoptik, a German competitor, in the U.S. District court for the Northern
District of California. On February 1, 1996, the Company filed another patent
infringement suit against Jenoptik in the Patent Court in Dusseldorf, Germany.
In these lawsuits, both of which are still pending, the Company alleges that
the manufacture and sale by Jenoptik of Jenoptik's TWIN and TWIN SC systems
infringe several of the Company's U.S. patents and one of the Company's
European patents that are related to the Company's Therma-Probe ion implant
metrology system. In the U.S. lawsuit, Jenoptik denies infringement and claims
that the Company's patents are invalid and unenforceable. Jenoptik also denies
infringement in the German lawsuit. In addition, in Germany, Jenoptik filed a
"nullity action," in which Jenoptik claims that the patent being asserted in
the German infringement litigation is invalid.
Although the Company believes that it is likely to succeed in the U.S.
lawsuit and has a reasonable chance of succeeding in the German lawsuit and
nullity action, it is impossible to predict the outcome of these actions. A
material adverse effect on the Company's business or the Company's financial
condition could occur if one or more of the Company's U.S. patents and/or the
Company's European patent are found to be invalid or unenforceable because such
a finding might affect the Company's ability to exclude competitors other than
Jenoptik from making or selling competing products in these jurisdictions.
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In letters to the Company dated July 14, 1995 and October 31, 1996,
Nanometrics, Inc. ("Nanometrics"), one of the Company's competitors, inquired
as to whether the Company was interested in licensing the use of Nanometrics'
U.S. Patent No. Re 34,783. This patent covers a method for measuring the
reflectance of a specimen by comparing the measured intensity of reflected
ultraviolet ("UV") radiation from an unknown sample with that of a known
sample. After analyzing Nanometrics' patent, the Company has concluded that it
does not infringe Nanometrics' patent and that the Nanometrics' patent is
invalid. For these reasons, the Company believes that a license is not
necessary. Nanometrics has neither accused the Company of patent infringement
nor threatened a lawsuit against the Company.
If the Company is found to infringe Nanometrics' patent, the Company believes
that the patent could only cover those Opti-Probe devices to which the Company
has recently added UV capability. In 1996, the Company sold only approximately
twenty units of UV-equipped Opti-Probe devices and did not sell any such units
prior to 1996. However, because of Nanometrics' willingness to license its
patent and the relatively small number of Opti-Probe devices affected, the
Company does not believe that any conflict with Nanometrics regarding its
patent is likely to have a material adverse effect on the Company's business or
the Company's financial condition.
The Company is also involved in various legal proceedings from time to time
arising in the ordinary course of business, none of which are expected to have
a material adverse effect on the Company's business or financial condition.
ENVIRONMENTAL MATTERS
The Company, like all manufacturing companies, is subject to various federal,
state and local environmental statutory requirements. The Company believes that
it is in material compliance with existing applicable environmental laws and
regulation and has all necessary permits and licenses.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Executive officers, Directors and certain key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Allan Rosencwaig........ 56 Chairman of the Board, President, and Chief Executive Officer
Anthony W. Lin.......... 46 Executive Vice President, Chief Financial Officer and Director
Charlotte Holland....... 38 Vice President, Finance and Administration
David Mak............... 39 Vice President, Manufacturing
Jon L. Opsal............ 56 Vice President, Research and Development
James E. Rhoades........ 53 Vice President, Sales
W. Lee Smith............ 48 Vice President, Strategic Marketing
Donald J. Strand........ 46 Vice President, Customer Service
David Willenborg........ 47 Vice President, Marketing
G. Leonard Baker, Jr. .. 55 Director
David Dominik........... 40 Director
Adam W. Kirsch.......... 35 Director
</TABLE>
ALLAN ROSENCWAIG co-founded the Company in January 1982 and has served as its
Chairman and Chief Executive Officer since that time. Prior to founding the
Company, Dr. Rosencwaig was a Group Leader at the Lawrence Livermore National
Laboratory from 1977 to 1982 and a Member of Technical Staff at AT&T Bell
Laboratories from 1969 to 1977. Dr. Rosencwaig holds Bachelor of Science,
Master of Science and Ph.D. degrees in Physics from the University of Toronto.
ANTHONY W. LIN joined the Company in June 1985 and has held a variety of
administrative positions since that time, including Corporate Controller,
Director of Finance, Vice President, Finance and Administration and Vice
President, Customer Support. Mr. Lin has served as a Director of the Company
since the Recapitalization. Prior to joining the Company, Mr. Lin was Corporate
Controller for MAD Intelligence Systems from 1984 to 1985, Accounting Manager
at Altos Computer Systems from 1982 to 1984, Staff Accountant at Deloitte,
Haskins & Sells from 1979 to 1982 and Senior Financial Analyst at Digital
Equipment Corporation from 1976 to 1979. Mr. Lin holds a Bachelor of Science
degree in Chemistry from National Taiwan University and a Master of Business
Administration degree from Harvard University and is licensed by the State of
California as a Certified Public Accountant.
CHARLOTTE HOLLAND joined the Company in August 1990 and, since that time, has
served as Director of Finance and Corporate Controller. Prior to joining the
Company, Ms. Holland served as Field Service Controller, Assistant Corporate
Controller and Financial Reporting Manager for Network Equipment Technologies,
Inc., General Accounting Manager and Financial Reporting Manager for Convergent
Technologies, Inc., Senior Accountant for Atari, Inc. and Senior Accountant for
Peat, Marwick, Mitchell & Co. Ms. Holland holds a Bachelor of Science degree in
Business Administration from San Jose State University and is licensed by the
State of California as a Certified Public Accountant.
DAVID MAK joined the Company in October 1992 and, since that time, has served
as the Manufacturing Manager and Director of Manufacturing. Prior to joining
the Company, Mr. Mak served in a variety of positions at Tencor Instruments,
including Manufacturing Engineering Manager, Mechanical Design Engineering
Manager, and Project Manager. Mr. Mak also served as Senior Mechanical Engineer
for Priam Corp., Advisory Engineer for Optimem, and Product Engineer for
Memorex Corp. Mr. Mak holds a Bachelor of Science degree in Mechanical
Engineering from the Polytechnic Institute of New York.
JON L. OPSAL joined the Company in September 1982 and has served in several
research and management positions since that time, including Senior Scientist,
Manager of Analytical Software, Manager of the Physics Department, Manager of
Research and Development and Director of Research and Development. Prior to
joining
50
<PAGE>
the Company, Dr. Opsal was an engineer at the Lawrence Livermore National
Laboratory from 1978 to 1982 and a Research Associate and Assistant Professor
at Michigan State University from 1974 to 1978. Dr. Opsal holds a Bachelor of
Arts degree in Physics and Mathematics from Eastern Washington University and
Master of Science and Ph.D. degrees in Physics from Michigan State University.
JAMES E. RHOADES joined the Company in 1992 and, prior to holding his
current position as Vice President, Sales, served as the International Sales
Manager and Director of International Sales. Prior to joining the Company, Mr.
Rhoades served as the Director of International Sales for Silicon Valley
Group, a manufacturer of automated wafer processing equipment, since 1990. Mr.
Rhoades holds a Bachelor of Science degree in Business Administration from San
Jose State University and a Master of Arts degree in International Commerce
and Finance from the American Institute of Foreign Trade.
W. LEE SMITH joined the Company in March 1983 and, since that time, has
served as its Research Group Leader, Applications Manager, Director of
Applications, Vice President, Product Development and Vice President,
Marketing. From 1976 to 1983, Dr. Smith was a Physicist and Nonlinear Optics
Group Leader at the Lawrence Livermore National Laboratory. Dr. Smith holds a
Bachelor of Science degree in Physics from North Carolina State University and
a Ph.D. in Physics from Harvard University.
DONALD J. STRAND joined the Company in July 1996. Prior to joining the
Company, Mr. Strand served as the Director of Customer Service for Watkins-
Johnson Company, Director of Western Regional Sales for Ulvac Technology,
Manager of Field Operations for the Ion Implant Division of Applied Materials,
Product Marketing Manager for Varian Associates and Director of Customer
Service for the Ion Implant Division of Eaton Corporation. Mr. Strand served
in the United States Air Force and holds an Associate of Science degree in
Electrical Engineering from Brown Institute.
DAVID WILLENBORG co-founded the Company with Dr. Rosencwaig in January 1982
and, since that time, has served as Director of Engineering, Vice President,
Engineering and Vice President, Technology. Prior to founding the Company, Mr.
Willenborg was an engineer at the Lawrence Livermore National Laboratory from
1975 to 1982 and at McDonnell-Douglas Aerospace from 1972 to 1973. Mr.
Willenborg holds Bachelor of Science and Master of Science degrees in
Electrical Engineering from the University of Illinois.
G. LEONARD BAKER, JR. has served as a Director of the Company since the
Recapitalization. Mr. Baker has been a General Partner of Sutter Hill Ventures
since 1973. Mr. Baker joined Sutter Hill Ventures in 1973, and, prior to that
time, was Manager of Product Planning for Europe, Africa and India at Cummins
Engine Company, where he also held various manufacturing positions. He serves
on the board of several companies primarily in the high-technology area.
DAVID DOMINIK has served as a Director of the Company since the
Recapitalization. Mr. Dominik has been a General Partner of Information
Partners, L.P. since January 1990 and Managing Director of Information
Partners, Inc. since June 1993. In addition, Mr. Dominik has been a Managing
Director of Bain Capital since June 1993. Mr. Dominik also serves as a
director of several privately held companies.
ADAM W. KIRSCH has served as a Director of the Company since the
Recapitalization. Mr. Kirsch has been a Managing Director of Bain Capital
since May 1993 and a general partner of Bain Venture Capital since 1990. Mr.
Kirsch joined Bain Venture Capital in 1985 as an associate, and, prior to
joining Bain Venture Capital, Mr. Kirsch was a consultant at Bain & Company
where he worked in mergers and acquisitions. He serves on the board of several
companies including Duane Reade, Inc., Stage Stores, Inc., Brookstone, Inc.,
Dade International Inc. and Wesley Jessen VisionCare, Inc.
At present, all Directors are elected and serve until a successor is duly
elected and qualified or until his or her earlier death, resignation or
removal. All members of the Board of Directors set forth herein were elected
pursuant to a stockholders agreement that was entered into in connection with
the Recapitalization. See "Certain Relationships and Related Transactions."
There are no family relationships between any of the Directors or
51
<PAGE>
executive officers of the Company. Executive officers of the Company are
elected by and serve at the discretion of the Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation for
Fiscal 1997 for the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers"). The Company did not grant any stock options in Fiscal
1997 and did not have any options outstanding at the end of Fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ----------------
OTHER ANNUAL ALL OTHER
NAME AND POSITION SALARY ($) BONUS ($) COMPENSATION ($)(1) COMPENSATION ($)
- ----------------- ---------- --------- ------------------- ----------------
<S> <C> <C> <C> <C>
Allan Rosencwaig........ $332,846 $243,000(2) -- $4,446(3)
Chairman, President and
Chief Executive Officer
Anthony W. Lin.......... 211,460 85,100(2) -- --
Executive Vice
President and Chief
Financial Officer
Jon L. Opsal............ 168,184 56,900(2) -- --
Vice President,
Research and
Development
W. Lee Smith............ 135,442 94,000(4) -- --
Vice President,
Strategic Marketing
David Willenborg........ 154,479 51,000 -- --
Vice President,
Marketing
</TABLE>
- --------
(1) None of the perquisites and other benefits paid to each Named Executive
Officer exceeded the lesser of $50,000 or 10% of the total annual salary
and bonus received by each Named Executive Officer.
(2) The Company expects to pay bonuses to Messrs. Rosencwaig, Lin, Opsal and
Willenborg in Fiscal 1998 since the Company met certain performance targets
in Fiscal 1997. To date, the amounts of such bonuses have not been
determined by the Board. The bonus amounts set forth in the table are
estimates based on the reported operating results of the Company, and
therefore, are subject to change.
(3) Reflects insurance premiums paid by the Company on behalf of Dr.
Rosencwaig.
(4) Reflects sales commissions earned by Mr. Smith during Fiscal 1997.
EMPLOYMENT AGREEMENTS
In connection with the Recapitalization, the Company entered into an
employment agreement with Allan Rosencwaig (the "Employment Agreement"). The
Employment Agreement provides that Dr. Rosencwaig will serve as the Chairman of
the Board, President and Chief Executive Officer for a period that will end on
the fifth anniversary of the consummation of the Recapitalization (the
"Employment Period"); provided that the Employment Period will automatically
terminate upon Dr. Rosencwaig's resignation, death or disability or termination
for Good Reason (as defined therein), or upon termination by the Company, with
or without Cause (as defined therein). Under the Employment Agreement, Dr.
Rosencwaig will receive: (i) an annual base salary of at least $400,000
(subject to annual review by the Board and certain annual increases beginning
in 1998); (ii) an annual bonus based upon the achievement by the Company of
certain operating targets and the attainment of certain individual goals by Dr.
Rosencwaig, each to be determined by the Board on an annual basis; and (iii)
certain fringe benefits. In addition, Dr. Rosencwaig is also entitled to
receive a deferred payment in the event the Company achieves certain operating
results. See "--Stock Plans." If the Employment Period is terminated by the
Company without Cause, by Dr. Rosencwaig for Good Reason or as a result of his
disability, Dr. Rosencwaig will be entitled to receive his base salary, bonus
(equal to 50% of base salary) and fringe benefits for 30 months
52
<PAGE>
following such termination. If the Employment Period is terminated by the
Company for Cause or if Dr. Rosencwaig resigns without Good Reason, Dr.
Rosencwaig will be entitled to receive his base salary through the date of
termination. Under the Employment Agreement, Dr. Rosencwaig has agreed not to:
(i) compete with the Company during the period in which he is employed by the
Company; (ii) disclose any confidential information during the period in which
he is employed by the Company and for five years thereafter; (iii) solicit any
customer, supplier, licensee, licensor, franchisee or other business relation
of the Company while he is employed by the Company and for a period of 30
months thereafter; and (iv) solicit or hire any management employee of the
Company for a period of 30 months following the date of termination. In
addition, Dr. Rosencwaig has agreed to disclose to the Company any and all
Inventions (as defined in such employment agreement) relating to Company's
business conceived or learned by him during his employment with the Company and
acknowledge that such Inventions will be the property of the Company.
In connection with the Recapitalization, the Company also entered into
employment agreements with the other Management Investors and certain other key
employees.
COMPENSATION OF DIRECTORS
Following the Recapitalization, Directors serving on the Board of Directors
are not be entitled to receive any compensation for serving on the Board.
Directors are reimbursed for their out-of-pocket expenses incurred in
connection with such services.
STOCK PLANS
In connection with the Recapitalization, the Board of Directors adopted the
Therma-Wave, Inc. 1997 Stock Purchase and Option Plan (the "1997 Stock Plan"),
which authorizes the granting of stock options and the sale of Class A Common
or Class B Common to current or future employees, directors, consultants or
advisors of the Company or its subsidiaries. Under the 1997 Stock Plan, the
Board is authorized to sell or otherwise issue any class or classes of Common
Stock at any time prior to the termination of the 1997 Stock Plan in such
quantity, at such price, on such terms and subject to such conditions as
established by the Board up to an aggregate of 3,000,000 shares of Class A
Common and 3,000,000 shares of Class B Common (including shares of Common Stock
with respect to which options may be granted), subject to adjustment upon the
occurrence of certain events to prevent any dilution or expansion of the rights
of participants that might otherwise result from the occurrence of such events.
Options to purchase an aggregate of 1,343,750 shares of Class B Common were
granted under the 1997 Stock Plan in connection with the Recapitalization.
Each of the Management Investors entered into an Executive Stock Agreement
(the "Stock Agreement"), which provided for the sale of the Class L Common,
Class A Common and Class B Common and established the terms of the options
granted pursuant to the 1997 Stock Plan. Pursuant to the Stock Agreements, the
Company: (i) sold shares of Class L Common and Class A Common at the same price
per share as paid by the Bain Capital Funds, (ii) sold shares of Class B Common
at the same price as paid by the Bain Capital Funds, which are subject to
quarterly vesting over a five year period (5% per quarter), and (iii) granted
options to acquire shares of Class B Common, which were divided into five equal
tranches with the exercise prices of $8.93, $10.68, $12.43, $14.18 and $15.89
per share. The aggregate exercise price of the options granted under the Stock
Agreements was approximately $16.7 million. The options granted under the Stock
Agreements were immediately exercisable. The shares of Class B Common issuable
upon the exercise of such options will vest (regardless of whether the option
has been exercised) on the fifth anniversary of their date of grant provided
that the Management Investor has been continuously employed by the Company
during such period. In addition, some or all of such shares of Class B Common
are subject to earlier vesting upon certain events, including all of such
shares vesting immediately on a sale of the Company. Upon exercise of any such
options, the Company will loan to the Management Investors the exercise price
therefor. The loan will be payable on the tenth anniversary of the
Recapitalization or earlier in certain circumstances. Under the terms of their
respective
53
<PAGE>
employment agreements, each of the Management Investors is entitled to receive
a deferred payment in an amount that is sufficient to repay such loan if the
Company achieves certain operating results.
The following table summarizes the shares of capital stock that were
purchased by the Named Executive Officers under the Stock Agreements:
<TABLE>
<CAPTION>
NO. OF SHARES PURCHASED
-----------------------
CLASS A CLASS B CLASS L AGGREGATE NO. OF
NAME COMMON COMMON COMMON PURCHASE PRICE OPTIONS GRANTED
- ---- ------- ------- ------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Allan Rosencwaig......... 993,279 671,875 110,364 $2,497,608 671,875
Anthony W. Lin........... 40,588 127,656 4,510 125,611 127,656
Jon L. Opsal............. 23,427 127,656 2,603 85,183 127,656
W. Lee Smith............. 40,738 100,781 4,526 119,636 100,781
David Willenborg......... 128,299 100,781 14,255 325,890 100,781
</TABLE>
In addition, the Stock Agreements granted the Company and the Bain Capital
Funds (in the event that the Company does not elect to exercise such option)
the right upon certain conditions to repurchase the shares of Class L Common,
Class A Common and Class B Common (including shares received upon the exercise
of options) held by a Management Investor in the event that the Management
Investor ceases to be employed by the Company. The shares that are subject to
such repurchase option and the repurchase price (either fair market value or
original cost) are dependent upon the circumstances under which such Management
Investor's employment was terminated. The Stock Agreements also: (i) restrict
the transfer of the Management Investors' securities, subject to certain
exceptions, (ii) grant each Management Investor certain participation rights in
connection with certain transfers made by the Bain Capital Funds, and (iii)
require each Management Investor to consent to a sale of the Company approved
by holders representing a majority of the shares of Common Stock held by the
Bain Capital Funds.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The outstanding equity securities of the Company consist of 9,073,521 shares
of Class A Common; 1,343,750 shares of Class B Common; 1,008,168 shares of
Class L Common; and 748,739 shares of Preferred Stock. The shares of Class A
Common and Class L Common each entitle the holder thereof to one vote per share
on all matters to be voted upon by the stockholders of the Company and are
otherwise identical, except that the shares of Class L Common are entitled to a
preference over Class A Common with respect to any distribution by the Company
to holders of its capital stock equal to the original cost of such share
($19.085) plus an amount which accrues on a daily basis at a rate of 12% per
annum, compounded annually. The Class B Common is identical to the Class A
Common except that the Class B Common is nonvoting and is convertible into
Class A Common at any time following an initial public offering by the Company
at the option of the holder thereof. The Preferred Stock has a liquidation
preference of $18.40 per share and is convertible into one share of Class A
Common at the option of the holder thereof. Dividends on the Preferred Stock
accrue at a rate of 6.0% per annum. The Preferred Stock has a scheduled
redemption of the earlier of: (i) the tenth anniversary of the Recapitalization
and (ii) one day following the scheduled maturity of the Notes, and is
otherwise redeemable by the Company at any time from time to time after the
earlier of: (i) June 30, 1998 and (ii) an initial public offering by the
Company. The Preferred Stock entitles the holder thereof to one vote for each
share of Class A Common issuable upon conversion of such Preferred Stock.
The following table sets forth certain information regarding the beneficial
ownership of (i) each class of voting securities of the Company by each person
known to the Company to own more than 5% of any class of outstanding voting
securities of the Company and (ii) the equity securities of the Company by each
Director of the Company, each Named Executive Officer and all of the Company's
directors and executive officers as a group. To the knowledge of the Company,
each of such stockholders has sole voting and investment power as to the shares
shown unless otherwise noted. Beneficial ownership of the securities listed in
the table have been determined in accordance with the applicable rules and
regulations promulgated under the Exchange Act.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------------------------------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK CLASS L COMMON STOCK PREFERRED STOCK
-------------------- -------------------- ------------------------ ------------------
NUMBER NUMBER
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE
NAME AND ADDRESS SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
---------------- --------- ---------- --------- ---------- ----------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Bain Capital Funds (1)...... 5,536,937 61.0% -- -- % 615,215 61.0% -- -- %
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Sutter Hill Ventures........ 1,642,382 18.1 -- -- 182,487 18.1 -- --
755 Page Mill Road
Palo Alto, California 94304
Toray Industries, Inc. (2).. 996,913 11.0 -- -- 45,363 4.5 588,653 78.6
8-1, Mihama 1-chome
Urayasu, Chiba 279, Japan
Shimadzu Corporation (3).... 271,112 3.0 -- -- 12,336 1.3 160,085 21.4
1, Nishinokyo-Kuwabaracho
Nakagyo-ku, Kyoto 604,
Japan
DIRECTORS AND EXECUTIVE
OFFICERS:
Allan Rosencwaig (4)........ 993,279 10.9 1,343,750 67.0 110,364 10.9 -- --
Anthony W. Lin (5).......... 40,588 * 255,312 17.0 4,510 * -- --
Jon L. Opsal (6)............ 23,427 * 255,312 17.0 2,603 * -- --
W. Lee Smith (7)............ 40,738 * 201,562 14.0 4,526 * -- --
David Willenborg(8)......... 128,299 1.4 201,562 14.0 14,255 1.4 -- --
G. Leonard Baker, Jr. (9)... 1,642,382 18.1 -- -- 182,487 18.1 -- --
David Dominik (10).......... 5,536,937 61.0 -- -- 615,215 61.0 -- --
Adam W. Kirsch (10)......... 5,536,937 61.0 -- -- 615,215 61.0 -- --
All Directors and executive
officers as a group (8
persons)................... 8,405,650 93.0 2,687,500 100.0 933,960 92.4 -- --
</TABLE>
- --------
*Less than one percent.
55
<PAGE>
(1) Includes shares of Class A Common and Class L Common held by Bain Capital
Fund V, L.P., ("Fund V"); Bain Capital Fund V-B, L.P. ("Fund V-B"); BCIP
Associates ("BCIP"); and BCIP Trust Associates, L.P. ("BCIP Trust" and
collectively with Fund V, Fund V-B and BCIP, have been defined herein as
the "Bain Capital Funds").
(2) The 996,913 shares of Class A Common included in the table represent: (i)
408,260 shares of Class A Common; and (ii) 588,653 shares of Preferred
Stock, which are immediately convertible into an equal number of shares of
Class A Common at the option of the holder thereof. A portion of each
class of the listed shares are held by Toray Industries (America), Inc.,
wholly owned subsidiary of Toray.
(3) The 271,112 shares of Class A Common included in the table represent: (i)
111,027 shares of Class A Common; and (ii) 160,085 shares of Preferred
Stock, which are immediately convertible into an equal number of shares of
Class A Common at the option of the holder thereof.
(4) The 1,343,750 shares of Class B Common included in the table represent:
(i) 671,875 shares of Class B Common, which are subject to vesting; and
(ii) 671,875 shares of Class B Common that can be acquired upon the
exercise of outstanding options. The address of Dr. Rosencwaig is c/o
Therma-Wave, Inc., 1250 Reliance Way, Fremont, California 94539.
(5) The 255,312 shares of Class B Common included in the table represent: (i)
127,656 shares of Class B Common, which are subject to vesting; and (ii)
127,656 shares of Class B Common that can be acquired upon the exercise of
outstanding options.
(6) The 255,312 shares of Class B Common included in the table represent: (i)
127,656 shares of Class B Common, which are subject to vesting; (ii)
127,656 shares of Class B Common that can be acquired upon the exercise of
outstanding options.
(7) The 201,562 shares of Class B Common included in the table represent: (i)
100,781 shares of Class B Common, which are subject to vesting; and (ii)
100,781 shares of Class B Common that can be acquired upon the exercise of
outstanding options.
(8) The 201,562 shares of Class B Common included in the table represent: (i)
100,781 shares of Class B Common, which are subject to vesting; and (ii)
100,781 shares of Class B Common that can be acquired upon the exercise of
outstanding options.
(9) Mr. Baker is a General Partner of Sutter Hill. As a result, the shares of
Class A Common and Class L Common acquired by Sutter Hill may be deemed to
be beneficially owned by Mr. Baker, who disclaims beneficial ownership of
any such shares in which he will not have a pecuniary interest. The
address of Mr. Baker is c/o Sutter Hill Ventures, 755 Page Mill Road, Palo
Alto, California 94304.
(10) Messrs. Dominik and Kirsch are each Managing Directors of Bain Capital and
limited partners of Bain Capital Partners V, L.P., the sole general
partner of Fund V and Fund V-B. Accordingly, Messrs. Dominik and Kirsch
may be deemed to beneficially own shares owned by Fund V and Fund V-B.
Messrs. Dominik and Kirsch are each general partners of BCIP and BCIP
Trust and, accordingly, may be deemed to beneficially own shares owned by
such funds. Each such person disclaims beneficial ownership of any such
shares in which he does not have a pecuniary interest. The address of such
persons is c/o Bain Capital, Inc., Two Copley Place, Boston, Massachusetts
02116.
56
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS TO EXECUTIVE OFFICERS
In connection with the Recapitalization, the Company made loans, in aggregate
principal amount of $303,344, to certain executive officers of the Company in
connection with their purchase of shares of capital stock under the Stock
Agreements. These loans are secured by a pledge of the shares of Common Stock
owned by such executive officers and bear interest at a rate equal to the
applicable federal rate at the time of the Recapitalization. The loans are
payable upon a sale of the Company or earlier under certain circumstances. The
following executive officers received the following aggregate amount of loans:
Allan Rosencwaig, Chairman, President and Chief Executive Officer, $151,172;
Anthony W. Lin, Executive Vice President and Chief Financial Officer, $28,723;
Jon L. Opsal, Vice President, $28,723; W. Lee Smith, Vice President, $22,676;
and David Willenborg, Vice President, $22,676. In addition, the Company expects
to loan such executive officers an aggregate of approximately $1,100,000 to pay
certain tax liabilities associated with the distribution from Toray.
Furthermore, the Company agreed to loan to each holder of options granted in
connection with the Recapitalization the exercise price therefor upon exercise
of such options. See "Management--Stock Plans."
ADVISORY AGREEMENT
In connection with the Recapitalization, the Company entered into an Advisory
Agreement with Bain Capital pursuant to which Bain Capital agreed to provide:
(i) general executive and management services; (ii) identification, support,
negotiation and analysis of acquisitions and dispositions; (iii) support,
negotiation and analysis of financial alternatives; (iv) finance, marketing and
human resource functions; and (v) other service agreed upon by the Company and
Bain Capital. In exchange for such services, Bain Capital received: (i) an
annual management fee of $1.0 million, plus reasonable out-of-pocket expenses
(payable quarterly); and (ii) a transaction fee in connection with the
consummation of each additional acquisition by the Company of an additional
business in an amount equal to 1% of the aggregate transaction value. In
connection with the Recapitalization, Bain Capital received a transaction fee
of $1.8 million. The Advisory Agreement has an initial term of ten years,
subject to automatic one-year extensions unless the Company or Bain Capital
provides written notice of termination.
STOCKHOLDERS AGREEMENT
Pursuant to the Recapitalization, the Company, the Bain Capital Funds
(together with certain of their designees that execute a counterpart to such
agreement (the "Bain Group")), Sutter Hill and the Existing Stockholders
entered into a stockholders agreement (the "Stockholders Agreement"). The
Stockholders Agreement: (i) requires that each of the parties thereto vote all
of his voting securities and to take all other necessary or desirable actions
to cause the size of the Board of Directors to be established at five members
and to cause three designees of the Bain Capital Funds to be elected to the
Board of Directors; (ii) grants the Company, the Bain Group and Sutter Hill a
right of first refusal on any proposed transfer of shares held by the Existing
Stockholders; (iii) grants the Existing Stockholders certain participation
rights in connection with certain transfers made by the Bain Group; and (iv)
requires the Existing Stockholders to consent to a sale of the Company to an
independent third party if such sale is approved by holders representing a
majority of the shares held by the Bain Group (an "Approved Sale"). In
addition, the Company agreed not to issue, sell or otherwise transfer for
consideration to any member of the Bain Group or Sutter Hill or any affiliates
thereof at any time prior to a registered initial public offering, any shares
of Common Stock (or securities convertible into or otherwise exercisable or
exchangeable for Common Stock or securities containing any profit participation
features or options) unless each of the Existing Stockholders is given the
opportunity to subscribe for and purchase their pro rata portion of such
additional shares at the same price and on the same terms. All of the foregoing
provisions of the Stockholders Agreement (other than those described in items
(ii) and (iii)) will terminate upon the consummation of an initial public
offering registered under the Securities Act (a "Public Offering"). The
provisions described in items (ii) and (iii) will terminate upon the earlier
of: (i) the date the shares subject to such provision are transferred in a
public sale; (ii) the consummation of an Approved Sale; or (iii) the
consummation of a Public Offering.
57
<PAGE>
REGISTRATION AGREEMENT
Pursuant to the Recapitalization, the Company, the Bain Group, Sutter Hill
the Existing Stockholders and the Management Investors entered into a
registration agreement (the "Registration Agreement"). Under the Registration
Agreement, the holders of a majority of the registerable securities owned by
the Bain Group and Sutter Hill have the right at any time, subject to certain
conditions, to require the Company to register any or all of their shares of
Common Stock under the Securities Act on Form S-1 (a "Long-Form Registration")
on three occasions at the Company's expense or on Form S-2 or Form S-3 (a
"Short-Form Registration") on six occasions at the Company's expense. In
addition, at any time after a Public Offering, the holders of a majority of the
registrable securities owned by the Existing Stockholders have the right,
subject to certain conditions, to require either a Long-Form Registration or a
Short-Form Registration on one occasion at the Company's expense. Further, at
any time after the later of the fifth anniversary of the closing of the
Recapitalization and 180 days after a Public Offering, the Management Investors
have the right, subject to certain conditions, to require either a Long-Form
Registration or a Short-Form Registration, at the Company's expense, with
respect to a number of shares of Common Stock the proceeds of which (subject to
certain limitations) would be sufficient to pay taxes incurred by them upon
receipt of the deferred bonuses under their employment contracts. See
"Management--Employment Agreements." The Company is not required, however, to
effect any such Long-Form Registration or Short-Form Registration within six
months after the effective date of a prior demand registration and may postpone
the filing of such registration for up to six months if the Company believes
that such a registration would reasonably be expected to have an adverse effect
on any proposal or plan by the Company or any of its subsidiaries to engage in
an acquisition, merger or similar transaction. In addition, all holders of
registerable securities are entitled to request the inclusion of any shares of
Common Stock subject to the Registration Agreement in any registration
statement at the Company's expense whenever the Company proposes to register
any of its securities under the Securities Act (other than (i) in connection
with Public Offering, unless any holders of registrable securities are
permitted to participate in the Public Offering, (ii) pursuant to a demand
registration, or (iii) pursuant to a registration on Form S-4 or S-8). In
connection with all such registrations, the Company has agreed to indemnify all
holders of registerable securities against certain liabilities, including
liabilities under the Securities Act.
STOCK REPURCHASE AGREEMENT
In January 1996, Toray and the Management Investors entered into an agreement
(the "Stock Repurchase Agreement") pursuant to which, among other things, Toray
acquired from the Management Investors all of the common stock and rights to
acquire stock of the Company held by the Management Investors for approximately
$11.0 million in cash and, upon a sale of the Company or in certain other
circumstances, the right to receive an additional payment the amount of which
is dependent upon the proceeds received in connection with the sale of the
Company (or, in certain circumstances, the fair market value of the Company's
stock). In connection with the Recapitalization, the Management Investors
received the following amounts of cash from Toray in satisfaction of Toray's
obligations under the Stock Repurchase Agreement:
<TABLE>
<CAPTION>
NAME CASH
---- ----------
<S> <C>
Allan Rosencwaig............................................... $2,239,724
Anthony W. Lin................................................. 95,608
Jon L. Opsal................................................... 55,183
W. Lee Smith................................................... 95,960
David Willenborg............................................... 302,216
</TABLE>
VOTING AGREEMENT
Pursuant to the Recapitalization, the Company, the Bain Group, Sutter Hill
and certain key employees of the Company, including the Management Investors,
entered into a voting agreement (the "Voting Agreement") pursuant to which each
party thereto agreed to vote his or its voting securities and to take all
necessary or desirable actions to cause the size of the Board at five directors
and to cause three designees of the Bain Group and two management employees of
the Company designated by Dr. Rosencwaig to be elected to the Board of
Directors.
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RECAPITALIZATION AGREEMENT
The Recapitalization Agreement contains customary provisions for such
agreements, including representations and warranties with respect to the
condition and operations of the business, covenants with respect to the conduct
of the business prior to the closing date of the Recapitalization and various
closing conditions, including the obtaining of financing and the continued
accuracy of representations and warranties.
Pursuant to the Recapitalization Agreement, the Existing Stockholders agreed
to jointly indemnify the Bain Capital Funds against any and all losses
resulting from any misrepresentation or breach of warranty made by them in the
Recapitalization Agreement, a claim for which must be made (in most cases) no
later than 18 months after the closing date of the Recapitalization. The
indemnification obligations of the Existing Stockholders under the
Recapitalization Agreement are generally subject to a $2.0 million minimum
aggregate threshold amount and limited to an aggregate payment of no more than
$30.0 million. Notwithstanding the foregoing, the Existing Stockholders have
jointly agreed to indemnify the Company and the Bain Capital Funds for any and
all losses with respect to: (i) taxes for all taxable periods prior to March
31, 1996; and (ii) any breach of the representation relating to taxes in the
Recapitalization Agreement (subject to the limitations of the preceding
sentence). In addition, the Company agreed to indemnify the Existing
Stockholders against any and all losses arising out of: (i) any employee
benefit plan of the Company; (ii) the severance of any employee of the Company
or its subsidiaries on or after the closing date; and (iii) subject to certain
exceptions, violations of Environmental Laws (as defined therein).
In addition, the Existing Stockholders have agreed for a period of three
years after the closing date of the Recapitalization not to compete with the
Company in the business of manufacturing, marketing or selling (i) measuring
equipment used for material characterization (such as ion implantation
monitoring or measurements in metal films); (ii) thin film measurement
equipment; or (iii) equipment that utilizes the intellectual property of the
Company. The Existing Stockholders have also agreed for a period of two years
after the closing date not to solicit the employment of the employees of the
Company without the prior written consent of the Bain Capital Funds.
DEVELOPMENT LICENSE AGREEMENT
In 1992, the Company entered into a Development License Agreement with Toray
and Shimadzu (the "Development License Agreement"). The purpose of the
Development License Agreement was to allow the parties to share patents and
technology related to (i) the entire field of thermal wave technology; (ii) the
field of laser technology related to thin film metrology; (iii) the field of
optical processing; and (iv) any other fields designated by a research and
development committee to be formed by the parties (collectively, the "Field of
Research"). Under the Development License Agreement: (i) the Company granted to
each of Toray and Shimadzu a royalty-free, non-exclusive license to use the
Company's patents and technology related to the Field of Research for the
purpose of conducting research and new product development activities in Japan;
and (2) Toray and Shimadzu granted to the Company a royalty-free, non-exclusive
license to use those of Toray's and Shimadzu's patents and technology
determined to be useful in connection with certain development projects for the
purpose of conducting research and new product development activities in the
U.S. and Japan. The Development License Agreement may be terminated by the
parties thereto in June 1999.
The Development License Agreement requires the parties to take certain steps
to coordinate their research and development activities. All enhancements,
modifications and improvements to certain of the Company's products existing at
the time the agreement was entered into will be owned by the Company,
regardless of which party creates such enhancements, modifications, and
improvements. However, to the extent any such enhancements, modifications and
improvements are based upon patents and technology owned by Toray or Shimadzu,
the Company will have to pay a development fee or royalty to those parties.
Other developments ("New Developments") will be jointly owned by the party or
parties who created the New Development and the party or parties whose patents
or technology were used in such New Development. The commercialization,
marketing and other use of each New Development will be governed by the terms
of a separate agreement to be entered into the relevant parties on a case-by-
case basis ("New Development Agreements"). To date, only one New Development
Agreement has been entered into between the parties, which relates to certain
film measurement equipment.
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DESCRIPTION OF BANK CREDIT FACILITY
In connection with the Recapitalization, the Company entered into a new bank
credit facility (the "Bank Credit Facility") with Bankers Trust Company (the
"Agent"), which provides for a revolving credit facility of $30.0 million. The
Company may borrow amounts under the Bank Credit Facility to finance its
working capital requirements and other general corporate purposes. All
revolving loans incurred under the Bank Credit Facility will mature on the
fifth anniversary of the Closing Date.
Indebtedness of the Company under the Bank Credit Facility will be guaranteed
by each of the Company's domestic subsidiaries and will be secured by (i) a
first priority security interest in all receivables, contracts, contract
rights, equipment, intellectual property, inventory and all other tangible and
intangible assets of the Company and each of its domestic subsidiaries, subject
to certain customary exceptions, (ii) a pledge of all capital stock of each
direct and indirect domestic subsidiary of the Company and (iii) a pledge of
65% of the capital stock of each first-tier foreign subsidiary of the Company.
The Company's borrowings under the Bank Credit Facility will bear interest at
a floating rate and may be maintained as Base Rate Loans (as defined in the
Bank Credit Facility) or, beginning 90 days after the Closing Date (or earlier
upon syndication) at the Company's option, as Eurodollar Loans (as defined in
the Bank Credit Facility). Base Rate loans shall bear interest at the Base Rate
(defined as the higher of (x) the applicable prime lending rate of Bankers
Trust Company and (y) the Federal Reserve reported certificate of deposit rate
plus 1/2 of 1%) plus 1.75%. Eurodollar Loans shall bear interest at the
Eurodollar Rate (as defined in the Bank Credit Facility) applicable for one,
two, three, six or twelve month periods, in each case plus 3.00%.
Amounts borrowed under the Bank Credit Facility may be repaid and reborrowed.
The Company will be required to pay to the lenders under the Bank Credit
Facility a commitment fee equal to 1/2 of 1% per annum, payable in arrears on a
quarterly basis, on the average unused portion of the Bank Credit Facility
during such quarter (provided, that such commitment fee increases to 3/4 of 1%
per annum if during any quarterly payment period the daily average outstanding
borrowings were less than 1/2 of the total revolving loan commitment). The
Company will also be required to pay to the lenders a letter of credit fee with
respect to each letter of credit outstanding equal to 3.00% per annum of the
average daily stated amount of such letter of credit and an additional fronting
fee of 1/4 of 1% on such average daily stated amount to the lender issuing such
letter of credit, in each case payable in arrears on a quarterly basis. The
Agent and the lenders will receive and continue to receive such other fees as
have been separately agreed upon with the Agent.
The Bank Credit Facility requires the Company to meet certain financial
tests, including, without limitation, minimum levels of EBITDA (as defined in
the Bank Credit Facility), minimum interest coverage, maximum leverage ratio,
and maximum amount of capital expenditures. The Bank Credit Facility contains
certain covenants which among other things limit the incurrence of additional
indebtedness, investments, dividends, transactions with affiliates, asset
sales, acquisitions, mergers and consolidations, prepayments of other
indebtedness (including the Notes), liens and encumbrances and other matters
customarily restricted in such agreements.
The Bank Credit Facility contains customary events of default, including
without limitation, payment defaults, breaches of representations and
warranties, covenant defaults, cross-defaults to certain other indebtedness,
certain events of bankruptcy and insolvency, judgment defaults, failure of any
guaranty or security document supporting the Bank Credit Facility to be in full
force and effect and change of control of the Company.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 16, 1997 to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold the Old Notes to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and a limited number of
institutional "accredited investors" as defined in Rule 501(a) (1), (2), (3)
or (7) under the Securities Act. As a condition to the Purchase Agreement, the
Company entered into the Registration Rights Agreement with the Initial
Purchaser pursuant to which the Company has agreed, for the benefit of the
holders of the Old Notes, at the Company's cost, to use its best efforts to
(i) file the Exchange Offer Registration Statement within 60 days after the
date of the original issue of the Old Notes with the Commission with respect
to the Exchange Offer for the Old Notes, (ii) use its best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 120 days after the date of the original issuance of the
Old Notes and (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, commence the Exchange Offer and use its
best efforts to issue the New Notes in exchange for the Old Notes on or prior
to 45 days after the date the Exchange Offer Registration Statement being
declared effective. Upon the Exchange Offer Registration Statement being
declared effective, the Company will offer the New Notes in exchange for
surrender of the Old Notes. The Company will keep the Exchange Offer open for
not less than 30 business days (or longer if required by applicable law) after
the date on which notice of the Exchange Offer is mailed to the holders of the
Old Notes. For each Old Note surrendered to the Company pursuant to the
Exchange Offer, the holder of such Old Note will receive a New Note having a
principal amount equal to that of the surrendered Old Note. Interest on each
Old Note will accrue from the last interest payment date on which interest was
paid on the Old Note, or if no interest has been paid on such Old Note, from
the date of its original issue to, but not including, the issuance date of the
New Notes. Interest on each New Note will accrue from the date of its original
issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes will, in general, be
freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate"
(as defined in the Securities Act) of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing the New
Notes (i) will not be able to rely on the interpretation of the staff of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Old Notes, unless such sale or transfer is made pursuant to an exemption
from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage in distribution of the
New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or any
other person participates in the Exchange Offer for the purpose of
distributing the New Notes it must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of
the New Notes and cannot rely on those no-action letters. As indicated above,
each Participating Broker-Dealer that receives a New Note for its own account
in exchange for Old Notes must acknowledge that it (i) acquired the Old Notes
for its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with
the Company or any "affiliate" of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the New Notes to be received in the
Exchange Offer and (iii) will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. For a
description of the procedures for resales by Participating Broker-Dealers, see
"Plan of Distribution."
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If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 165
days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered New Notes so request or (iv) in the case of any holder that
participates in the Exchange Offer, such holder does not receive New Notes on
the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such holder as
an affiliate of the Company within the meaning of the Securities Act), then in
each case, the Company will (x) promptly deliver to the holders and the Trustee
written notice thereof and (y) at the Company's sole expense, (a) as promptly
as practicable, file a shelf registration statement covering resales of the
Notes (a "Shelf Registration Statement"), (b) use its reasonable best efforts
to cause such Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its reasonable best efforts to keep effective such
Shelf Registration Statement until the earlier of two years after the Issue
Date and such time as all of the applicable Notes have been sold thereunder.
The Company will, in the event of the filing of a Shelf Registration Statement,
provide to each holder of the Old Notes copies of the prospectus which is a
part of such Shelf Registration Statement, notify each such holder when such
Shelf Registration Statement has become effective and take certain other
actions as are required to permit unrestricted resales of the Notes. A holder
that sells its Notes pursuant to a Shelf Registration Statement generally will
be required to be named as a selling security holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such holder (including certain indemnification
obligations).
If the Company fails to comply with the above provisions or if such
registration statements fails to become effective, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable with
respect to the Old Notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement is filed with the Commission on or prior to
the applicable filing date or (B) notwithstanding that the Company has
consummated or will consummate an Exchange Offer, the Company is required
to file a Shelf Registration Statement and such Shelf Registration
Statement is not filed on or prior to the date required by the Registration
Rights Agreement, then commencing on the day after either such required
filing date, Additional Interest shall accrue on the principal amount of
the Old Notes at a rate of 0.25% per annum for the first 90 days
immediately following each such filing date, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement is declared effective by the Commission on or prior
to 120 days after the applicable filing date or (B) notwithstanding that
the Company has consummated or will consummate an Exchange Offer, the
Company is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the applicable Effectiveness Date (as defined in the Registration
Rights Agreement), then, commencing on the day after such date, Additional
Interest shall accrue on the principal amount of the Old Notes at a rate of
0.25% per annum for the first 90 days immediately following such date, such
Additional Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged New Notes for all Old Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 45th day after the date on which the Exchange Offer
Registration Statement was first declared effective or (B) if applicable,
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the Issue Date (other than after such time as all Old
Notes have been disposed of thereunder), then Additional Interest shall
accrue on the principal amount of the Old Notes at a rate of 0.25% per
annum for the first 90 days commencing on (x) the 46th day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above,
such Additional Interest rate increasing by an additional 0.25% per annum
at the beginning of each subsequent 90-day period;
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provided, however, that the Additional Interest rate on the Old Notes may not
exceed in the aggregate 1.0% per annum; and provided further, that (1) upon the
filing of the Exchange Offer Registration Statement or Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration Statement or Shelf Registration Statement (in the
case of (ii) above), or (3) upon the exchange of New Notes for all Old Notes
tendered (in the case of clause (iii)(A) above), or upon the effectiveness of
the Exchange Offer Registration Statement which had ceased to remain effective
in the case of clause (iii)(B) above, Additional Interest on the Old Notes as a
result of such clause (or the related subclause thereof), as the case may be,
shall cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or (iii)
above will be payable in cash, on the same original interest payment dates as
the Notes. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest rate by the principal amount of the Notes
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.
Holders of the Old Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by, all the provisions of the Registration Rights Agreement, a copy of
which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of the
Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes will be issued in
a transaction that has been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof and (iii) the holders of
the New Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for liquidated damages in
certain circumstances relating to the timing of the Exchange Offer, all of
which rights will terminate when the Exchange Offer is terminated. The New
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture.
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As of the date of this Prospectus, $115,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the exchange fees and expenses.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
November 15, 1997 to the persons who are registered holders of the New Notes
on November 1, 1997. Interest on the Old Notes accepted for exchange will
cease to accrue upon issuance of the New Notes.
Interest on the New Notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1997.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures
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thereon guaranteed if required by the Letter of Transmittal or transmit an
Agent's Message in connection with a book-entry transfer, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be
tendered effectively, the Old Notes, Letter of Transmittal or an Agent's
Message and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old
Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and (iii)
that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Company the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the Old
Notes at the Book-Entry Transfer Facility (as defined in the Letter of
Transmittal) for the purpose of facilitating the Exchange Offer, and subject to
the establishment thereof, any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of Old
Notes by causing such Book-Entry Transfer Facility to transfer such Old Notes
into the Exchange Agent's account with respect to the Old Notes in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book- Entry Transfer Facility, unless an
Agent's Message is received by the Exchange Agent, in compliance with ATOP, an
appropriate Letter of Transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its
address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the Book-
Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
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(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent upon five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"); (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited); (iii) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described above
under "--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company, Holdings or any of their
subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
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If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
IBJ Schroder Bank & Trust Company
Attention: Reorganization Department
One State Street
New York, New York 10004
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will
not constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a
person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the
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Securities Act (and based upon an opinion of counsel reasonably acceptable to
the Company), (iii) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives the New Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives New Notes in exchange for Old Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives an New Senior Note for its own
account in exchange for Old Notes must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Notes. For a description
of the procedures for such resales by Participating Broker-Dealers, see "Plan
of Distribution. "
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DESCRIPTION OF NOTES
The New Notes will be issued under the Indenture. The terms of the New Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "TIA") as in
effect on the date of the Indenture. The form and terms of the New Notes are
the same as the form and terms of the Old Notes (which they replace) except
that (i) the New Notes bear a Series B designation, (ii) the New Notes have
been issued in a transaction that has been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holders of New Notes will not be entitled to certain rights under the
Registration Agreement, including the provisions providing for liquidated
damages in certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange Offer is consummated. The New
Notes are subject to all such terms, and holders of the New Notes are referred
to the Indenture and the TIA for a statement of them. The following is a
summary of the material terms and provisions of the New Notes. This summary
does not purport to be a complete description of the New Notes and is subject
to the detailed provisions of, and qualified in its entirety by reference to,
the New Notes and the Indenture (including the definitions contained therein),
copies of which are filed as exhibits to the Exchange Offer Registration
Statement of which this Prospectus is a part. Definitions relating to certain
capitalized terms are set forth under "--Certain Definitions" and throughout
this description. Capitalized terms that are used but not otherwise defined
herein have the meanings assigned to them in the Indenture and such definitions
are incorporated herein by reference. The Old Notes and the New Notes are
sometimes referred to herein collectively as the "Notes."
The Notes will be senior unsecured obligations of the Company, ranking pari
passu in right of payment with all other senior unsecured obligations of the
Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if any)
on the Notes at the Trustee's corporate office in New York, New York. At the
Company's option, interest may be paid at the Trustee's corporate trust office
or by check mailed to the registered address of Holders.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $115,000,000 and will
mature on May 15, 2004. Interest on the Notes will accrue at the rate of 10
5/8% per annum and will be payable semiannually in cash on each May 15 and
November 15 commencing on November 15, 1997, to the Persons who are registered
Holders at the close of business on May 1 and November 1, respectively,
immediately preceding the applicable interest payment date.
The Notes will not be entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after May 15, 2001,
upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on May 15 of the year set
forth below, plus, in each case, accrued interest to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 105.313%
2002........................................................... 102.656
2003........................................................... 100.000
</TABLE>
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Optional Redemption upon Equity Offerings. At any time, or from time to time,
on or prior to May 15, 2000, the Company may, at its option, use the net cash
proceeds of one or more Equity Offerings to redeem up to 40% (provided that
such percentage shall decrease to 35% if an Initial Public Offering has not
been consummated on or prior to November 15, 1998 and any other Notes
previously redeemed pursuant to this provision shall be included in determining
such percentage) of the aggregate principal amount of Notes originally issued
at a redemption price equal to 110.625% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of such redemption;
provided that at least $69.0 million aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 120 days after
the consummation of any such Equity Offering; provided that in the case of an
Initial Public Offering, the Company shall first comply with the provisions set
forth below under "--Mandatory Redemption Following Initial Public Offering."
Mandatory Redemption Following Initial Public Offering. If the Company
consummates an Initial Public Offering prior to May 15, 2000, the Company shall
apply the Net Cash Proceeds relating to such Initial Public Offering to make an
offer to purchase (the "IPO Proceeds Offering") on a date (the "IPO Proceeds
Offering Payment Date") not less than 30 nor more than 45 days following the
consummation of the Initial Public Offering (such consummation date to be
determined without regard to any over-allotment option granted by the Company
to underwriters) from all Holders on a pro rata basis that amount of Notes
equal to the Net Cash Proceeds at a price equal to 110.625% of the aggregate
principal amount of Notes to be repurchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that the aggregate
amount of Net Cash Proceeds required to be applied pursuant to this provision
shall be reduced dollar for dollar (i) to the extent such Net Cash Proceeds are
used to prepay indebtedness under the Bank Credit Agreement and effect a
permanent reduction in the availability thereunder and (ii) by the aggregate
amount of Net Cash Proceeds of one or more Equity Offerings consummated prior
to the consummation of the Initial Public Offering to the extent used to redeem
Notes as set forth under "--Optional Redemption Upon Equity Offerings" above;
and provided, further, that notwithstanding the foregoing, the Company shall
not be required pursuant to this provision to redeem an aggregate principal
amount of Notes in excess of 40% of the aggregate principal amount of Notes
originally issued (or 35% if the Initial Public Offering is consummated on or
after November 15, 1998), less the aggregate principal amount of Notes
previously redeemed pursuant to the terms set forth above under "--Optional
Redemption Upon Equity Offerings."
SELECTION AND NOTICE
In case of a partial redemption, selection of the Notes or portions thereof
for redemption shall be made by the Trustee by lot, pro rata or in such manner
as it shall deem appropriate and fair and in such manner as complies with any
applicable legal requirements; provided, however, that if a partial redemption
is made with the proceeds of a Equity Offering, selection of the Notes or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. Notes may be redeemed in
part in multiples of $1,000 principal amount only. Notice of redemption will be
sent, by first class mail, postage prepaid, at least 30 days and not more than
60 days prior to the date fixed for redemption to each Holder whose Notes are
to be redeemed at the last address for such Holder then shown on the registry
books. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after any redemption date, interest
will cease to accrue on the Notes or part thereof called for redemption as long
as the Company has deposited with the Paying Agent funds in satisfaction of the
redemption price pursuant to the Indenture.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest thereon to the date of purchase.
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Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by the management of
the Company. While such restrictions cover a wide variety of arrangements which
have traditionally been used to effect highly leveraged transactions, the
Indenture may not afford the Holders of Notes protection in all circumstances
from the adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, or (c) make any Restricted
Investment (each of the foregoing actions set forth in clauses (a), (b) and (c)
being referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event
of Default shall have occurred and be continuing, (ii) the Company is not able
to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant, or (iii) the aggregate amount of Restricted Payments
made subsequent to the Issue Date shall exceed the sum of: (w) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss,
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minus 100% of such loss) of the Company earned subsequent to the Issue Date and
on or prior to the date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period); plus (x) 100% of the
aggregate net proceeds received by the Company (including the fair market value
of property other than cash) from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company
(including Capital Stock issued upon the conversion of convertible Indebtedness
or in exchange for outstanding Indebtedness); plus (y) without duplication of
any amounts included in clause (iii) (x) above, 100% of the aggregate net
proceeds (including the fair market value of property other than cash) of any
equity contribution received by the Company from a holder of the Company's
Capital Stock (excluding any net proceeds from an Equity Offering to the extent
used to redeem Notes in accordance with the optional redemption provisions of
the Notes) plus (z) 100% of the aggregate net proceeds (including the fair
market value of property other than cash) of any (i) sale or other disposition
of Restricted Investments made by the Company and its Restricted Subsidiaries
or (ii) dividend from, or the sale of the stock of, an Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Event of Default shall have
occurred and be continuing as a consequence thereof, the acquisition of any
shares of Capital Stock of the Company (the "Retired Capital Stock"), either
(A) solely in exchange for shares of Qualified Capital Stock of the Company
(the "Refunding Capital Stock"), or (B) if no Default or Event of Default shall
have occurred and be continuing, through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company; (3) if no Default
or Event of Default shall have occurred and be continuing or would occur as a
consequence thereof, the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified Capital
Stock) issued after the Issue Date (including, without limitation, the
declaration and payment of dividends on Refunding Capital Stock in excess of
the dividends declarable and payable thereon pursuant to clause (2)); provided
that, at the time of the issuance of such Designated Preferred Stock, the
Company, after giving effect to such issuance on a pro forma basis, would have
had a Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0; (4)
payments for the purpose of and in an amount equal to the amount required to
permit the Company to redeem or repurchase its common equity or options in
respect thereof, in each case in connection with the repurchase provisions
under employee stock option or stock purchase agreements or other agreements to
compensate management or other employees; provided that such redemptions or
repurchases pursuant to this clause (4) shall not exceed $5.0 million (which
amount shall be increased by the amount of any proceeds to the Company from (x)
sales of Capital Stock of the Company to management or other employees
subsequent to the Issue Date in excess of such amounts as provided a basis for
a Restricted Payment pursuant to clause (iii) in the foregoing paragraph and
(y) any "key-man" life insurance policies which are used to make such
redemptions or repurchases) in the aggregate; provided, further, that the
cancellation of Indebtedness owing to the Company from management or other
employees of the Company or any of its Restricted Subsidiaries in connection
with a repurchase of Capital Stock of the Company will not be deemed to
constitute a Restricted Payment under the Indenture; (5) repurchases of Capital
Stock deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; (6) so long as no Default
or Event of Default shall have occurred and be continuing, payments not to
exceed $500,000 in the aggregate to enable the Company to make payments to
holders of its Capital Stock in lieu of issuance of fractional shares of its
Capital Stock; (7) payments made in connection with the application of the net
proceeds of the Recapitalization; and (8) loans made in the ordinary course of
business to management or other employees to purchase common equity of the
Company and to make tax payments associated with the receipt of cash
distributions in connection with the Recapitalization. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph, (a)
amounts expended (to the extent such expenditure is in the form of cash)
pursuant to clauses (1), (2), (4) and (6) shall be included in such
calculation; provided such expenditures pursuant to clause (4) shall not be
included to the extent of cash proceeds received by the Company from any "key-
man" life insurance policies and (b) amounts expended pursuant to clauses (3),
(5), (7) and (8) shall be excluded from such calculation.
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Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur"), any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of any such Indebtedness, the Company may incur Indebtedness if on
the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than (a) 2.50 to 1.0, if the date of such incurrence is on or prior
to May 15, 1998 (subject to clause (c)(y) below), (b) 2.25 to 1.0, if the date
of such incurrence is after May 15, 1998 and on or prior to November 15, 1998
(subject to clause (c)(y) below), or (c) 2.00 to 1.00, if date of such
incurrence is after (x) November 15, 1998 or (y) an Initial Public Offering has
been consummated.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates involving aggregate consideration in excess of $1.0 million (an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted under
paragraph (b) below and (y) Affiliate Transactions on terms that are not
materially less favorable than those that might reasonably have been obtained
in a comparable transaction at such time on an arm's-length basis from a Person
that is not an Affiliate; provided, however, that for a transaction or series
of related transactions with an aggregate value of $2.5 million or more, at the
Company's option (i) such determination shall be made in good faith by a
majority of the disinterested members of the Board of the Directors of the
Company or (ii) the Board of Directors of the Company or any such Restricted
Subsidiary party to such Affiliate Transaction shall have received an opinion
from a nationally recognized investment banking firm that such Affiliate
Transaction is on terms not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate; and provided,
further, that for a transaction or series of related transactions with an
aggregate value of $5.0 million or more, the Board of Directors of the Company
or any such Restricted Subsidiary party to such Affiliate Transaction shall
have received an opinion from a nationally recognized investment banking firm
that such Affiliate Transaction is on terms not materially less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate.
(b) The foregoing restrictions shall not apply to (i) reasonable fees and
compensation paid to and indemnity provided on behalf of officers, directors,
employees or consultants of the Company or any Subsidiary as determined in good
faith by the Company's Board of Directors or senior management; (ii)
transactions exclusively between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries;
provided such transactions are not otherwise prohibited by the Indenture; (iii)
transactions effected as part of a Qualified Securitization Transaction; (iv)
any agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment thereto)
or in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date;
(v) Restricted Payments permitted by the Indenture; (vi) the payment of
customary annual management, consulting and advisory fees and related expenses
to the Principals and their Affiliates; (vii) payments by the Company or any of
its Restricted Subsidiaries to the Principals and their Affiliates made
pursuant to any financial advisory or financing agreement, including, without
limitation, in connection with acquisitions or divestitures which are approved
by the Board of Directors of the Company or such Restricted Subsidiary in good
faith; (viii) payments or loans to employees or consultants which are approved
by the Board of Directors of the Company in good faith; (ix) the existence of,
or the performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which
it is a party as of the Issue Date and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of obligations
under, any future amendment
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to any such existing agreement or under any similar agreement entered into
after the Issue Date shall only be permitted by this clause (ix) to the extent
that the terms of any such amendment or new agreement are not otherwise
disadvantageous to the Holders of the Notes in any material respect; (x)
transactions permitted by, and complying with, the provisions of the covenant
described under "--Merger, Consolidation and Sale of Assets"; and (xi)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary course
of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Indenture which
are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of the Company or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
of any kind against or upon any of its property or assets, or any proceeds
therefrom, unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Notes are equally and
ratably secured, except for (A) Liens existing as of the Issue Date and any
extensions, renewals or replacements thereof, (B) Liens securing obligations
under the Bank Credit Agreement, (C) Liens securing the Notes, (D) Liens of the
Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any
Subsidiary of the Company, (E) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted under the
Indenture and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens (x) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being refinanced and (y) do
not extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so refinanced, and (F)
Permitted Liens.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock, (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) non-assignment provisions
of any contract or any lease entered into in the ordinary course of business;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Issue Date (including, without
limitation, the Bank Credit Agreement); (6) restrictions on the transfer of
assets subject to any Lien permitted under the Indenture imposed by the holder
of such Lien; (7) restrictions imposed by any agreement to sell assets or
capital stock permitted under the Indenture to any Person pending the closing
of such sale; (8) any agreement or instrument governing Capital Stock of any
Person that is acquired; (9) Indebtedness or other contractual requirements of
a Securitization Entity in connection with a Qualified Securitization
Transaction; provided that such restrictions apply only to such Securitization
Entity; (10) any agreement or instrument governing Indebtedness (whether or not
outstanding) of foreign Restricted Subsidiaries of the Company incurred in
reliance on clauses (iii) and (xvi) of the definition of Permitted
Indebtedness; (11) other Indebtedness permitted to be incurred subsequent to
the Issue Date pursuant to the provisions of the covenant described under
"Limitation on Incurrence of Additional Indebtedness;" provided that any such
restrictions are ordinary and customary with respect to the type of
Indebtedness being incurred (under the relevant circumstances); (12)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business; and (13) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (12) above; provided that such amendments, modifications,
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restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's Board of
Directors, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock (other than to
the Company or to a Wholly Owned Restricted Subsidiary of the Company) or
permit any Person (other than the Company or a Wholly Owned Restricted
Subsidiary of the Company) to own any Preferred Stock of any Restricted
Subsidiary of the Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or a series of related transactions, consolidate with or merge
with or into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets to, another Person or Persons or adopt
a plan of liquidation unless: (i) either (A) the Company shall be the survivor
of such merger or consolidation or (B) the surviving Person (the "Surviving
Entity") is a corporation, partnership, limited liability company or trust
organized and existing under the laws of the United States, any state thereof
or the District of Columbia and such Surviving Entity shall expressly assume
all the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (on a pro forma basis,
including any Indebtedness incurred or anticipated to be incurred in
connection with such transaction), the Company or the Surviving Entity, as the
case may be, (A) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to such
transaction and (B) shall be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant;
(iii) immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the transaction), no Default or Event of Default shall have
occurred and be continuing; and (iv) the Company or the Surviving Entity, as
the case may be, shall have delivered to the Trustee an officers' certificate,
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
the applicable provisions of the Indenture and that all conditions precedent
in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company. Notwithstanding the foregoing clauses (ii) and (iii), (a) any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (b) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is
received at the time of such disposition; (iii) upon the consummation of an
Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of
receipt thereof either (A) to prepay Indebtedness under the Bank Credit
Agreement and effect a permanent reduction in the availability thereunder,
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(B) to reinvest in Productive Assets, or (C) a combination of prepayment (and
reduction), repurchase and investment permitted by the foregoing clause
(iii)(A) and (iii)(B). Pending the final application of any such Net Cash
Proceeds, the Company or such Restricted Subsidiary may temporarily reduce
Indebtedness under a revolving credit facility, if any, or otherwise invest
such Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset
Sale or such earlier date, if any, as the Board of Directors of the Company or
of such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) or
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis that amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $5.0 million, at
which time the Company or such Restricted Subsidiary shall apply all Net Cash
Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred
to make a Net Proceeds Offer (the first date the aggregate of all such deferred
Net Proceeds Offer Amounts is equal to $5.0 million or more shall be deemed to
be a "Net Proceeds Offer Trigger Date").
Notwithstanding the two immediately preceding paragraphs, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes any combination of Productive
Assets, cash or Cash Equivalents and (ii) such Asset Sale is for fair market
value (as determined in good faith by the Company's Board of Directors);
provided the portion of such consideration that constitutes cash and Cash
Equivalents received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall be deemed Net Cash Proceeds subject to the provisions of the two
immediately preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A
Net Proceeds Offer shall remain open for a period of 20 business days or such
longer period as may be required by law. To the extent that the aggregate
amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net
Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer
Amount for general corporate purposes. Upon completion of any such Net Proceeds
Offer, the Net Proceeds Offer Amount shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities
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laws or regulations conflict with the "Asset Sale" provisions of the Indenture,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the Indenture by virtue thereof.
Limitation of Guarantees by Subsidiaries. The Company will not permit any
Restricted Subsidiary, directly or indirectly, by way of the pledge of any
intercompany note or otherwise, to assume, guarantee or in any other manner
become liable with respect to any Indebtedness of the Company or any other
Subsidiary (other than (A) Indebtedness and other obligations under the Bank
Credit Agreement, (B) Permitted Indebtedness of a Restricted Subsidiary, (C)
Indebtedness under Currency Agreements in reliance on clause (vi) of the
definition of Permitted Indebtedness or (D) Interest Swap Obligations incurred
in reliance on clause (v) of the definition of Permitted Indebtedness), unless,
in any such case, such Restricted Subsidiary executes and delivers a
supplemental indenture to the Indenture providing a guarantee of payment of the
Notes by such Restricted Subsidiary (the "Guarantee").
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged, without any further action required on
the part of the Trustee or any Holder, upon: (i) the unconditional release of
such Restricted Subsidiary from its liability in respect of the Indebtedness in
connection with which such Guarantee was executed and delivered pursuant to the
preceding paragraph; or (ii) any sale or other disposition (by merger or
otherwise) to any Person which is not a Restricted Subsidiary of the Company of
all of the Company's Capital Stock in, or all or substantially all of the
assets of, such Restricted Subsidiary; provided that (a) such sale or
disposition of such Capital Stock or assets is otherwise in compliance with the
terms of the Indenture and (b) such assumption, guarantee or other liability of
such Restricted Subsidiary has been released by the holders of the other
Indebtedness so guaranteed.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses a majority of whose revenues are not derived from the
same or reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which the Company and its
Restricted Subsidiaries are engaged on the Issue Date.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default": (i)
the failure to pay interest on any Notes when the same becomes due and payable
and the default continues for a period of 30 days; (ii) the failure to pay the
principal on any Notes when such principal becomes due and payable, at
maturity, upon redemption or otherwise (including the failure to make a payment
to purchase Notes tendered pursuant to a Change of Control Offer or a Net
Proceeds Offer); (iii) a default in the observance or performance of any other
covenant or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes; (iv)
the failure to pay at final stated maturity (giving effect to any extensions
thereof) the principal amount of any Indebtedness of the Company or any
Restricted Subsidiary (other than a Securitization Entity) of the Company and
such failure continues for a period of 20 days or more, or the acceleration of
the final stated maturity of any such Indebtedness (which acceleration is not
rescinded, annulled or otherwise cured within 20 days of receipt by the Company
or such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay principal
at final maturity or which has been accelerated, in each case with respect to
which the 20-day period described above has passed, aggregates $5.0 million or
more at any time; (v) one or more judgments in an aggregate amount in excess of
$5.0 million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become final
and non-appealable; and (vi) certain events of bankruptcy affecting the Company
or any of its Significant Subsidiaries.
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Upon the happening of any Event of Default specified in the Indenture, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare all of the unpaid principal of and accrued interest on all the
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same shall become
immediately due and payable. If an Event of Default with respect to bankruptcy
proceedings of the Company occurs and is continuing, then such amount shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of Notes.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may rescind and cancel such
declaration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest
is lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances and (v)
in the event of the cure or waiver of an Event of Default of the type described
in clause (vi) of the description above of Events of Default, the Trustee shall
have received an officers' certificate and an opinion of counsel that such
Event of Default has been cured or waived. The holders of a majority in
principal amount of the Notes may waive any existing Default or Event of
Default under the Indenture, and its consequences, except a default in the
payment of the principal of or interest on any Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, except
for (i) the rights of holders of the Notes to receive payments in respect of
the principal of, premium, if any, and interest on the Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payments, (iii) the
rights, powers, trust, duties and immunities of the Trustee and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. government obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance (except in specified circumstances), the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the
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Holders will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default with respect to the Indenture
resulting from the incurrence of Indebtedness, all or a portion of which will
be used to defease the Notes concurrently with such incurrence); (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under, the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by the Company with the intent of preferring the Holders over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; (vii) the
Company shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with; (viii) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company other than the Notes and (B)
assuming no intervening bankruptcy or insolvency of the Company between the
date of deposit and the 91st day following the deposit and that no Holder is an
insider of the Company, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (ix) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be;
(ii) the Company has paid all other sums payable under the Indenture by the
Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does
not, in the opinion of the Trustee, adversely affect the rights of any of the
Holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose
Holders must consent to an amendment; (ii) reduce the rate of or change or have
the effect of changing the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change or have the
effect of changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor; (iv) make any Notes payable in money other than
that stated in the Notes; (v) make any change in provisions of the Indenture
protecting the right of each Holder to receive payment
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of principal of and interest on such Holder's Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting holders of a
majority in principal amount of a class of Notes to waive Defaults or Events of
Default (other than Defaults or Events of Default with respect to the payment
of principal of or interest on the Notes); (vi) amend, change or modify in any
material respect the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate a
Net Proceeds Offer with respect to any Asset Sale that has been consummated or
modify any of the provisions or definitions with respect thereto after a Change
of Control has occurred or the subject Asset Sale has been consummated; or
(vii) modify the ranking of the Notes to adversely affect the Holders in any
material respect.
ADDITIONAL INFORMATION
The Indenture provides that upon consummation of this Exchange Offer the
Company will deliver to the Trustee within 15 days after the filing of the same
with the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act (without regard to whether
the Company is subject to the requirements of such Section 13 or 15d of the
Exchange Act). The Indenture further provides that prior to consummation of the
Exchange Offer, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act within 15 days of when any such document would otherwise have
been required to be filed with the Commission. The Company will also comply
with the other provisions of TIA (S) 314(a).
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or assumed in connection with the acquisition of assets from
such Person and not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such acquisition.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, no Person (other than the Company or
any Subsidiary of the Company) in whom a Securitization Entity makes an
Investment in connection with a Qualified Securitization Transaction shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of such Investment.
"all or substantially all" shall have the meaning given such phrase in the
Revised Model Business Corporation Act.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Company or
any Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person which constitute all or substantially all of the assets of such Person,
any division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
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any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary
of the Company or (b) any other property or assets of the Company or any
Restricted Subsidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "Merger,
Consolidation and Sale of Assets" or any disposition that constitutes a Change
of Control, (iii) the sale or discount, in each case without recourse, of
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (iv) the factoring of
accounts receivable arising in the ordinary course of business pursuant to
arrangements customary in the region, (v) the licensing of intellectual
property, (vi) disposals or replacements of obsolete equipment in the ordinary
course of business, (vii) the sale, lease, conveyance, disposition or other
transfer by the Company or any Restricted Subsidiary of assets or property to
one or more Wholly Owned Restricted Subsidiaries in connection with Investments
permitted under the "Limitations on Restricted Payments" covenant, (viii) sales
of accounts receivable, equipment and related assets (including contract
rights) of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Entity for the fair market value thereof,
including cash in an amount at least equal to 75% of the fair market value
thereof as determined in accordance with GAAP, and (ix) transfers of accounts
receivable, equipment and related assets (including contract rights) of the
type specified in the definition of "Qualified Securitization Transaction" (or
a fractional undivided interest therein) by a Securitization Entity in a
Qualified Securitization Transaction. For the purposes of clause (viii),
Purchase Money Notes shall be deemed to be cash.
"Bain Related Party" means Bain Capital and any Affiliate of Bain Capital.
"Bank Credit Agreement" means the Credit Agreement dated as of May 16, 1997,
among the Company, the lenders party thereto in their capacities as lenders
thereunder and Bankers Trust Company, as agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of corporate stock, including each class of common stock and
preferred stock of such Person, and (ii) with respect to any Person that is not
a corporation, any and all partnership or other equity interests of such
Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means: (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial
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paper maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at least
P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances (or,
with respect to foreign banks, similar instruments) maturing within one year
from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia, Japan or any member of the European Economic Community or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200.0 million; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture);
(ii) the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) any Person
or Group (other than one or both of the Principals or their respective Related
Parties) shall become the owner, directly or indirectly, beneficially or of
record, of shares representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Capital Stock of the Company;
or (iv) the first day within any two-year period on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Company" means Therma-Wave, Inc., a Delaware corporation.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent
Consolidated Net Income has been reduced thereby, (A) all income taxes and
foreign withholding taxes of such Person and its Restricted Subsidiaries paid
or accrued in accordance with GAAP for such period, (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person,
the ratio of Consolidated EBITDA of such Person during the four full fiscal
quarters (the "Four Quarter Period") ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such
Person for the Four Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness or the issuance of any Designated Preferred Stock of such Person
or any of its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any incurrence or
repayment of other Indebtedness or the issuance or redemption of other
Designated Preferred Stock (and the application of the proceeds thereof)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to the Transaction Date, as if
such incurrence or repayment or issuance or redemption, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA including any pro forma
expense and cost reductions, which are directly attributable and factually
supportable, applied to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale
or Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its
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Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been in effect during
the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(before amortization or write-off of debt issuance costs) plus (ii) the amount
of all cash dividend payments on any series of Preferred Stock of such Person;
provided that with respect to any series of Designated Preferred Stock that was
not paid cash dividends during such period but that accrues dividends according
to its terms during any period prior to the maturity date of the Notes, cash
dividends shall be deemed to have been paid with respect to such series of
Designated Preferred Stock during such period for purposes of clause (ii) of
this definition.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (i) the aggregate of all cash and non-
cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis
in conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom (a) gains and losses from Asset Sales
(without regard to the $500,000 limitation set forth in the definition thereof)
or abandonments or reserves relating thereto and the related tax effects
according to GAAP, (b) gains and losses due solely to fluctuations in currency
values and the related tax effects according to GAAP, (c) items classified as
extraordinary, unusual or nonrecurring gains and losses (including, without
limitation, restructuring costs), and the related tax effects according to
GAAP, (d) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of the Company or is merged or consolidated with the Company or any
Restricted Subsidiary of the Company, (e) the net income of any Restricted
Subsidiary of the Company to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of the Company of that
income is restricted by contract, operation of law or otherwise, (f) the net
loss of any Person, other than a Restricted Subsidiary of the Company, (g) the
net income of any Person, other than a Restricted Subsidiary of the Company,
except to the extent of cash dividends or distributions paid to the Company or
a Restricted Subsidiary of the Company by such Person, (h) only for purposes of
clause (iii) (w) of the first paragraph of the "Limitation on Restricted
Payments" covenant, any amounts included pursuant to clause (iii) (z) of the
first paragraph of such covenant, (i) non-cash compensation charges, including
any arising from stock options and (j) start-up costs and duplicative costs
incurred in connection with the transition service and distribution agreements
in effect on the Issue Date (as the same may be amended from time to time).
"Consolidated Net Worth" means, with respect to any Person for any date of
determination, the sum of (i) stated capital with respect to Capital Stock of
such Person and additional paid-in capital, and (ii) retained
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earnings (or minus accumulated deficit) of such Person and its Subsidiaries
(or, in the case of the Company, the Restricted Subsidiaries), less, to the
extent included in the foregoing, amounts attributable to Disqualified Capital
Stock, each item determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge
constituting an extraordinary item or loss which requires an accrual of or a
reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of the Principals or their Affiliates or was
nominated by the Principals or their Affiliates or any designees of the
Principals or their Affiliates on the Board of Directors.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with the
lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Preferred Stock" means Preferred Stock that is so designated as
Designated Preferred Stock, pursuant to an officers' certificate executed by
the principal executive officer and the principal financial officer of the
Company, on the issuance date thereof, the cash proceeds of which are excluded
from the calculation set forth in clause (iii) of the first paragraph of the
"Limitation on Restricted Payments" covenant.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than
an event which would constitute a Change of Control), matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a Change of Control) on or prior to the final maturity
date of the Notes.
"Equity Offering" means the issuance and sale of Qualified Capital Stock of
the Company.
"fair market value" means, unless otherwise specified, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" is defined to mean generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP applied on a consistent basis, except that calculations
made for purposes of determining compliance with the terms of the covenants and
with other provisions of the Indenture shall be made without giving effect to
(i) the deduction or amortization of any premiums, fees, and expenses incurred
in connection with the acquisition in 1991 and Recapitalization and
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related financings or any other permitted incurrence of Indebtedness or
refinancing Indebtedness and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles
Board Opinion ("APB") 16 (including non-cash write-ups and non-cash charges
relating to inventory, fixed assets and in-process research and development, in
each case arising in connection with the Recapitalization, the acquisition of
the Company in 1991 or future acquisitions) and APB 17 (including non-cash
charges relating to intangibles and goodwill arising in connection with the
Recapitalization and acquisition of the Company in 1991 or future
acquisitions).
"Indebtedness" means with respect to any Person, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable and warranty and service
obligations arising in the ordinary course of business), (v) all obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured, (viii) all obligations under currency
swap agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in
good faith by the Board of Directors of the issuer of such Disqualified Capital
Stock and (y) any transfer of accounts receivable, equipment or other assets
(including contract rights) which constitute a sale for purposes of GAAP and
any related recourse provisions under instrument sales programs entered into in
the ordinary course of business shall not constitute Indebtedness hereunder.
"Initial Public Offering" means the first underwritten public offering of
Qualified Capital Stock by the Company pursuant to a registration statement
filed with the Commission in accordance with the Securities Act for aggregate
net cash proceeds of at least $25.0 million.
"Interest Swap Obligations" means the obligations of any Person, pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Subsidiary, as the case may
be. For the purposes of the "Limitation on Restricted Payments" covenant,
(i) "Investment" shall include and be valued at the book value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the book value of
the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus
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the cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, 100% of the outstanding Common
Stock of such Restricted Subsidiary, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the book
value of the Common Stock of such Restricted Subsidiary not sold or disposed
of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (i) with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents received by the Company or any of its
Subsidiaries from such Asset Sale net of (a) out-of-pocket expenses and fees
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), (b) taxes paid or payable
after taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) any portion of cash proceeds which the Company determines in
good faith should be reserved for post-closing adjustments, it being understood
and agreed that on the day that all such post-closing adjustments have been
determined, the amount (if any) by which the reserved amount in respect of such
Asset Sale exceeds the actual post-closing adjustments payable by the Company
or any of its Subsidiaries shall constitute Net Cash Proceeds on such date and
(ii) with respect to any Equity Offering the cash proceeds received by the
Company in connection with such Equity Offering net of out-of-pocket expenses
and fees relating to such Equity Offering (including, but without limitation,
legal, accounting and underwriting discounts and commissions); provided that
the Net Cash Proceeds shall be determined without regard to an over-allotment
option granted to the Company by the underwriters except to the extent of
proceeds received from such over-allotment option upon the consummation of the
initial sale of Qualified Capital Stock of the Company pursuant to the Initial
Public Offering.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness, without
duplication.
"Permitted Indebtedness" means, without duplication, (i) the Notes, (ii)
Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate
principal amount at any time outstanding not to exceed $30.0 million less the
aggregate amount of Indebtedness of Securitization Entities in Qualified
Securitization Transactions (other than Qualified Securitization Transactions
involving equipment and related assets) less the aggregate amount then
outstanding pursuant to clause (iii); less any required permanent repayments
(which are accompanied by a corresponding permanent commitment reduction)
thereunder; provided that the amount of Indebtedness permitted to be incurred
pursuant to the Bank Credit Agreement in accordance with this clause (ii) shall
be in addition to any Indebtedness permitted to be incurred pursuant to the
Bank Credit Agreement in reliance on, and in accordance with, clauses (x), (xi)
and (xvi) of this definition, (iii) Indebtedness of foreign Restricted
Subsidiaries of the Company in an aggregate principal amount not to exceed $5.0
million at any one time outstanding; provided the aggregate amount then
outstanding under this clause (iii) when added to the aggregate amount then
outstanding under clause (ii) shall not exceed the aggregate amount permitted
under clause (ii), (iv) other Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or permanent
reductions thereon, (v) Interest Swap Obligations of the Company or any of its
Subsidiaries covering
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Indebtedness of the Company or any of its Subsidiaries; provided that any
Indebtedness to which any such Interest Swap Obligations correspond is
otherwise permitted to be incurred under the Indenture; provided, further, that
such Interest Swap Obligations are entered into, in the judgment of the
Company, to protect the Company from fluctuation in interest rates on their
respective outstanding Indebtedness, (vi) Indebtedness under Currency
Agreements, (vii) intercompany Indebtedness owed by the Company to any Wholly
Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of
the Company to the Company or any Wholly Owned Restricted Subsidiary of the
Company, (viii) Acquired Indebtedness to the extent the Company could have
incurred such Indebtedness in accordance with the "Limitation on Incurrence of
Additional Indebtedness" covenant on the date such Indebtedness became Acquired
Indebtedness, (ix) guarantees by the Company and its Wholly Owned Restricted
Subsidiaries of each other's Indebtedness; provided that such Indebtedness is
permitted to be incurred under the Indenture, including, with respect to
guarantees by Wholly Owned Restricted Subsidiaries of the Company, the
"Limitation on Guarantees by Subsidiaries" covenant, (x) Indebtedness
(including Capitalized Lease Obligations) incurred by the Company or any of its
Restricted Subsidiaries to finance the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct purchase
of assets or the Capital Stock of any Person owning such assets) in an
aggregate principal amount outstanding not to exceed 5% of Total Assets at the
time of any incurrence thereof (including any Refinancing Indebtedness with
respect thereto) (which amount may, but need not, be incurred in whole or in
part under the Bank Credit Agreement), (xi) Indebtedness incurred by the
Company or any of its Restricted Subsidiaries constituting reimbursement
obligations with respect to letters of credit issued in the ordinary course of
business, including, without limitation, letters of credit in respect of
workers' compensation claims or self-insurance, or other Indebtedness with
respect to reimbursement type obligations regarding workers' compensation
claims, (xii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification, adjustment
of purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of any business, assets
or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition, (xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course of business, (xiv) any refinancing,
modification, replacement, renewal, restatement, refunding, deferral,
extension, substitution, supplement, reissuance or resale of existing or future
Indebtedness, including any additional Indebtedness incurred to pay interest or
premiums required by the instruments governing such existing or future
Indebtedness as in effect at the time of issuance thereof ("Required Premiums")
and fees in connection therewith ("Refinancing Indebtedness"); provided that
any such event shall not (1) result in an increase in the aggregate principal
amount of Permitted Indebtedness (except to the extent such increase is a
result of a simultaneous incurrence of additional Indebtedness (A) to pay
Required Premiums and related fees or (B) otherwise permitted to be incurred
under the Indenture) of the Company and its Subsidiaries and (2) create
Indebtedness with a Weighted Average Life to Maturity at the time such
Indebtedness is incurred that is less than the Weighted Average Life to
Maturity at such time of the Indebtedness being refinanced, modified, replaced,
renewed, restated, refunded, deferred, extended, substituted, supplemented,
reissued or resold (except that this subclause (2) will not apply in the event
the Indebtedness being refinanced, modified, replaced, renewed, restated,
refunded, deferred, extended, substituted, supplemented, reissued or resold was
originally incurred in reliance upon clauses (vii) or (xvi) of this
definition), (xv) the incurrence by a Securitization Entity of Indebtedness in
a Qualified Securitization Transaction that is not recourse to the Company or
any Subsidiary of the Company (except for Standard Securitization Undertakings)
and (xvi) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10.0 million at
any one time outstanding (which amount may, but need not, be incurred in whole
or in part under the Bank Credit Agreement).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary
of the Company (whether existing on the Issue Date or created thereafter) or in
any other Person (including by means of any transfer of cash or other property)
if as a
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result of such Investment such Person shall become a Wholly Owned Restricted
Subsidiary of the Company and Investments in the Company by any Restricted
Subsidiary of the Company, (ii) cash and Cash Equivalents, (iii) Investments
existing on the Issue Date, (iv) loans and advances to management and other
employees of the Company and its Restricted Subsidiaries in the ordinary course
of business in an aggregate principal amount not to exceed $3.0 million at any
one time outstanding, (v) accounts receivable created or acquired in the
ordinary course of business, (vi) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture, (vii) Investments in Unrestricted Subsidiaries in an amount at any
one time outstanding not to exceed $3.0 million, (viii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers, (ix) guarantees (A) by the Company of
Indebtedness otherwise permitted to be incurred by Restricted Subsidiaries of
the Company under the Indenture or (B) permitted by the "Limitation on
Guarantees by Subsidiaries" covenant, (x) additional Investments having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (x) that are at that time outstanding, not to exceed 5%
of Total Assets at the time of such Investment at any one time outstanding,
(xi) any Investment by the Company or a Wholly Owned Subsidiary of the Company
in a Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of a
Purchase Money Note or an equity interest, (xii) any transaction to the extent
it constitutes an Investment that is permitted by, and made in accordance with,
clause (b) of the "Limitations on Transactions with Affiliates" covenant (other
than transactions described in clause (v) of such clause (b)), (xiii)
Investments the payment for which consists exclusively of Qualified Capital
Stock of the Company and (xiv) Investments received by the Company or its
Restricted Subsidiaries as consideration for asset sales, including Asset
Sales; provided in the case of an Asset Sale, such Asset Sale is effected in
compliance with the "Limitation on Asset Sales" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (A) the related purchase money
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired
and (B) the Lien securing such Indebtedness shall be created within 90 days
of such acquisition;
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(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment, or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Indebtedness of foreign Restricted Subsidiaries of
the Company incurred in reliance on clause (iii) of the definition of
Permitted Indebtedness;
(xiv) Liens securing Acquired Indebtedness incurred in reliance on clause
(viii) of the definition of Permitted Indebtedness;
(xv) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary with respect to obligations that do not in the
aggregate exceed $10.0 million at any one time outstanding;
(xvi) Liens on assets transferred to a Securitization Entity or on assets
of a Securitization Entity, in either case incurred in connection with a
Qualified Securitization Transaction;
(xvii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xviii) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods; and
(xx) Liens existing on the Issue Date, together with any Liens securing
Indebtedness incurred in reliance on clause (xiv) of the definition of
Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; provided that the Liens securing the
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Principals" means Bain Capital and Sutter Hill Ventures.
"Productive Assets" means properties or assets (including Capital Stock) of a
kind used or usable in the businesses of the Company and its Restricted
Subsidiaries permitted by the covenant entitled "Conduct of Business."
"Purchase Money Note" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity, which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
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"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Securitization Entity (in the case of a transfer by
the Company or any of its Subsidiaries) and (b) any other Person (in the case
of a transfer by a Securitization Entity), or may grant a security interest in,
any accounts receivable or equipment (whether now existing or arising or
acquired in the future) of the Company or any of its Subsidiaries, and any
assets related thereto including, without limitation, all collateral securing
such accounts receivable and equipment, all contracts and contract rights and
all guarantees or other obligations in respect of such accounts receivable and
equipment, proceeds of such accounts receivable and equipment and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment.
"Related Party" means, with respect to Bain Capital, any Bain Related Party
and with respect to Sutter Hill Ventures, any Sutter Hill Ventures Related
Party.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and its successors.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such
Property.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable or equipment and related assets) which engages in no
activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding
guarantees of Obligations (other than the principal of, and interest on,
Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates the Company or any Subsidiary of the Company in any
way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings, (b) with which
neither the Company nor any Subsidiary of the Company has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to the Company or such Subsidiary than those that might be obtained
at the time from Persons that are not Affiliates of the Company, other than
fees payable in the ordinary course of business in connection with servicing
receivables of such entity, and (c) to which neither the Company nor any
Subsidiary of the Company has any obligation to maintain or preserve such
entity's financial condition or cause such entity to achieve certain levels of
operating results. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors of the Company
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing conditions.
"Significant Subsidiary" means, as of any date of determination, for any
Person, each Subsidiary of such Person which (i) for the most recent fiscal
year of such Person (on or prior to December 31, 1996, the fiscal period
beginning on the Issue Date and ending on the most recently completed fiscal
quarter of such Person)
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accounted for more than 10% of consolidated revenues or consolidated net income
of such Person or (ii) as at the end of such fiscal year (on or prior to
December 31, 1996, the fiscal period beginning on the Issue Date and ending on
the most recently completed fiscal quarter of such Person), was the owner of
more than 10% of the consolidated assets of such Person.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in an accounts receivable or equipment
transaction.
"Subsidiary", with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Sutter Hill Ventures" means Sutter Hill Ventures, a California limited
partnership and certain other investors designated by Sutter Hill Ventures.
"Sutter Hill Ventures Related Party" means (a) any stockholder or partner of
Sutter Hill Ventures on the Issue Date or (b) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest which
consist of Sutter Hill Ventures and/or such other Persons referred to in the
immediately preceding clause (a).
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries, as set forth on the Company's most recent consolidated
balance sheet.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that (x) the Company
certifies to the Trustee that such designation complies with the "Limitation on
Restricted Payments" covenant and (y) each Subsidiary to be so designated and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to
which the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and
(y) immediately before and immediately after giving effect to such designation,
no Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution giving effect to such
designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons pursuant to applicable law) are owned by such Person
or any Wholly Owned Restricted Subsidiary of such Person.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes (and the related
guarantees) initially will be represented by one or more permanent global
certificates in definitive, fully registered form (the "Global Notes"). The
Global Notes will be deposited on the date of the consummation of the Exchange
Offer with, or on behalf of, The Depository Trust Company, New York, New York
("DTC") and registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to "foreign purchasers" or
Accredited Investors who are not QIBs (in each case, as defined in "Transfer
Restrictions") or (ii) held by QIBs or institutional Accredited Investors who
are not QIBs who elect to take physical deliver of their certificates instead
of holding their interest through a Global Note (and which are thus ineligible
to trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers") will be issued in registered form (the "Certificated Security").
Upon the transfer to a QIB or another institutional Accredited Investor who is
not a QIB of any Certificated Security initially issued to a Non-Global
Purchaser, such Certificated Security will, unless the transferee requests
otherwise or the Global Certificates have previously been exchanged in whole
for Certificated Securities, be exchanged for an interest in a Global Note.
The Global Notes. The Company expects that pursuant to procedures established
by DTC (i) upon the issuance of the Global Notes, DTC or its custodian will
credit, on its internal system, the principal amount of Notes of the individual
beneficial interests represented by such Global Notes to the respective
accounts of persons who have accounts with such depositary and (ii) ownership
of beneficial interests in the Global Notes will be shown on, and the transfer
of such ownership will be effected only through, records maintained by DTC or
its nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs and institutional Accredited
Investors who are not QIBs may hold their interests in the Global Note directly
through DTC if they are participants in such system, or indirectly through
organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in any of the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Notes, will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of the Global Notes as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Notes held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical deliver
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of a Certificated Security for any reason, including to sell Notes to persons
in states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary
view, and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. The Company
recommends that each holder consult such holder's own tax advisor as to the
particular tax consequences of exchanging such holder's Old Notes for New
Notes, including the applicability and effect of any state, local or foreign
tax laws.
The Company believes that the exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the New Notes will not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such holder.
As a result, there will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating Broker-
Dealer for use in connection with any such resale (provided that the Company
receives notice from any Participating Broker-Dealer of its status as a
Participating Broker-Dealer within 30 days after the Expiration Date). In
addition, until , 1997 (90 days after the commencement of the Exchange
Offer), all dealers effecting transactions in the New Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Notes by
Participating Broker-Dealers. New Notes received by Participating Broker-
Dealers for their own accounts pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the New Notes
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of such New Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a Prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly, upon request and in no event more than five business days after such
request, send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that has
provided the Company with notice of its status as a Participating Broker-Dealer
within 30 days of the Expiration Date.
95
<PAGE>
GLOSSARY
"ASIC"................................ Application Specific Integrated
Circuit. A custom-designed integrated
circuit that performs specific
functions which would otherwise
require a number of off-the-shelf
integrated circuits to perform. The
use of an ASIC in place of a
conventional integrated circuit
reduces product size and cost and also
improves reliability.
"beta-testing"........................ Testing a new product under full
operational conditions, generally at a
customer's facility.
"clean-room".......................... A room with an environment that is
kept to a high degree of cleanliness
by a constant flow of clean air
throughout the room. The level of
cleanliness of clean rooms is
designated by Class Number. For
example, a Class 1000 clean room has
fewer than 1000 particles larger than
a minimum size per cubic centimeter of
air, while a Class 100 clean room has
fewer than 100 such particles per
cubic centimeter. Persons working in a
clean room must wear appropriate
gowns, caps, gloves and shoes so as to
minimize their effect on the clean
room environment.
"DRAM"................................ Dynamic Random Access Memory. A type
of volatile memory product that is
used in electronic systems to store
data and program instructions. It is
the most common type of RAM and must
be refreshed with electricity
thousands of times per second or else
its memory will fade away.
"ellipsometer"........................ An optical metrology instrument that
measures the degree of change in the
polarization of a beam of light that
is reflected from the surface of a
sample. Ellipsometers are used to
measure the thickness and, in some
cases, the optical properties of thin
films.
"etching"............................. Removal of film from the surface of a
wafer through wet chemical or dry
plasma processes.
"fab"................................. A manufacturing facility that
fabricates semiconductors.
"image processing".................... Computer processing of a magnified
video image in order to locate an area
of interest on a patterned wafer.
"integrated circuit".................. A combination of two or more
transistors on a base material,
usually silicon. All semiconductor
devices are just very complicated
integrated circuits with thousands of
transistors.
"ion implantation"....................
Implanting of ions, such as boron,
phosphorus or arsenic, into selected
areas of a silicon wafer in order to
G-1
<PAGE>
alter the electrical properties of the
silicon in these areas. The
implantation is performed by
bombarding the silicon wafer with a
high energy beam of ions.
"metrology"........................... The science of quantitative
measurement.
"photolithography".................... Generating a pattern on the surface of
a wafer by first coating the surface
with a light sensitive material called
a photoresist and then exposing the
photoresist to light (usually of a
short wavelength) through a patterned
mask. The exposure replicates the mask
pattern onto the photoresist.
"planarization"....................... A process by which the surface of a
patterned wafer that may contain
severe topographical features is made
flat by mechanical or chemical means.
"reflectance"......................... The ratio of the amount of light
reflected from a surface to the amount
of light incident on that surface.
Reflectance is usually a function of
wavelength and the angle of incidence.
"semiconductor"....................... A material with electrical conducting
properties in between those of metals
and insulators. (Metals always conduct
and insulators never conduct, but
semiconductors sometimes conduct.)
Essentially, semiconductors transmit
electricity only under certain
circumstances, such as when given a
positive or negative electric charge.
Therefore, a semiconductor's ability
to conduct can be turned on or off by
manipulating those charges, which
allows the semiconductor to act as an
electric switch. The most common
semiconductor material is silicon,
used as the base of most semiconductor
devices today because it is relatively
inexpensive and easy to create.
"spectrophotometer"................... An optical metrology instrument that
measures the amount of light reflected
from a surface as a function of the
wavelength of the light.
Spectrophotometers are used to measure
the thickness, and in some cases, the
optical properties of thin films.
"thermal wave physics"................ The physics of how to generate and
detect high frequency thermal or heat
waves, and how these thermal waves
interact with materials.
"thin film deposition"................ The deposition of thin films onto a
wafer surface by chemical or plasma
processes.
"thin film removal"................... The removal or etching of thin films
from a wafer surface by chemical or
plasma processes.
"transistor"..........................
An individual circuit that can amplify
or switch electric current. This is
the building block of all integrated
circuits and semiconductors.
G-2
<PAGE>
"ultra-violet"........................ That region of the optical spectrum
that extends from the violet region to
shorter wavelengths, typically from
400nm to 150nm.
"wafer"............................... Thin, round, flat piece of silicon
that is the base of most
semiconductors. Wafers typically come
in sizes of 39 to 89 in diameter. A
single 89 wafer could have hundreds of
semiconductor devices fabricated on
it.
G-3
<PAGE>
THERMA-WAVE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Income.......................................... F-4
Consolidated Statements of Shareholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Therma-Wave, Inc.
We have audited the accompanying consolidated balance sheets of Therma-Wave,
Inc. as of April 6, 1997 and March 31, 1996, and the related consolidated
statements of income, shareholders' equity (net capital deficiency), and cash
flows for the years ended April 6, 1997, March 31, 1996 and April 2, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Therma-Wave, Inc. at April 6, 1997 and March 31, 1996 and the consolidated
results of its operations and its cash flows for the years ended April 6,
1997, March 31, 1996 and April 2, 1995, in conformity with generally accepted
accounting principles.
Ernst & Young llp
San Jose, California
May 8, 1997, except for Note 8, as to which the date is May 16, 1997
F-2
<PAGE>
THERMA-WAVE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
APRIL 6, MARCH 31,
1997 1996
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 16,741 $ 7,690
Accounts receivable, net of allowance for doubtful
accounts of 1,622 in 1997 and $284 in 1996 ............. 20,107 18,830
Receivable from parent................................... 1,425 1,425
Inventories:
Purchased materials.................................... 8,937 5,760
Systems in process..................................... 7,252 5,619
Finished systems....................................... 1,238 1,756
-------- --------
Total inventories........................................ 17,427 13,135
Deferred income taxes.................................... 5,556 3,201
Other current assets..................................... 383 339
-------- --------
Total current assets....................................... 61,639 44,620
Property and equipment:
Laboratory and test equipment............................ 3,721 3,667
Office furniture and equipment........................... 4,292 2,402
Machinery and equipment.................................. 1,521 1,421
Leasehold improvements................................... 2,237 2,921
-------- --------
11,771 10,411
Less accumulated depreciation and amortization........... 5,928 4,165
-------- --------
Net property and equipment................................. 5,843 6,246
Goodwill and purchased intangibles, net of accumulated
amortization of $8,286 at March 31, 1996.................. -- 1,275
Patents, net of accumulated amortization of $985 in 1997
and $912 in 1996.......................................... 481 496
Security deposits and other................................ 657 419
-------- --------
Total assets........................................... $ 68,620 $ 53,056
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term notes payable................................. $ 3,834 $ 5,019
Accounts payable......................................... 4,076 3,344
Accrued compensation and related expenses................ 2,922 3,344
Income taxes payable..................................... 1,507 904
Accrued warranty costs................................... 4,990 2,594
Other accrued liabilities................................ 4,427 4,174
Deferred service revenue................................. 1,075 1,333
Capital lease obligations due within one year............ 88 168
-------- --------
Total current liabilities.................................. 22,919 20,880
Notes payable.............................................. 23,100 23,100
Capital lease obligations due after one year............... 429 539
Deferred taxes............................................. 1,685 1,544
Deferred rent and other.................................... 342 90
Commitments and contingencies
Shareholders' equity
Common stock, $0.001 par value; 50,000,000 shares
authorized; 45,515,339 shares issued and outstanding.... 45 45
Additional paid-in capital............................... 60,465 60,465
Accumulated deficit...................................... (38,927) (52,028)
Notes receivable from shareholders....................... -- (524)
Accumulated foreign currency translation adjustments..... (1,438) (1,055)
-------- --------
Total shareholders' equity................................. 20,145 6,903
-------- --------
Total liabilities and shareholders' equity............. $ 68,620 $ 53,056
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
THERMA-WAVE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
APRIL
APRIL 6, MARCH 31, 2,
1997 1996 1995
-------- --------- -------
<S> <C> <C> <C>
Net revenues....................................... $109,493 $79,293 $55,675
Cost of revenues................................... 49,795 35,027 25,024
-------- ------- -------
Gross margin....................................... 59,698 44,266 30,651
Operating expenses:
Research and development......................... 13,050 10,072 5,942
Selling, general and administrative.............. 22,004 18,704 13,299
Amortization of goodwill and purchased
intangibles..................................... 1,275 1,912 1,912
-------- ------- -------
Total operating expenses........................... 36,329 30,688 21,153
-------- ------- -------
Operating income................................... 23,369 13,578 9,498
Other income (expense):
Interest expense................................. (1,621) (1,722) (1,998)
Interest income.................................. 346 247 102
Other income and expense......................... 14 (138) (115)
-------- ------- -------
(1,261) (1,613) (2,011)
-------- ------- -------
Income before provision for income taxes........... 22,108 11,965 7,487
Provision for income taxes......................... 9,007 4,684 --
-------- ------- -------
Net income......................................... $ 13,101 $ 7,281 $ 7,487
======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
THERMA-WAVE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
NOTES FOREIGN
COMMON STOCK ADDITIONAL RECEIVABLE CURRENCY
----------------- PAID-IN ACCUMULATED FROM TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT SHAREHOLDERS ADJUSTMENTS TOTAL
---------- ------ ---------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 27,
1994................... 26,420,550 $26 $44,213 $(66,796) $-- $ (288) $(22,845)
Issuance of common
stock................. 19,094,789 19 15,568 -- (524) -- 15,063
Tax benefit from
exercise of employee
options............... -- -- 420 -- -- -- 420
Foreign currency
translation
adjustments........... -- -- -- -- -- (504) (504)
Net income............. -- -- -- 7,487 -- -- 7,487
---------- --- ------- -------- ---- ------- --------
Balance at April 2,
1995................... 45,515,339 45 60,201 (59,309) (524) (792) (379)
Foreign currency
translation
adjustments........... -- -- -- -- -- (263) (263)
Tax benefit from
exercise of employee
options............... -- -- 264 -- -- -- 264
Net income............. -- -- -- 7,281 -- -- 7,281
---------- --- ------- -------- ---- ------- --------
Balance at March 31,
1996................... 45,515,339 45 60,465 (52,028) (524) (1,055) 6,903
Foreign currency
translation adjustment
...................... -- -- -- -- -- (383) (383)
Repayment of notes
receivable from
shareholders ......... -- -- -- -- 524 -- 524
Net income ............ -- -- -- 13,101 -- -- 13,101
---------- --- ------- -------- ---- ------- --------
Balance at April 6,
1997................... 45,515,339 $45 $60,465 $(38,927) $-- $(1,438) $ 20,145
========== === ======= ======== ==== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
THERMA-WAVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------
APRIL 6, MARCH 31, APRIL 2,
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 13,101 $ 7,281 $ 7,487
Adjustments to reconcile net income to net cash
provided by activities:
Depreciation and amortization................. 3,744 3,607 2,998
Deferred income taxes......................... (2,214) (453) (1,204)
Changes in assets and liabilities:
Accounts receivable......................... (1,277) (1,381) (12,228)
Inventories................................. (5,006) (5,061) (1,953)
Other current assets........................ (44) (142) 132
Accounts payable............................ 732 (545) 1,135
Accrued compensation and related expenses... (422) (587) 2,419
Income taxes payable........................ 603 688 756
Other accrued liabilities................... 2,649 2,220 1,991
Deferred service revenue.................... (258) 333 349
Deferred rent and other..................... 252 (93) (6)
-------- ------- --------
Net cash provided by operating activities....... 11,860 5,867 1,876
INVESTING ACTIVITIES
Purchases of property and equipment............. (1,091) (4,361) (1,616)
Increase in other assets........................ (484) (604) (432)
-------- ------- --------
Net cash used in investing activities........... (1,575) (4,965) (2,048)
FINANCING ACTIVITIES
Receivable from parent.......................... -- -- (1,425)
Proceeds from notes payable..................... 250 -- 2,800
Repayments on notes payable..................... (1,435) (1,231) (10,557)
Principal payments under capital lease
obligations.................................... (190) (311) (96)
Tax benefit from exercise of stock options...... -- 264 420
Issuance of common stock........................ -- -- 15,063
Proceeds from notes receivable from
shareholders................................... 524 -- --
-------- ------- --------
Net cash (used in) provided by financing
activities..................................... (851) (1,278) 6,205
Effect of exchange rate changes on cash......... (383) (263) (504)
-------- ------- --------
Net (decrease) increase in cash and cash
equivalents.................................... 9,051 (639) 5,529
Cash and cash equivalents at beginning of
period......................................... 7,690 8,329 2,800
-------- ------- --------
Cash and cash equivalents at end of period...... $ 16,741 $ 7,690 $ 8,329
======== ======= ========
Supplementary disclosures:
Cash paid for interest........................ $ 2,059 $ 2,228 $ 2,012
======== ======= ========
Cash paid for income taxes.................... $ 10,661 $ 5,039 $ 102
======== ======= ========
Noncash financing activity:
Common stock issued for notes receivable from
shareholders................................. -- -- $ 524
======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Therma-Wave, Inc. (the "Company") develops, manufactures, and markets
process control metrology systems for use in the manufacture of
semiconductors. These system are based on the Company's proprietary thermal
wave and optical technologies. The Company's sole shareholders are two
Japanese Companies, Toray Industries ("Toray") and Shimadzu Corporation
("Shimadzu") subsequent to their acquisition of all outstanding shares of the
Company's capital stock in December, 1991. The Company sells its products to
major semiconductor manufacturing companies throughout the world, generally
requires no collateral and maintains an allowance for doubtful accounts for
credit losses.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Therma-Wave, Inc. and its wholly owned subsidiaries. All significant
intercompany transactions and balances are eliminated in consolidation.
In December 1991 Toray and Shimadzu purchased all outstanding shares of the
Company's capital stock in an acquisition accounted for as a purchase. The
purchase price was allocated to the identifiable assets based on their
estimated fair market values at the date of acquisition utilizing an
independent valuation. The remaining purchased intangibles and goodwill are
being amortized over their estimated useful lives of five years.
Revenue Recognition
Revenue from system sales and spare parts is generally recognized at the
time of shipment. Revenue on service contracts is deferred and recognized on a
straight-line basis over the period of the contract. Estimated contractual
warranty obligations are recorded when related sales are recognized.
Major Customers/Sources of Supply
Sales to customers representing 10% or more of net revenues during fiscal
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
APRIL 6, MARCH 31, APRIL 2,
CUSTOMER 1997 1996 1995
-------- -------- --------- --------
<S> <C> <C> <C>
A............................................. 13% 17% 17%
B............................................. 10% 15% 18%
</TABLE>
Certain of the components and subassemblies included in the Company's
systems are obtained from a single source or a limited group of suppliers.
Although the Company seeks to reduce dependence on those sole and limited
source suppliers, the partial or complete loss of certain of these sources
could have at least a temporary adverse effect on the Company's results of
operations and damage customer relationships. Further, a significant increase
in the price of one or more of these components could adversely affect the
Company's results of operations.
F-7
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accounts receivable from three customers accounted for approximately 28%,
13% and 10% of total accounts receivable at April 6, 1997. Accounts receivable
from three customers accounted for approximately 16%, 15% and 13% of total
accounts receivable at March 31, 1996.
Cash and Cash Equivalents
The Company maintains its cash and cash equivalents in depository accounts,
money market accounts and certificates of deposit with several financial
institutions.
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Foreign Currency Translation
The Company has determined that the functional currency of its foreign
operations is the local foreign currency. The accumulated effects of foreign
translation rate changes related to net assets located outside the United
States are included as a component of shareholders' equity. Foreign currency
transaction gains (losses) are included in other income and expense in the
accompanying consolidated statements of income and amounted to $74,000,
$(217,000) and $(11,000) for the years ended April 6, 1997, March 31, 1996 and
April 2, 1995, respectively.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided on the straight-line method over the estimated useful lives of the
respective assets, generally five years. Leasehold improvements and assets
recorded under capital leases are amortized using the straight-line method
over the shorter of the assets' useful lives or lease terms.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates, and such differences could affect
the results of operations reported in future periods.
Accounting Period
The Company's fiscal year is a 52 to 53-week year ending on the Sunday on or
nearest preceding March 31 for periods prior to 1997 and the Sunday on or
following March 31 of each year for periods thereafter.
Advertising Costs
The Company expenses advertising and promotional costs, which are not
material, as they are incurred.
F-8
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The Company believes that as of April 6, 1997, the fair value of its short
and long-term debt approximates the carrying value of those obligations. The
fair value of the Company's debt is estimated based on the Company's current
incremental borrowing rates on similar debt obligations guaranteed by Toray and
Shimadzu.
2. TRANSACTIONS WITH TORAY AND SHIMADZU
Account balances with Toray and Shimadzu are as follows (in thousands);
<TABLE>
<CAPTION>
APRIL 6, MARCH 31,
1997 1996
-------- ---------
<S> <C> <C>
Due from (due to) Toray and Shimadzu:
Accounts receivables.................................... $ 18 $ 84
Receivable from parent.................................. 1,425 1,425
Accrued expenses........................................ (25) --
------ ------
$1,418 $1,509
====== ======
</TABLE>
Transactions with Toray and Shimadzu are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
APRIL 6, MARCH 31, APRIL 2,
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Sales............................................ $590 $ -- $42
Purchases of inventories, at cost................ 94 -- 3
</TABLE>
The Company incurred expenses of approximately $559,000, $739,000 and
$426,000 for the fiscal years ended April 6, 1997, March 31, 1996 and April 2,
1995, respectively, for employees loaned to the Company by Toray and Shimadzu.
In December 1994 and March 1995, Toray and Shimadzu purchased 16,666,667
additional common shares of the Company for $15,000,000.
3. FINANCING ARRANGEMENTS
The Company has a credit agreement with a Japanese bank for an unsecured,
renewable note payable with a outstanding principal balance at April 6, 1997,
of $3,834,000. The renewable note, guaranteed by Toray, is due at May 31, 1997
and bears interest at an annual rate of 1.625%.
The Company has $23,100,000 of unsecured long-term debt under four separate
loan agreements with banks at April 6, 1997. This debt was transferred from the
Company's principal shareholders in connection with the acquisition described
in Note 1. The debt is guaranteed by Toray and Shimadzu, bears interest at
variable rates tied to the federal funds rate plus 0.5% (approximately 6.3% as
of April 6, 1997), and matures on May 30, 1997. Although management expects to
have the ability to extend the terms of the loan agreements, the instruments
were refinanced on a long-term basis in conjunction with the Recapitalization
Agreement. (See Note 8).
The Company also has unsecured line of credit agreements with four banks
which provide for borrowings of up to $6,200,000 and are guaranteed by Toray
and Shimadzu. At April 6, 1997, there were no outstanding borrowings under
these agreements.
F-9
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases its facilities under noncancellable operating leases
which require the Company to pay maintenance and operating expenses, such as
taxes, insurance and utilities. The Company is required pursuant to the terms
of a facility lease to maintain a standby letter of credit that is
collateralized by a $650,000 certificate of deposit.
Property and equipment include equipment recorded under capital leases of
approximately $1,050,000 and $999,000 and related accumulated amortization of
$547,000 and $413,000 at April 6, 1997 and March 31, 1996.
Rent expense was approximately $1,524,000, $897,000 and $606,000 for the
fiscal years ended April 6, 1997, March 31, 1996 and April 2, 1995,
respectively.
At April 6, 1997, future minimum lease payments under capital and
noncancellable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
----------- ------- ---------
<S> <C> <C>
1998.................................................... $120 $ 1,242
1999.................................................... 103 1,158
2000.................................................... 90 1,146
2001.................................................... 88 1,142
2002 and thereafter..................................... 212 5,525
---- -------
Future minimum lease payments........................... 613 $10,213
=======
Less amounts representing interest...................... (96)
----
Present value of future minimum lease payments.......... 517
Less current portion.................................... (88)
----
$429
====
</TABLE>
Contingencies
The Company is involved in various legal proceedings from time to time
arising in the ordinary course of business, none of which management expects
to have a material adverse effect on the Company's results of operations or
financial condition.
F-10
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The domestic and foreign components of income before provision for income
taxes are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
APRIL 2, MARCH 31, APRIL 6,
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
Domestic...................................... $7,808 $ 9,814 $19,419
Foreign....................................... (321) 2,151 2,689
------ ------- -------
Total....................................... $7,487 $11,965 $22,108
====== ======= =======
</TABLE>
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------
APRIL 2, MARCH 31, APRIL 6,
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
Current:
Federal...................................... $ 1,007 $4,429 $ 9,696
State........................................ 197 708 1,525
Foreign...................................... -- -- --
------- ------ -------
1,204 5,137 11,221
Deferred:
Federal...................................... (882) (313) (1,921)
State........................................ (322) (140) (293)
Foreign...................................... -- -- --
------- ------ -------
(1,204) (453) (2,214)
------- ------ -------
Total provision.............................. $ -- $4,684 $ 9,007
======= ====== =======
</TABLE>
A reconciliation between income tax provisions at the U.S. federal statutory
rate and the effective rate reflected in the statements of operations is as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------
APRIL 6, MARCH 31, APRIL 2,
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Provision at statutory rate.................. 35.0% 35.0% 34.0%
State taxes, net of federal benefit.......... 3.6 3.8 1.7
Amortization of goodwill and purchased
intangibles................................. 2.0 5.6 8.7
Foreign losses not benefitted................ -- -- 4.9
Utilization of net operating loss and credit
carryforwards............................... (3.2) (5.4) (29.8)
Other changes in valuation allowances........ -- (4.8) (23.6)
Other........................................ 3.3 4.9 4.1
---- ---- -----
40.7% 39.1% 0.0%
==== ==== =====
</TABLE>
F-11
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
<TABLE>
<CAPTION>
APRIL 6, MARCH 31,
1997 1996
-------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued costs and expenses......................... $ 4,359 $ 2,956
State taxes........................................ 534 248
Other.............................................. 663 209
Net operating loss................................. 491 1,205
------- -------
Total gross deferred tax assets.................... 6,047 4,618
Less valuation allowance........................... (491) (1,205)
------- -------
Net deferred tax assets............................ $ 5,556 $ 3,413
======= =======
Deferred tax liabilities:
Deferred revenue on foreign sales.................. $(1,424) $(1,571)
Other.............................................. (261) (185)
------- -------
Net deferred tax liabilities....................... $(1,685) $(1,756)
======= =======
</TABLE>
The net changes in the total valuation allowance for fiscal 1997 and fiscal
1996 were $(714,000) and $(1,218,000), respectively, and relate primarily to
changes in certain foreign net operating losses.
At April 6, 1997, the Company has net operating loss carryforwards for
foreign income tax purposes of approximately $1,324,000, which expire in
varying amounts through 2010. Utilization of these carryforwards could be
subject to substantial limitation if it should be determined that a more than
50% change in ownership of the Company's stock has occurred over a three-year
period or if such a change was to occur in the future.
In the year ended March 31, 1996, the Company utilized all Federal and state
research and development tax credit carryforwards as well as its federal
alternative minimum tax credit carryforwards.
6. RETIREMENT PLAN
The Company has a retirement plan under Section 401(k) of the Internal
Revenue Code covering substantially all employees. Discretionary company
contributions which are based on achieving certain operating profit goals,
were $540,000, $499,000 and $285,000 in fiscal 1997, 1996 and 1995,
respectively.
F-12
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SEGMENT INFORMATION
The Company operates in one business segment, which includes developing,
manufacturing and marketing process development and control systems for use in
the semiconductor industry. The following table summarizes the Company's
operations from its headquarters located in Fremont, California ("United
States") and its wholly-owned subsidiary in Japan (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 6, 1997
-------------------------------------------
UNITED ADJUSTMENTS/
STATES JAPAN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue.................... $103,578 $10,991 $(5,076) $109,493
======== ======= ======= ========
Income from operations........... $ 20,974 $ 1,632 $ 763 $ 23,369
======== ======= ======= ========
Identifiable assets.............. $ 67,764 $ 7,497 $(6,641) $ 68,620
======== ======= ======= ========
<CAPTION>
FISCAL YEAR ENDED MARCH 31, 1996
-------------------------------------------
UNITED ADJUSTMENTS/
STATES JAPAN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue.................... $ 75,020 $11,303 $(7,030) $ 79,293
======== ======= ======= ========
Income from operations........... $ 11,200 $ 503 $ 1,875 $ 13,578
======== ======= ======= ========
Identifiable assets.............. $ 52,653 $ 9,229 $(8,826) $ 53,056
======== ======= ======= ========
<CAPTION>
FISCAL YEAR ENDED APRIL 2, 1995
-------------------------------------------
UNITED ADJUSTMENTS/
STATES JAPAN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue.................... $ 50,965 $ 8,010 $(3,300) $ 55,675
======== ======= ======= ========
Income (loss) from operations.... $ 9,488 $ (655) $ 665 $ 9,498
======== ======= ======= ========
Identifiable assets.............. $ 45,252 $ 9,006 $(9,177) $ 45,081
======== ======= ======= ========
</TABLE>
Export sales, representing sales from the United States to customers in
foreign countries primarily in Asia and Europe, was approximately $54,390,000,
$34,503,000 and $24,531,000 of total United States revenue for the fiscal years
ended April 6, 1997, March 31, 1996 and April 2, 1995.
8. SUBSEQUENT EVENT
In December 1996, the Board of Directors approved the Recapitalization
Agreement (the "Recapitalization Agreement"). Pursuant to the Recapitalization
Agreement which closed on May 16, 1997, the Company: (i) redeemed from Toray
and Shimadzu approximately 86.6% of its outstanding capital stock for $96.9
million; (ii) converted their remaining outstanding capital stock to newly
issued shares of preferred stock and common stock; (iii) repaid all outstanding
notes payable of approximately $27.0 million; (iv) canceled the receivable from
parent of $1,425,000 which was recorded as a reduction of additional paid-in
capital; and (v) paid the estimated fees and expenses of $11.0 million related
to the Recapitalization. In order to finance the transactions contemplated by
the Recapitalization Agreement, the Company: (i) issued $115.0 million in
aggregate principal amount of senior notes in a private debt offering; (ii)
received an equity contribution of $20.0 million in cash from an investor
group, including Bain Capital Funds ("Bain"), and members of the Company's
senior management team; and (iii) converted equity securities of Toray and
Shimadzu having a value of $15.0 million into newly issued shares of preferred
stock and common stock.
F-13
<PAGE>
THERMA-WAVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Recapitalization, the Board of Directors adopted the
Therma-Wave, Inc. 1997 Stock Purchase and Option Plan (the "1997 Stock Plan"),
which authorizes the granting of stock options and the sale of Class A Common
or Class B Common to current or future employees, directors, consultants or
advisors of the Company or its subsidiaries. Under the 1997 Stock Plan, the
Board is authorized to sell or otherwise issue any class or classes of Common
Stock at any time prior to the termination of the 1997 Stock Plan in such
quantity, at such price, on such terms and subject to such conditions as
established by the Board of Directors up to an aggregate of 3,000,000 shares
of Class A Common and 3,000,000 shares of Class B Common, subject to
adjustment. Options to purchase an aggregate of 1,343,750 shares of Class B
Common were granted to employees under the 1997 Stock Plan in connection with
the Recapitalization.
In connection with the Recapitalization Agreement, the Company and the
original purchasers of the $115.0 million of senior notes entered into a
Registration Agreement dated May 15, 1997 which grants the holder of the notes
certain exchange and registration rights. Based upon the terms of such
agreement, the Company will issue new notes with similar terms as the old
notes except that the new notes will be registered under the Securities Act
and therefore will not bear legends restricting their transfer.
F-14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH
IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICI-
TATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... i
Prospectus Summary........................................................ 1
Risk Factors ............................................................. 14
The Recapitalization...................................................... 21
Use of Proceeds .......................................................... 22
Capitalization............................................................ 23
Unaudited Pro Forma Financial Data........................................ 24
Selected Historical Financial Data........................................ 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 29
Industry Overview......................................................... 35
Business.................................................................. 38
Management................................................................ 49
Principal Stockholders.................................................... 54
Certain Relationships and Related Transactions............................ 56
Description of Bank Credit Facility....................................... 59
The Exchange Offer........................................................ 60
Description of Notes...................................................... 69
Book Entry; Delivery and Form............................................. 92
Certain Federal Income Tax Consequences................................... 94
Plan of Distribution...................................................... 94
Experts................................................................... 95
Legal Matters............................................................. 95
Glossary.................................................................. G-1
Index to Financial Statements............................................. F-1
</TABLE>
----------------
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-------------
PROSPECTUS
-------------
$115,000,000
THERMA-WAVE, INC.
OFFER TO EXCHANGE ITS SERIES B 10 5/8% SENIOR NOTES DUE 2004 FOR ANY AND ALL OF
ITS OUTSTANDING
10 5/8% SENIOR NOTES DUE 2004
JUNE , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
General Corporation Law
The Company is incorporated under the laws of the State of Delaware, Section
145 ("Section 145") of the General Corporation Law of the State of Delaware,
as the same exists or may hereafter be amended (the "General Corporation
Law"), inter alia, provides that a Delaware corporation may indemnify any
persons who were, are or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify any persons who are, were or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reasons of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Certificate of Incorporation and By-Laws
The Company's Certificate of Incorporation and By-laws provides for the
indemnification of officers and directors to the fullest extent permitted by
the General Corporation Law.
ITEM 21.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Recapitalization Agreement, dated as of December 18, 1996, as amended
by Amendment No. 1 and Supplement, dated May 16, 1997, by and among
Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP
Associates, BCIP Trust Associates, L.P., Toray Industries, Inc.,
Toray Industries (America), Inc. and Shimadzu Corporation.+*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Therma-Wave.
3.2 Amended and Restated By-Laws of Therma-Wave.
4.1 Purchase Agreement, dated as of May 16, 1997, by and among Therma-Wave
and BT Securities Corporation.
4.2 Indenture, dated as of May 15, 1997, by and among Therma-Wave and IBJ
Schroder Bank & Trust Company, as trustee.
4.3 Form of 10 5/8% Senior Notes.
4.4 Form of Series B 10 5/8% Senior Notes.
4.5 Registration Rights Agreement, dated as of May 15, 1997, by and among
Therma-Wave and BT Securities Corporation, as Initial Purchaser.
5.1 Opinion of Kirkland & Ellis.*
10.1 Employment Agreement, dated as of May 16, 1997, by and between Therma-
Wave and Dr. Allan Rosencwaig.
10.2 Employment Agreement, dated as of May 16, 1997, by and between Therma-
Wave and David L. Willenborg.
10.3 Employment Agreement, dated as of May 16, 1997, by and between Therma-
Wave and W. Lee Smith.
10.4 Employment Agreement, dated as of May 16, 1997, by and between Therma-
Wave and Jon L. Opsal.
10.5 Employment Agreement, dated as of May 16, 1997, by and between Therma-
Wave and Anthony W. Lin.
10.6 Executive Stock Agreement, dated as of May 16, 1997, by and between
Therma-Wave and Dr. Allan Rosencwaig.
10.7 Executive Stock Agreement, dated as of May 16, 1997, by and between
Therma-Wave and David L. Willenborg.
10.8 Executive Stock Agreement, dated as of May 16, 1997, by and between
Therma-Wave and W. Lee Smith.
10.9 Executive Stock Agreement, dated as of May 16, 1997, by and between
Therma-Wave and Jon L. Opsal.
10.10 Executive Stock Agreement, dated as of May 16, 1997, by and between
Therma-Wave and Anthony W. Lin.
10.11 Stockholders Agreement, dated as of May 16, 1997, by and among Therma-
Wave and certain stockholders named therein.
10.12 Development License Agreement, dated June 12, 1992, by and among
Therma-Wave and Therma-Wave K.K., Toray Industries, Inc. and Shimadzu
Corporation.*
10.13 New Development Agreement, dated December 22, 1997, by and between
Therma-Wave and Toray Industries, Inc.*
10.14 Lease Agreement, dated as of May 26, 1995, by and between Therma-Wave
and Sobrato Interests.*
10.15 Advisory Agreement, dated as of May 16, 1996, between Therma-Wave and
Bain Capital, Inc.
10.16 Voting Agreement, dated as of May 16, 1997, between Therma-Wave and
certain stockholders named therein.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.17 Credit Agreement, dated as of May 16, 1997, between Therma-Wave and
Bankers Trust Company, as agent, and certain financial institutions
named therein.+
10.18 Pledge Agreement, dated as of May 16, 1997, between Therma-Wave and
Bankers Trust Company, as agent.
10.19 Security Agreement, dated as of May 16, 1997, between Therma-Wave and
Bankers Trust Company, as agent.+
10.20 Therma-Wave, Inc. 1997 Stock Purchase and Option Plan.
10.21 Registration Agreement, dated as of May 16, 1997, between Therma-Wave
and the stockholders named therein.
12.1 Statement Regarding Computation of Earnings to Fixed Charges and Pro
Forma Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included in Part II to the Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- --------
* To be filed by amendment.
+ The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by the
Commission.
(B) FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedules are included in this
Registration Statement:
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
II-3
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bonafide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) The undersigned registrants hereby undertake as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrants pursuant to the provisions described
under Item 20 or otherwise, the registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrants of expenses incurred or
paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrants will, unless in the opinion of their counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(9) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THERMA-WAVE,
INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
FREEMONT, STATE OF CALIFORNIA, ON JUNE 23, 1997.
Therma-Wave, Inc.
/s/ Allan Rosencwaig
By: _________________________________
Allan Rosencwaig
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Allan Rosencwaig, Anthony W. Lin and Ian Loring
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement (and any
registration statement filed pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, for the offerings which this Registration Statement
relates), and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
/s/ Allan Rosencwaig Chairman of the June 23, 1997
- ------------------------------------- Board, President,
ALLAN ROSENCWAIG and Chief Executive
Officer (Principal
Executive Officer)
/s/ Anthony W. Lin Executive Vice June 23, 1997
- ------------------------------------- President, Chief
ANTHONY W. LIN Financial Officer,
and Director
(Principal
Financial Officer)
/s/ Charlotte Holland Vice President, June 23, 1997
- ------------------------------------- Finance and
CHARLOTTE HOLLAND Administration
(Principal
Accounting Officer)
/s/ G. Leonard Baker, Jr. Director June 23, 1997
- -------------------------------------
G. LEONARD BAKER, JR.
/s/ David Dominik Director June 23, 1997
- -------------------------------------
DAVID DOMINIK
/s/ Adam W. Kirsch Director June 23, 1997
- -------------------------------------
ADAM W. KIRSCH
II-5
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Therma-Wave, Inc.
We have audited the consolidated financial statements of Therma-Wave, Inc.
as of April 6, 1997 and March 31, 1996 and for each of the three years in the
period ended April 6, 1997, and have issued our report thereon dated May 8,
1997, except for Note 8, as to which the date is May 16, 1997 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedules listed in Item 21(b) of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young LLP
San Jose, California
May 16, 1997
S-1
<PAGE>
THERMA-WAVE, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ---------- ----------- -------- ---------
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COST ACCOUNTS AT END OF
DESCRIPTION OF PERIOD AND EXPENSE DESCRIBE PERIOD
----------- ---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Year ended April 6, 1997
Deducted from asset accounts;
Allowance for doubtful accounts... $284 -- $1,338 $1,622
---- --- ------ ------
Total............................ 284 -- 1,338 1,622
==== === ====== ======
Year ended March 31, 1996
Deducted from asset accounts;
Allowance for doubtful accounts... 280 -- 4 284
---- --- ------ ------
Total............................ 280 -- 4 284
==== === ====== ======
Year ended April 2, 1995
Deducted from asset accounts;
Allowance for doubtful accounts... 30 -- 250 280
---- --- ------ ------
Total............................ 30 -- 250 280
==== === ====== ======
</TABLE>
S-2
<PAGE>
Exhibit 2.1
AMENDMENT NO. 1 AND SUPPLEMENT
TO RECAPITALIZATION AGREEMENT
-----------------------------
Amendment No. 1 and Supplement to Recapitalization Agreement (this
"Amendment") is made and entered into as of May 16, 1997 by and among Therma-
Wave, Inc., a Delaware corporation, Toray Industries, Inc., a Japanese
corporation, Toray Industries (America), Inc., a New York corporation, Shimadzu
Corporation, a Japanese corporation, and Bain Capital Fund V, L.P., Bain Capital
Fund V-B, L.P., BCIP Associates and BCIP Trust Associates, L.P.
WHEREAS, the parties hereto entered into the Recapitalization
Agreement on December 18, 1996 (the "Recapitalization Agreement") pursuant to
which the Company will undergo a recapitalization which will result in, among
other things, the Purchasers, the Sellers and certain members of the Company's
management owning all of the outstanding capital stock of the Company.
WHEREAS, the parties each desire to amend the Recapitalization
Agreement on the terms and in the manner set forth in this Amendment.
NOW, THEREFORE, for themselves and their respective successors and
permitted assigns, the parties hereto agree as follows:
Section 1. Definitions, Etc. Terms defined (directly or indirectly by
reference) in the Recapitalization Agreement and used without other definition
herein shall have the respective meanings herein assigned to such terms in the
Recapitalization Agreement. The rules of interpretation set forth in the
Recapitalization Agreement shall likewise govern this Amendment.
Section 2. Amendment to Preamble.
(a) The second "whereas" clause in the Preamble to the Agreement is
amended hereby by replacing the reference to "8,135,003 shares of the Common
Stock" in the third line of such clause with the phrase "6,960,035.3446 shares
of the Common Stock".
(b) The fourth "whereas" clause in the Preamble of the Agreement is
amended hereby as follows:
(i) by replacing the reference to "8,490,567 shares" in the fifth line
of such clause with "7,264,236 shares",
(ii) by replacing the reference to "943,396 shares" in the sixth and
seventh lines of such clause with "807,138 shares",
<PAGE>
(iii) by deleting the word "and" set forth in the ninth line of such
clause immediately prior to "(ii) Sellers", and
(iv) by inserting the following language into the last line of such
clause immediately following the words "hereinafter set forth": "and (iii)
Company will issue to certain of its executive employees an aggregate of
1,226,331 shares of Common-A Stock and 136,258 shares of Common-L Stock for
an aggregate purchase price of $2,888,671.72."
Section 3. Amendment to Section 2(a). Section 2(a) is amended hereby by
replacing "$20,000,000" in the eighth line of such subsection with
"$17,111,328.28."
Section 4. Amendment to Section 2(c). Section 2(c) is amended hereby as
follows by replacing the references to "8,490,567 shares" and "943,396 shares"
in the fifth line of such subsection to "7,264,236 shares" and "807,138 shares",
respectively.
Section 5. Amendment to Section 7(c). Section 7(c) is hereby amended by
replacing the reference to $2,500,000" in clause (i) of the second sentence
thereof with "$3,500,000" and by adding the following immediately prior to the
clause (x) of clause (ii) of such sentence: "(w) to provide that Company shall
make a $500,000 payment to Sobrato as a prepayment of rent upon the
effectiveness of such amendment."
Section 6. Acknowledgment Regarding Termination of Subscription
Obligation. The parties hereto hereby acknowledge and agree that any obligation
which Toray might have had to pay approximately $1,425,000 or any other amount
to Company to acquire shares of stock of Company or for any other purpose
pursuant to the Key Employee Stock Agreement dated October 30, 1991 among Toray,
Company and certain Key Employees of Company or pursuant to any other agreement
in connection with Company's repurchase of shares from Charles Shalvoy was
cancelled and terminated pursuant to the terms of the Agreement dated January
25, 1996 among Toray, Company and certain Key Employees of Company. It is
further agreed that Sellers shall have no obligation whatsoever to Purchasers or
Company pursuant to the Recapitalization Agreement with regard to any
representations or warranties contained therein relating to any such purported
obligation of Toray to make any such payments to Company.
Section 7. Acknowledgment Regarding Additional Investor Parties. The
parties hereto hereby acknowledge that each of the parties set forth on Schedule
A attached hereto is a designee of the Purchasers under the Recapitalization
Agreement and as such, at the closing of the Recapitalization Agreement, shall
purchase from the Company Purchaser Shares in the amount and for that portion of
the Company Purchase Price set forth in Schedule A hereto, and thereafter shall
deliver to the Company such Purchaser Shares and receive in exchange therefor
New Common Stock in the amounts set forth on Schedule A, and otherwise shall be
entitled to all other rights and be subject to all other obligations of the
Purchasers under the Recapitalization Agreement.
Section 8. Acknowledgment Regarding Location of Closing. Notwithstanding
the provisions of Section 10(a) of the Recapitalization Agreement, the parties
acknowledge that the
-2-
<PAGE>
Closing will take place at 10:00 A.M. on May 16, 1997 at the offices of White &
Case, 1155 Avenue of the Americas, New York, New York, 10036.
Section 9. Subsequent Transaction. Subsequent to the completion of the
sale and exchange of shares contemplated by Section 2 of the Recapitalization
Agreement, at the Closing, Company shall issue and deliver to Sellers 9,853
shares of Common-A Stock and 1,095 shares of Common-L Stock in exchange for
1,261 shares of Preferred Stock. The number of shares of Common-A Stock, Common-
L Stock and Preferred Stock to be transferred pursuant to this Section shall be
allocated 6,504, 723 and 833 to Toray, 1,242, 138 and 159 to Toray America and
2,107, 234 and 269 to Shimadzu, respectively. Company and Purchaser agree that
all the relevant provisions in the Stockholders Agreement and the Company's
Restated Certificate of Incorporation which prohibit the transfer of those
shares shall be waived for the purpose of this particular transaction.
Section 10. Conditions to Effectiveness. This Amendment shall take effect
on a date (the "Amendment Effective Date") when each of the parties has executed
a duly executed original counterpart of this Amendment.
Section 11. Ratification, Etc. Except as expressly modified or waived
hereby, each term and provision of the Recapitalization Agreement and the other
agreements executed in connection therewith is hereby ratified and confirmed and
shall continue in full force and effect. From and after the Amendment Effective
Date, all references to the Recapitalization Agreement shall be deemed to be
references to the Recapitalization Agreement as amended by this Amendment.
Section 12. Representations and Warranties of the Company. Each of the
Company, each Seller and each Purchaser hereby represents and warrants that (a)
it has the requisite corporate or partnership power and authority, as the case
may be, and is duly authorized, to enter into this Amendment and (b) after
giving effect to this Amendment, the Recapitalization Agreement and the other
documents contemplated thereby shall continue to be the valid and binding
obligations of such person, enforceable against such person in accordance with
their respective terms.
Section 13. Governing Law. This Amendment shall be governed by, construed
and enforced in accordance with the laws of the State of New York, without
regard to the principles thereof relating to conflict of laws.
Section 14. Counterparts. This Amendment may be executed in any number of
counterparts, which shall together constitute but one and the same instrument.
Section 15. Successors and Assigns. This Amendment shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
* * *
-3-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed to take effect as of the date first hereinabove
written.
PURCHASER
---------
BAIN CAPITAL FUND V, L.P., a Delaware
limited partnership
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: ______________________________
Its: ______________________________
BAIN CAPITAL FUND V-B, L.P., a Delaware
limited partnership
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: ______________________________
Its: ______________________________
BCIP ASSOCIATES, a Delaware general
partnership
By: ______________________________
A General Partner
<PAGE>
BCIP TRUST ASSOCIATES, L.P., a Delaware
limited partnership
By: ______________________________
A General Partner
TORAY INDUSTRIES, INC.
By: ______________________________
Its: ______________________________
TORAY INDUSTRIES (AMERICA), INC.
By: ______________________________
Its: ______________________________
SHIMADZU CORPORATION
By: ______________________________
Its: ______________________________
THERMA-WAVE, INC.
By: ______________________________
Its: ______________________________
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Purchaser
Investment Shares Class A Class L
------------- ------------ --------- -------
<S> <C> <C> <C> <C>
Randolph Street Partners $ 200,000.00 81,350.42 84,906 9,434
Sutter Hill Ventures,
a California limited partnership $2,901,557.56 1,180,214.59 1,231,787 136,866
Sutter Hill Associates, L.P. $ 392,453.45 159,631.26 264,303 17,309
Wells Fargo Bank, Trustee
SHV M/P/T FBO
Paul M. Wythes $ 54,983.89 22,364.81 --- 2,881
Wells Fargo Bank, Trustee
SHV M/P/T FBO
David L. Anderson $ 181,708.29 73,910.23 --- 9,521
Wells Fargo Bank, Trustee
SHV M/P/T FBO
G. Leonard Baker, Jr. $ 181,708.29 73,910.23 --- 9,521
Wells Fargo Bank, Trustee
SHV M/P/T FBO
William H. Younger, Jr. $ 20,865.18 8,486.96 88,788 ---
Wells Fargo Bank, Trustee
SHV M/P/T FBO
Tench Coxe $ 132,946.15 54,076.12 56,443 6,271
Wells Fargo Bank, Trustee
SHV M/P/T FBO
Sherryl W. Hossack $ 2,501.36 1,017.43 1,061 118
</TABLE>
-6-
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THERMA-WAVE, INC.
ARTICLE ONE
The name of the Corporation is Therma-Wave, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
A. AUTHORIZED SHARES
-----------------
The total number of shares of capital stock which the Corporation has
authority to issue is 27,000,000 shares, consisting of:
(1) 1,000,000 shares of Series A Convertible Preferred Stock, par
value $.01 per share ("Series A Preferred");
(2) 20,000,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common");
(3) 4,000,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common"); and
(4) 2,000,000 shares of Class L Common Stock, par value $.01 per
share ("Class L Common").
<PAGE>
The Class A Common, Class B Common and Class L Common, and any other common
stock issued hereafter, are referred to collectively as the "Common Shares."
The Series A Preferred and the Common Shares shall have the rights, preferences
and limitations set forth below. Capitalized terms used but not otherwise
defined in Part A or Part B or Part C of this Article IV are defined in Part D.
B. SERIES A PREFERRED
------------------
Section 1. Dividends.
1A. General Obligation. When and as declared by the Corporation's
Board of Directors and to the extent permitted under the General Corporation Law
of Delaware, the Corporation shall pay preferential dividends in cash to the
holders of the Series A Preferred (the "Series A Preferred") as provided in this
Section 1. Dividends on each share of the Series A Preferred (a "Share") shall
be cumulative and accrue at the rate of 6% per annum of the sum of the
Liquidation Value thereof plus all accumulated and unpaid dividends thereon from
and including the date of issuance of such Share to and including the first to
occur of (i) the date on which the Liquidation Value of such Share (plus all
accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the redemption of such
Share by the Corporation, (ii) the date on which such Share is converted into
shares of Conversion Stock hereunder or (iii) the date on which such share is
otherwise acquired by the Corporation. Such dividends shall accrue whether or
not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
1B. Dividend Reference Dates. To the extent not paid on May 16 of
each year, beginning May 16, 1998 (the "Dividend Reference Date"), all dividends
which have accrued on each Share outstanding during the year ending upon each
such Dividend Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such Share until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the number of
Shares held by each such holder.
Section 2. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation (whether voluntary or involuntary), each holder of Series
A Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the greater of (a)
the aggregate Liquidation Value of all Shares held by such holder (plus all
accrued and unpaid dividends thereon, which for all purposes hereof shall
include dividends which have accrued since the last Dividend Reference Date) and
(b) the amount that such holder would have received had such holder converted
such Shares into shares of Class A Common
2
<PAGE>
immediately prior to such liquidation, dissolution or winding up, and the
holders of Series A Preferred shall not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Series A
Preferred are insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid under this Section 2, then the entire
assets available to be distributed to the Corporation's stockholders shall be
distributed pro rata among such holders based upon the aggregate Liquidation
Value (plus all accrued and unpaid dividends) of the Series A Preferred held by
each such holder. Not less than 30 days prior to the payment date stated
therein, the Corporation shall mail written notice of any such liquidation,
dissolution or winding up to each record holder of Series A Preferred, setting
forth in reasonable detail the amount of proceeds to be paid with resect to each
Share and each share of Common Stock in connection with such liquidation,
dissolution or winding up.
Section 3. Priority of Series A Preferred on Dividends and
Redemptions. So long as any Series A Preferred remains outstanding, without the
prior written consent of the holders of a majority of the outstanding shares of
Series A Preferred, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities, nor shall the Corporation directly or indirectly pay or
declare any dividend or make any distribution upon any Junior Securities;
provided that the Corporation may repurchase shares of Common Stock from former
employees of the Corporation and its Subsidiaries to the extent permitted by the
Corporation's agreements related to the Corporation's indebtedness, including
without limitation any indenture, whether entered into in connection with
transactions contemplated by the Recapitalization Agreement or thereafter, and
including any extensions or refinancings thereof.
Section 4. Redemptions.
4A. Scheduled Redemption. On May 17, 2004 (the "Scheduled Redemption
Date"), the Corporation shall redeem all outstanding Shares of Series A
Preferred at a price per Share equal to the Liquidation Value thereof (plus
accrued and unpaid dividends thereon).
4B. Optional Redemptions. The Corporation may, at any time and from
time to time after the first to occur of (i) June 30, 1998 and (ii) the
Corporation's initial Public Offering, redeem all or any portion of the Shares
of Series A Preferred then outstanding at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon). Any
partial redemption pursuant to this paragraph shall be for a number of Shares,
the aggregate Liquidation Value of which, together with accrued and unpaid
dividends thereon, is at least $5,000,000, and redemptions made pursuant to this
paragraph shall not relieve the Corporation of its obligation to redeem Shares
on the Scheduled Redemption Dates.
4C. Redemption Payments. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash equal to
the Liquidation Value of such Share (plus all accrued and unpaid dividends
thereon). If the funds of the Corporation legally available for redemption of
Shares on
3
<PAGE>
any Redemption Date are insufficient to redeem the total number of Shares to be
redeemed on such date, those funds which are legally available shall be used to
redeem the maximum possible number of Shares pro rata among the holders of the
Shares to be redeemed based upon the aggregate Liquidation Value of such Shares
held by each such holder (plus all accrued and unpaid dividends thereon). At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Shares, such funds shall immediately be used to
redeem the balance of the Shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
4D. Notice of Redemption. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Series A
Preferred (other than a redemption at the request of a holder or holders of
Series A Preferred) to each record holder thereof not more than 60 nor less than
30 days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
4E. Determination of the Number of Each Holder's Shares to be
Redeemed. The number of Shares of Series A Preferred to be redeemed from each
holder thereof in redemptions hereunder shall be the number of Shares determined
by multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.
4F. Dividends After Redemption Date. No Share shall be entitled to
any dividends accruing after the date on which the Liquidation Value of such
Share (plus all accrued and unpaid dividends thereon) is paid to the holder of
such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4G. Redeemed or Otherwise Acquired Shares. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not be reissued, sold or
transferred.
4H. Special Redemptions.
(i) If, in connection with or after any Public Offering, any member of
the Bain Group receives any proceeds in respect of Common Stock owned by such
member, the Corporation shall give prompt written notice to the holders of the
Series A Preferred of such event. The holder or holders of a majority of the
Series A Preferred then outstanding may require the Corporation to redeem all
outstanding shares of Series A Preferred at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by
giving written notice to the Corporation of such election within 30 days after
the receipt of such notice from the Corporation. Upon receipt of such election,
the Corporation shall be obligated to redeem the outstanding Shares of Series A
Preferred on a date fixed by the Corporation, which date shall be not more than
30 days after the Corporation's receipt of such notice.
4
<PAGE>
(ii) If a Change in Ownership has occurred or the Corporation obtains
knowledge that a Change in Ownership is proposed to occur, the Corporation shall
give prompt written notice of such Change in Ownership describing in reasonable
detail the material terms and date of consummation thereof to each holder of
Series A Preferred. The holder or holders of a majority of the Series A
Preferred then outstanding may require the Corporation to redeem all outstanding
shares of Series A Preferred at a price per Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon) by giving written notice
to the Corporation of such election prior to the later of (a) 30 days after
receipt of the Corporation's notice and (b) five days prior to the consummation
of the Change in Ownership (the "Expiration Date").
Upon receipt of such election, the Corporation shall be obligated to
redeem the outstanding Shares of Series A Preferred on the later of (a) the
occurrence of the Change in Ownership or (b) five days after the Corporation's
receipt of such election(s). If any proposed Change in Ownership does not occur,
all requests for redemption in connection therewith shall be automatically
rescinded.
The term "Change in Ownership" means any sale or transfer or series of
sales or transfers by the Bain Group (other than to any Affiliate of any member
of the Bain Group) of at least 25% of the Common Stock purchased by the Bain
Group pursuant to the Recapitalization Agreement, determined on the basis of the
cost of such Common Stock.
(iii) If a Fundamental Change is proposed to occur, the Corporation
shall give written notice of such Fundamental Change describing in reasonable
detail the material terms and date of consummation thereof to each holder of
Series A Preferred not more than 45 days nor less than 20 days prior to the
consummation of such Fundamental Change, and the Corporation shall give each
holder of Series A Preferred prompt written notice of any material change in the
terms or timing of such transaction. The holder or holders of a majority of the
Series A Preferred then outstanding may require the Corporation to redeem all
outstanding Shares of Series A Preferred at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by
giving written notice to the Corporation of such election prior to the later of
(a) five days prior to the consummation of the Fundamental Change or (b) 30 days
after receipt of notice from the Corporation.
Upon receipt of such election, the Corporation shall be obligated to
redeem the outstanding Shares of Series A Preferred upon the consummation of
such Fundamental Change. If any proposed Fundamental Change does not occur, all
requests for redemption in connection therewith shall be automatically
rescinded.
The term "Fundamental Change" means any sale or transfer of all or
substantially all of the assets of the Corporation and its Subsidiaries on a
consolidated basis in any transaction or series of related transactions.
(iv) Redemptions made pursuant to this paragraph 4H shall not relieve
the Corporation of its obligation to redeem Series A Preferred on the Scheduled
Redemption Dates pursuant to paragraph 4A above.
5
<PAGE>
4I. Partial Redemptions. Notwithstanding anything to the contrary
contained herein, any redemption by the Corporation of less then all of the
Shares of Series A Preferred then held by each holder must be a number of Shares
of Series A Preferred sufficient, in the good faith opinion of counsel to the
holder, to not be treated as a dividend under Section 302 of the Internal
Revenue Code of 1986, as amended (or any comparable successor provision), as to
such holder.
Section 5. Voting Rights. The holders of the Series A Preferred
shall be entitled to notice of all stockholders meetings in accordance with the
Corporation's bylaws, and the holders of the Series A Preferred shall be
entitled to vote on all matters submitted to the stockholders for a vote
together with the holders of the Common Stock voting together as a single class
with each share of Common Stock entitled to one vote per share and each Share of
Series A Preferred entitled to one vote for each share of Common Stock issuable
upon conversion of the Series A Preferred as of the record date for such vote
or, if no record date is specified, as of the date of such vote.
Section 6. Conversion.
6A. Conversion Procedure.
(i) At any time, any holder of Series A Preferred may convert all of
the Series A Preferred held by such holder into shares of Conversion Stock. Each
Share of Series A Preferred shall be convertible into one share of Conversion
Stock (as such amount is adjusted for stock splits, stock dividends,
recapitalizations and similar transactions).
(ii) Except as otherwise provided herein, each conversion of Series A
Preferred shall be deemed to have been effected as of the close of business on
the date on which the certificate or certificates representing the Series A
Preferred to be converted have been surrendered for conversion at the principal
office of the Corporation. At the time any such conversion has been effected,
the rights of the holder of the Shares converted as a holder of Series A
Preferred (including the right to receive accrued and unpaid dividends on the
Series A Preferred) shall cease and the Person or Persons in whose name or names
any certificate or certificates for shares of Conversion Stock are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon).
(iv) Notwithstanding any other provision hereof, if a conversion of
Series A Preferred is to be made in connection with a Public Offering, a Change
in Ownership, a Fundamental Change or other transaction affecting the
Corporation, the conversion of any Shares of Series A Preferred may, at the
election of the holder thereof, be conditioned upon the consummation of such
transaction, in which case such conversion shall not be deemed to be effective
until such transaction has been consummated.
6
<PAGE>
(v) As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Conversion Stock issuable by reason of such
conversion in such name or names and such denomina tion or denominations as the
converting holder has specified.
(vi) The issuance of certificates for shares of Conversion Stock upon
conversion of Series A Preferred shall be made without charge to the holders of
such Series A Preferred for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Conversion Stock. Upon conversion of each Share of Series
A Preferred, the Corporation shall take all such actions as are necessary in
order to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable, free and clear
of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
(vii) The Corporation shall not close its books against the transfer
of Series A Preferred or of Conversion Stock issued or issuable upon conversion
of Series A Preferred in any manner which interferes with the timely conversion
of Series A Preferred. The Corporation shall assist and cooperate with any
holder of Shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Shares
hereunder (including, without limitation, making any filings required to be made
by the Corporation).
(viii) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Series A Preferred, such number
of shares of Conversion Stock issuable upon the conversion of all outstanding
Series A Preferred. All shares of Conversion Stock which are so issuable shall,
when issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Corporation shall take all such actions
as may be necessary to assure that all such shares of Conversion Stock may be so
issued without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Conversion
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of the
Series A Preferred.
6B. Notices. The Corporation shall give written notice to all
holders of Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any dissolution or liquidation.
Section 7. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
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<PAGE>
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions to insure that each of the holders of Series A Preferred shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series A
Preferred, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had converted its
Series A Preferred immediately prior to such Organic Change.
Section 8. Registration of Transfer. The Corporation shall keep at
its principal office a register for the registration of Series A Preferred. Upon
the surrender of any certificate representing Series A Preferred at such place,
the Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such Series A Preferred
represented by the surrendered certificate.
Section 9. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Shares of Series A Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor or an original party to the
Recapitalization Agreement its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 10. Amendment and Waiver. No amendment, modification or
waiver shall be binding or effective with respect to any provision of Sections 1
to 11 of this Part B without the prior written consent of the holders of a
majority of the Series A Preferred outstanding at the time such action is taken;
provided that no change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders of a majority
of the Series A Preferred then outstanding.
Section 11. Notices. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal
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<PAGE>
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
C. COMMON SHARES
-------------
Except as otherwise provided in this Part C or as otherwise required
by applicable law, all Common Shares shall be identical in all respects and
shall entitle the holders thereof to the same rights and privileges, subject to
the same qualifications, limitations and restrictions.
Section 1. Voting Rights. Except as otherwise required by applicable
law, all holders of Class A Common and Class L Common shall be entitled to one
vote per share on all matters to be voted on by the Corporation's stockholders.
Except as otherwise provided by applicable law, all holders of Class B Common
shall have no right to vote on any matters to be voted on by the Corporation's
stockholders.
Section 2. Distributions. At the time of each Distribution, such
Distribution shall be made to the holders of Common Shares in the following
priority:
(i) The holders of Class L Common, as a separate class, shall be
entitled to receive all or a portion of such Distribution (ratably among such
holders based upon the aggregate Unpaid Yield on Class L Common held by each
such holder as of the time of such Distribution) equal to the aggregate Unpaid
Yield on the outstanding shares of Class L Common as of the time of such
Distribution, and no Distribution or any portion thereof shall be made under
paragraph 2(ii) or (iii) below until the entire amount of the Unpaid Yield on
the outstanding shares of Class L Common as of the time of such Distribution has
been paid in full. The Distributions made pursuant to this paragraph 2(i) to
holders of Class L Common shall constitute a payment of Yield on Class L Common.
(ii) After the required amount of a Distribution has been made in full
pursuant to paragraph 2(i) above, the holders of Class L Common, as a separate
class, shall be entitled to receive all or a portion of such Distribution
(ratably among such holders based upon the aggregate Unreturned Cost of shares
of Class L Common held by each such holder as of the time of such Distribution)
equal to the aggregate Unreturned Cost of the outstanding shares of Class L
Common as of the time of such Distribution, and no Distribution or any portion
thereof shall be made under paragraph 2(iii) below until the entire amount of
the Unreturned Cost of the Outstanding shares of Class L Common as of the time
of such Distribution has been paid in full. The Distributions made pursuant to
this paragraph 2(ii) to holders of Class L Common shall constitute a payment of
Cost of Class L Common.
(iii) After the required amount of a Distribution has been made
pursuant to paragraphs 2(i) and 2(ii) above, holders of Common Shares, as a
group, shall be entitled to receive the remaining portion of such Distribution
(ratably among such holders based upon the number of Common Shares held by each
such holder as of the time of such Distribution).
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Section 3. Stock Splits and Stock Dividends. The Corporation shall
not in any manner subdivide (by stock split, stock dividend or otherwise) or
combine (by stock split, stock dividend or otherwise) the outstanding Common
Shares of one class unless the outstanding Common Shares of all the other
classes shall be proportionately subdivided or combined, respectively. All such
subdivisions and combinations shall be payable only in Class L Common to the
holder of Class L Common, in Class A Common to the holders of Class A Common,
and in Class B Common to the holders of Class B Common. In no event shall a
stock split or stock dividend constitute a payment of Yield or a return of Cost.
Section 4. Conversion of Class L Common Upon Initial Public Offering.
(i) Upon the consummation of the Corporation's initial Public
Offering, each outstanding share of Class L Common shall, without any action by
the holder thereof, automatically convert into a number of shares of Class A
Common equal to the sum of (i) one and (ii) the result of (x) the Unreturned
Cost plus Unpaid Yield of such share of Class L Common divided by (y) the price
per share of the Class A Common in the Public Offering (in each case before
giving effect to any stock split declared in connection with such Public
Offering).
(ii) As soon as possible after a conversion has been effected, the
Corporation shall deliver to the converting holder a certificate or certificates
representing the number of shares of Class A Common issuable by reason of such
conversion in such name or names and such denomina tion or denominations as the
converting holder has specified.
(iii) The issuance of certificates for shares of Class A Common upon
conversion of Class L Common shall be made without charge to the holders of such
Class L Common for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
shares of Class A Common. Upon conversion of each share of Class L Common, the
Corporation shall take all such actions as are necessary in order to insure that
the Class A Common issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(iv) The Corporation shall not close its books against the transfer of
Class L Common or of Class A Common issued or issuable upon conversion of Class
L Common in any manner which interferes with the timely conversion of Class L
Common. The Corporation shall assist and cooperate with any holder of shares
required to make any governmental filings or obtain any governmental approval
prior to or in connection with any conversion of shares hereunder (including,
without limitation, making any filings required to be made by the Corporation).
(v) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Class A Common, solely for the
purpose of issuance upon the conversion of the Class L Common, such number of
shares of Class A Common issuable upon the conversion of all outstanding Class L
Common. All shares of Class A Common which are so issuable shall, when issued,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Corporation shall take all such actions as may be
necessary to
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<PAGE>
assure that all such shares of Class A Common may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Class A Common may be listed
(except for official notice of issuance which shall be immediately delivered by
the Corporation upon each such issuance). The Corporation shall not take any
action which would cause the number of authorized but unissued shares of Class A
Common to be less than the number of such shares required to be reserved
hereunder for issuance upon conversion of the Class L Common.
Section 5. Conversion of Class B Common.
(i) Upon consummation of the Corporation's initial Public Offering,
each holder of Class B Common shall be entitled to convert any or all of the
shares of such holder's Class B Common into the same number of shares of Class A
Common.
(ii) Each conversion of shares of Class B Common into shares of Class
A Common shall be effected by the surrender of the certificate or certificates
representing the shares to be converted at the principal office of the
Corporation at any time during normal business hours, together with a written
notice by the holder of such Class B Common stating that such holder desires to
convert the shares, or a state number of shares, of Class B Common represented
by such certificate or certificates into Class A Common. Each conversion shall
be deemed to have been effected as of the close of business on the date on which
such certificate or certificates have been surrendered and such notice has been
received, and at such time the rights of the holder of the converted Class B
Common as such holder shall cease and the person or persons in whose name or
names the certificate or certificates for shares of Class A Common are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of Class A Common represented thereby.
(iii) Promptly after the surrender of certificates and the receipt of
such written notice, the Corporation shall issue and deliver in accordance with
the surrendering holder's instructions (a) the certificate or certificates for
the Class A Common issuable upon such conversion and (b) a certificate
representing any Class B Common which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion but
which was not converted.
(iv) The issuance of certificates for Class A Common upon conversion
of Class B Common shall be made without charge to the holders of such shares for
any issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of Class A Common. All
shares of Class A Common which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges.
(v) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common, solely for the purpose
of issuance upon the conversion of Class B Common, such number of shares of
Class A Common issuable upon the conversion of all outstanding Class B Common.
All shares of Class A Common which are so
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<PAGE>
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges.
(vi) The Corporation shall not close its books against the transfer of
Class A Common or of Class B Common issued or issuable upon conversion of Class
A Common in any manner which would interfere with the timely conversion of Class
A Common.
(vii) If the Corporation in any manner subdivides or combines the
outstanding shares of Class A Common or Class B Common, as the case may be, the
outstanding shares of the Class A Common (in the case of a subdivision or
combination of the Class B Common) or the Class B Common (in the case of a
subdivision or combination of the Class A Common), shall be proportionately
subdivided or combined in a similar manner.
Section 6. Registration or Transfer. The Corporation shall keep at
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of Common Shares. Upon the
surrender of any certificate representing shares of any class of Common Shares
at such place, the Corporation shall, at the request of the registered holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance.
Section 7. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Common Shares, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor or an original party to
the Recapitalization Agreement, its own agreement will be satisfactory), or, in
the case of any such mutilation upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate.
Section 8. Notices. All notices referred to herein shall be in
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
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<PAGE>
Section 9. Fractional Shares. In no event will holders of fractional
shares be required to accept any consideration in exchange for such shares other
than consideration which all holders of Common Stock are required to accept.
Section 10. Amendment and Waiver. No amendment or waiver of any
provision of Part C of this Article IV shall be effective without the prior
written consent of the holders of a majority of the then outstanding Common
Shares voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common Shares
shall be effective without the prior consent of the holders of a majority of the
then outstanding shares of such affected class of Common Shares, voting as a
single class.
D. DEFINITIONS
-----------
"Affiliate" means, with respect to any Person, any other Person,
entity or investment fund controlling, controlled by or under common control
with such Person and, in the case of a Person which is a partnership, any
partner of such Person.
"Bain Group" means, collectively, Bain Capital Fund V, L.P., Bain
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P., and
Randolph Street Partners.
"Change in Ownership" has the meaning set forth in paragraph 4H of
Part B hereof.
"Common Stock" means, collectively, the Corporation's Class A Common
Stock, the Corporation's Class B Common Stock, the Corporation's Class L Common
Stock and any other class of capital stock of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation, other than the Series A Preferred.
"Conversion Stock" means shares of the Corporation's Class A Common
Stock, par value $.01 per share; provided that if there is a change such that
the securities issuable upon conversion of the Series A Preferred are issued by
an entity other than the Corporation or there is a change in the type or class
of securities so issuable, then the term "Conversion Stock" shall mean the
securities issuable upon conversion of the Series A Preferred.
"Cost" of each share of Class L Common shall be equal to $19.085 per
share (as proportionally adjusted for all stock splits, stock dividends and
other recapitalizations affecting the Class L Common).
"Distribution" means each distribution made by the Corporation to
holders of Common Shares, whether in cash, property, or securities of the
Corporation and whether by dividend, liquidating distributions or otherwise;
provided that neither of the following shall be a Distribution: (a) any
redemption or repurchase by the Corporation of any Common Shares for any reason
or (b) any recapitalization or exchange of any Common Shares, or any subdivision
(by stock
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<PAGE>
split, stock dividend or otherwise) or any combination (by stock split, stock
dividend or otherwise) of any outstanding Common Shares.
"Fundamental Change" has the meaning set forth in paragraph 4H of Part
B hereof.
"General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
"Junior Securities" means any capital stock or other equity securities
of the Corporation, except for the Series A Preferred.
"Liquidation Value" of any Share of Series A Preferred as of any
particular date shall be equal to $18.40.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its capital
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force; provided that for
purposes of paragraph 4H of Part B hereof, a Public Offering shall not include
an offering made in connection with a business acquisition or combination or an
employee benefit plan.
"Recapitalization Agreement" means the Recapitalization Agreement
dated as of December 18, 1996 among the Corporation, the Bain Group, Toray
Industries, Inc., Toray Industries (America), Inc. and Shimadzu Corporation.
"Redemption Date" as to any Share means the date specified in the
notice of any redemption at the Corporation's option or at the holder's option
or the applicable date specified herein in the case of any other redemption;
provided that no such date shall be a Redemption Date unless the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon and any
required premium with respect thereto) is actually paid in full on such date,
and if not so paid in full, the Redemption Date shall be the date on which such
amount is fully paid.
"Subsidiary" means any corporation of which a majority of the shares
of outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the board of directors are, at the time as of which
any determination is being made, owned by the Corporation either directly or
indirectly through Subsidiaries.
"Unpaid Yield" of any share of Class L Common means an amount equal to
the excess, if any, of (a) the aggregate Yield accrued on such share, over (b)
the aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
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"Unreturned Cost" of any share of Class L Common means an amount equal
to the excess, if any, of (a) the Cost of such share, over (b) the aggregate
amount of Distributions made by the Corporation that constitute a return of the
Cost of such share.
"Yield" means, with respect to each outstanding share of Class L
Common for each calendar year, the amount accruing on such share each day during
such year at the rate of 12% per annum of the sum of (a) such share's Unreturned
Cost, plus (b) Unpaid Yield thereon for all prior years. In calculating the
amount of any Distribution to be made to the Class L Common during a calendar
year, the portion of a Class L Common share's Yield for such portion of such
year elapsing before such Distribution is made shall be taken into account.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, alter or repeal the by-laws of the Corporation.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the Corporation. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
ARTICLE EIGHT
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINE
The Corporation expressly elects not to be governed by (S)203 of the
General Corporation Law of the State of Delaware.
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<PAGE>
ARTICLE TEN
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
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Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
THERMA-WAVE, INC.
A Delaware corporation
(Adopted on May 16, 1996)
ARTICLE I
---------
OFFICES
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Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle 19805. The name of the corporation's registered
agent at such address shall be The Corporation Trust Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall deter mine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the president or the holders of shares entitled to cast
not less than a majority of the votes at the meeting.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is
<PAGE>
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one
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<PAGE>
upon which by express provisions of an applicable law or of the certificate of
incorporation a different vote is required, in which case such express provision
shall govern and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corpora tion's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this
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section, written consents signed by the holders of a sufficient number of shares
to take such corporate action are so recorded. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing. Any
action taken pursuant to such written consent or consents of the stockholders
shall have the same force and effect as if taken by the stockholders at a
meeting thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board shall be six (6). Thereafter, the number of
directors shall be established from time to time by in accordance with the
provisions of that certain Stockholders Agreement, dated as of May 16, 1996 by
and among the corporation and certain of its stockholders (the "Stockholders
Agreement") or the Voting Agreement, dated as of May 16, 1997 by and among the
corporation and certain of its stockholders (the "Voting Agreement"). The
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors. Except as provided in the Stockholders Agreement or the
Voting Agreement and Section 4 of this Article III, the directors shall be
elected in this manner at the annual meeting of the stockholders. Each director
elected shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. The directors may only be removed,
with or without cause, as set forth in the Stockholders Agreement or the Voting
Agreement. Any director may resign at any time upon written notice to the
corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may only be filled as
set forth in the Stockholders Agreement or the Voting Agreement. Each director
so chosen shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings
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of the board of directors may be called by or at the request of the president on
at least twenty-four (24) hours notice to each director, either personally, by
telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be
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conclusively presumed to have assented to any action taken unless his or her
dissent shall be entered in the minutes of the meeting or unless his or her
written dissent to such action shall be filed with the person acting as the
secretary of the meeting before the adjournment thereof or shall be forwarded by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to any member
who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a chairman, president, chief
financial officer, one or more vice-presidents, secretary, a treasurer, and such
other officers and assistant officers as may be deemed necessary or desirable by
the board of directors. Any number of offices may be held by the same person.
In its discretion, the board of directors may choose not to fill any office for
any period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at
the first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
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Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall have
the powers and perform the duties incident to that position. Subject to the
powers of the board of directors, he shall be in the general and active charge
of the entire business and affairs of the corporation. He shall preside at all
meetings of the board of directors and stockholders and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or provided in these by-laws. Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chairman of the board
shall perform all the duties and responsibilities and exercise all the powers of
the president.
Section 7. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors, chairman or as may be provided in these
by-laws.
Section 8. Chief Financial Officer. The chief financial officer of the
corporation shall, under the direction of the chief executive officer, be
responsible for all financial and accounting matters and for the direction of
the offices of treasurer and controller. The chief financial officer shall have
such other powers and perform such other duties as may be prescribed by the
chairman of the board, the chief executive officer or the board of directors or
as may be provided in these by-laws.
Section 9. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or by the president, shall, in the absence or disability of the president, act
with all of the powers and be subject to all the restrictions of the president.
The vice-presidents shall also perform such other duties and have such other
powers as the board of directors, the chairman, the president or these by-laws
may, from time to time, prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
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by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the chairman, the
president, or secretary may, from time to time, prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six (6) years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman, the
president or chief financial officer may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
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ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corpor ation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corpora tion to indemnify the
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claimant for the amount claimed, but the burden of such defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obliga tions then
existing with respect to any state of facts or proceeding then existing.
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Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the certificate or
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
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Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
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Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or
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officers, agent or agents of the corporation, and in such manner, as shall be
determined by resolution of the board of directors or a duly authorized
committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
-14-
<PAGE>
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
Except for Article III hereof, the Stockholders Agreement or the Voting
Agreement, these by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the by-laws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
-15-
<PAGE>
Exhibit 4.1
Therma-Wave, Inc.
$115,000,000
10.625% Senior Notes due 2004
PURCHASE AGREEMENT
------------------
May 16, 1997
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Therma-Wave, Inc., a Delaware corporation (the "Company"), hereby
-------
confirms its agreement with you (the "Initial Purchaser"), as set forth below.
-----------------
1. The Securities. Subject to the terms and conditions herein
--------------
contained, the Company proposes to issue and sell to the Initial Purchaser
$115,000,000 aggregate principal amount of its 10.625% Senior Notes due 2004
(the "Notes"). The Notes are to be issued under an indenture (the "Indenture")
----- ---------
to be dated as of May 15, 1997 between the Company and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee").
-------
The Notes are being issued and sold in connection with the
recapitalization of the Company (the "Recapitalization") pursuant to a
----------------
Recapitalization Agreement dated December 18, 1996 as amended by Amendment No.
1, dated May 16, 1997 (the "Recapitalization Agreement"), by and among Bain
--------------------------
Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP Associates, BCIP Trust
Associates, L.P. and designees, if any (collectively, the "Purchasers"), and
Toray Industries, Inc. and Toray Industries (America) Inc. (collectively,
"Toray"), and Shimadzu Corporation ("Shimadzu") and the Company.
The Recapitalization will be financed by: (i) the proceeds from the
issuance of the Notes, (ii) consideration paid by the Purchasers to the Company
in the amount of $20.0 million and (iii) the retention by Toray and Shimadzu of
$15.0 million in equity securities of the Company. The Company will also enter
into a senior secured bank financing pursuant to a
<PAGE>
-2-
credit agreement (the "Credit Agreement") among the Company, Bankers Trust
----------------
Company, as agent, and certain financial institutions party thereto in the form
of a revolving credit facility for working capital and other corporate purposes
in the amount of $30 million.
The Notes will be offered and sold to the Initial Purchaser without
being registered under the Securities Act of 1933, as amended (the "Act"), in
---
reliance on one or more exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated April 22, 1997 (the "Preliminary
-----------
Memorandum") and a final offering memorandum dated May 13, 1997 (the "Final
- ---------- -----
Memorandum"; the Preliminary Memorandum and the Final Memorandum each herein
- ----------
being referred to as a "Memorandum"), each setting forth or including a
----------
description of the terms of the Notes and the offering, a description of the
Recapitalization of the transactions contemplated thereby and hereby, a
description of the Company and any material developments relating to the Company
occurring after the date of the most recent historical financial statements
included therein.
The Initial Purchaser and its direct and indirect transferees of the
Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
--------- -------------------
Agreement"), pursuant to which the Company has agreed, among other things, to
- ---------
file a registration statement (the "Registration Statement") with the Securities
----------------------
and Exchange Commission (the "Commission") registering the Exchange Notes (as
----------
defined therein) or, in certain cases, the Notes under the Act.
2. Representations and Warranties. The Company represents and
------------------------------
warrants to and agrees with the Initial Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date thereof
and at all times subsequent thereto up to the Closing Date (as defined in
Section 3 below) contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 2(a) do not apply to statements or omissions made in reliance upon
<PAGE>
-3-
and in conformity with information relating to the Initial Purchaser, furnished
to the Company in writing by the Initial Purchaser, expressly for use in the
Preliminary Memorandum, the Final Memorandum or any amendment or supplement
thereto.
(b) As of the Closing Date, the Company will have the capitalization
set forth in the Final Memorandum; all of the subsidiaries of the Company are
listed on Schedule 2 attached hereto (each, a "Subsidiary" and collectively, the
---------- ----------
"Subsidiaries"); all of the outstanding shares of capital stock of the Company
------------
and the Subsidiaries have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; except as set forth in
the Final Memorandum, all of the outstanding shares of capital stock of the
Company and of each of the Subsidiaries will be free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability (other than
those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting; except as set forth in the Final Memorandum, there are
no (i) options, warrants or other rights to purchase from the Company, (ii)
agreements or other obligations to issue or (iii) other rights to convert any
obligation into, or exchange any securities for, shares of capital stock of or
ownership interests in the Company or any of the Subsidiaries outstanding.
Except for the Subsidiaries or as disclosed in the Final Memorandum, the Company
does not own, directly or indirectly, any material amount of capital stock or
any other equity or long-term debt securities or have any equity interest in any
firm, partnership, joint venture or other entity.
(c) Each of the Company and the Subsidiaries has been duly
incorporated, is validly existing and is in good standing as a corporation under
the laws of its jurisdiction of incorporation, with all requisite corporate
power and authority to own its properties and conduct its business as now
conducted, and as described in the Final Memorandum; each of the Company and the
Subsidiaries is, and upon consummation of the Recapitalization will be, duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not reasonably be expected, individually or in the aggregate, to
have a material adverse effect on the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Company and the Subsidiaries, taken as a whole (any such event, a "Material
--------
Adverse Effect").
- --------------
<PAGE>
-4-
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the Registration
Rights Agreement). On the Closing Date, the Notes, the Exchange Notes and the
Private Exchange Notes will each be duly and validly authorized by the Company
and, when executed by the Company and authenticated by the Trustee in accordance
with the provisions of the Indenture and, in the case of the Notes, when
delivered to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. The Indenture
meets the requirements for qualification under the Trust Indenture Act of 1939,
as amended (the "TIA"). On the Closing Date, the Indenture will be duly and
---
validly authorized by the Company and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement. On the Closing Date, the Registration Rights Agreement will be duly
and validly authorized by the Company and, when executed and delivered by the
Company, will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that (A)
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general princi-
<PAGE>
-5-
ples of equity and the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and public policy
considerations.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by the Company.
(h) The Company has delivered to the Initial Purchaser a true,
correct and complete executed copy of the Recapitalization Agreement, together
with any amendments thereto. The Company has all requisite corporate power and
authority to enter into the Recapitalization Agreement and the Company has all
requisite corporate power and authority to consummate the transactions
contemplated thereby. The Recapitalization Agreement has been duly authorized,
executed and delivered by the Company.
(i) No consent, approval, authorization or order of any court or
governmental agency or body or third party is required for the performance of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby except such as have been obtained and such as
may be required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Notes by the Initial Purchaser. None of the Company
or the Subsidiaries is, or upon consummation of the Recapitalization will be,
(i) in violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute, judgment,
decree, order, rule or regulation applicable to any of them or any of their
respective properties or assets, except for any such breach or violation which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, or (iii) in breach of or default under (nor has any
event occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "Contracts"), except
---------
for any such breach, default, violation or event which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
<PAGE>
-6-
(j) The execution, delivery and performance by the Company of this
Agreement, the Indenture, the Registration Rights Agreement and the
Recapitalization Agreement and the consummation by the Company of the
transactions contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof, will not conflict with or constitute or result in a breach
of or a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict, breach, violation,
default or event which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the Company or
any of the Subsidiaries, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to the Company or any of
the Subsidiaries or any of their respective properties or assets, except for any
such conflict, breach or violation which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(k) The audited consolidated financial statements of the Company
included in the Final Memorandum present fairly in all material respects the
financial position, results of operations and cash flows of the Company at the
dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except as otherwise stated therein. The summary and selected financial
and statistical data in the Final Memorandum present fairly in all material
respects the information shown therein and the summary and selected financial
data have been prepared and compiled on a basis consistent with the audited
financial statements included therein, except as otherwise stated therein. To
the best of the Company's knowledge, Ernst & Young LLP (the "Independent
-----------
Accountants") is an independent public accounting firm within the meaning of the
- -----------
Act and the rules and regulations promulgated thereunder.
(l) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) have been prepared in accordance with the
------------
Commission's published rules and guide-
<PAGE>
-7-
lines with respect to pro forma financial statements, and (iii) have been
properly computed on the bases described therein; the assumptions used in the
preparation of the pro forma financial data and other pro forma financial
information included in the Final Memorandum are reasonable and the adjustments
used therein are appropriate to give effect to the transactions or circumstances
referred to therein.
(m) Other than as described in the Memorandum under the captions
"Business-Legal Proceedings," there is not pending or, to the knowledge of the
Company, threatened any action, suit, proceeding, inquiry or investigation to
which the Company or any of the Subsidiaries is a party, or to which any of the
property or assets of the Company or the Subsidiaries is subject, before or
brought by any court, arbitrator or governmental agency or body which, if
determined adversely to the Company or any of the Subsidiaries, would reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
or which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Notes to be sold hereunder or the
consummation of the other transactions described in the Final Memorandum.
(n) Each of the Company and the Subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Final Memorandum, and,
except as set forth in the Final Memorandum, none of the Company or the
Subsidiaries has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how which, if such assertion of infringement or conflict were sustained,
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(o) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made or will have made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently required or
necessary to own or lease, as the case may be, and to operate its respective
properties and to carry on its respective businesses as now or proposed to be
conducted as set forth in the Final Memorandum ("Permits"), except where the
-------
failure to obtain such Permits would not rea-
<PAGE>
-8-
sonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; each of the Company and the Subsidiaries has fulfilled and
performed all of its material obligations with respect to such Permits and no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit; and none of the Company or the
Subsidiaries has received any notice of any proceeding relating to revocation or
modification of any such Permit, except as described in the Final Memorandum and
except where such revocation or modification would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(p) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein, (i) none of the Company or
the Subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Company and the Subsidiaries, taken as a whole (a "Material Change"), (ii) none
---------------
of the Company or the Subsidiaries has purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock, and (iii) there shall not have been any change in the
capital stock or long-term indebtedness of the Company or the Subsidiaries which
would, individually or in the aggregate, be a Material Change.
(q) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and has
paid all taxes shown as due thereon; and other than tax deficiencies which the
Company or any Subsidiary is contesting in good faith and for which the Company
or such Subsidiary has provided adequate reserves, there is no tax deficiency
that has been asserted against the Company or any of the Subsidiaries that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources
<PAGE>
-9-
which the Company and the Subsidiaries believe to be reliable and accurate.
(s) None of the Company, the Subsidiaries or, to the best of their
knowledge, any agent acting on their behalf has taken or will take any action
that might cause this Agreement or the sale of the Notes to violate Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System, in each
case as in effect, or as the same may hereafter be in effect, on the Closing
Date.
(t) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described in
the Final Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. All
leases, contracts and agreements to which the Company or any of the Subsidiaries
is a party or by which any of them is bound are valid and enforceable against
the Company or such Subsidiaries, and to the knowledge of the Company, are
valid and enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect.
(u) There are no pending legal or governmental proceedings involving
or affecting the Company or any Subsidiary or any of their respective properties
or assets which would be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum, nor are there any
material contracts or other documents which would be required to be described in
a prospectus pursuant to the Act that are not described in the Final Memorandum.
(v) Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, (A) each of the Company and the
Subsidiaries is in compliance with and not subject to liability under applicable
Environmental Laws, (B) each of the Company and the Subsidiaries has made all
filings and provided all notices required under any applicable Environmental
<PAGE>
-10-
Law, and has and is in compliance with all Permits required under any applicable
Environmental Laws and each of them is in full force and effect, (C) there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding, notice or demand letter or request for
information pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the Subsidiaries under
any Environmental Law, (D) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or any of the
Subsidiaries, (E) none of the Company or the Subsidiaries has received notice
that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law, (F) no property or facility of
------
the Company or any of the Subsidiaries is (i) listed or proposed for listing on
the National Priorities List under CERCLA or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials, into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
(ii) the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and (iii)
underground and above ground storage tanks, and related piping, and emissions,
discharges, releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of the Subsidiaries which is pending or, to
the knowledge of the Company or any of the Subsidiaries, threatened.
(x) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as the Company believes is adequate for the
conduct of its business and the value of its properties.
<PAGE>
-11-
(y) None of the Company or the Subsidiaries has any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which the Company or any of the Subsidiaries makes or ever
-----
has made a contribution and in which any employee of the Company or of any
Subsidiary is or has ever been a participant. With respect to such plans, the
Company and each Subsidiary are in compliance in all material respects with all
applicable provisions of ERISA.
(z) Each of the Company and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(aa) None of the Company or the Subsidiaries will be an "investment
company" or "promoter" or "principal underwriter" for an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(bb) The Notes, the Exchange Notes, the Indenture and the Registration
Rights Agreement will conform in all material respects to the descriptions
thereof in the Final Memorandum.
(cc) No holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement other than as expressly permitted thereby.
(dd) To the best of the Company's knowledge, immediately after the
consummation of the transactions contemplated by this Agreement and the
Recapitalization Agreement, the fair value and present fair saleable value of
the assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not, nor will the Company be,
after giving effect to the execution, delivery and performance of this Agreement
and the Recapitalization Agreement, and the consummation of the transactions
contemplated
<PAGE>
-12-
hereby and thereby, (a) left with unreasonably small capital with which to carry
on its business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent.
(ee) Neither the Company nor its respective Affiliates (as defined in
Rule 501(b) of Regulation D under the Act) has directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Act) which is or could be
integrated with the sale of the Notes in a manner that would require the
registration under the Act of the Notes or (ii) engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Notes or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(ff) Assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 8 hereof, it is not necessary in connection with
the offer, sale and delivery of the Notes to the Initial Purchaser in the manner
contemplated by this Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
(gg) No securities of the Company are of the same class (within the
meaning of Rule 144A under the Act) as the Notes and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system.
(hh) None of the Company or the Subsidiaries has taken, nor will any of
them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Notes.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to the Initial Purchaser or to counsel for the Initial Purchaser
shall be deemed a joint and several representation and warranty by the Company
and each of the Subsidiaries to the Initial Purchaser as to the matters covered
thereby. Any officer of the Company or any Subsidiary executing a certificate
pursuant to the terms of this Agreement shall be deemed to do so exclusively in
his/her capacity as an officer of the Company or any Subsidiary and shall not
incur any personal liability in connection therewith.
<PAGE>
-13-
3. Purchase, Sale and Delivery of the Notes. On the basis of the
----------------------------------------
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase the Notes in the amount set forth on Schedule 1 hereto from the
----------
Company, at 97.00% of their principal amount. One or more certificates in
definitive form for the Notes that the Initial Purchaser has agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Initial Purchaser requests shall be delivered by or on behalf of
the Company to the Initial Purchaser, against payment by or on behalf of the
Initial Purchaser of the purchase price therefor by wire transfer (same day
funds), to such account or accounts as the Company has specified, or by such
means as the parties hereto shall agree prior to the Closing Date. Such
delivery of and payment for the Notes shall be made at the offices of White &
Case, New York, New York at 10:00 A.M., New York time, on May 16, 1997, or at
such other place, time or date as the Initial Purchaser, on the one hand, and
the Company, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "Closing Date."
------------
4. Offering by the Initial Purchaser. The Initial Purchaser proposes to
---------------------------------
make an offering of the Notes at the price and upon the terms set forth in the
Final Memorandum, as soon as practicable after this Agreement is entered into
and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Company. The Company covenants and agrees with the
------------------------
Initial Purchaser that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchaser shall not have given its consent (which shall not be unreasonably
withheld). The Company will promptly, upon the reasonable request of the Initial
Purchaser or counsel for the Initial Purchaser (and agreement by counsel to
the Company), make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Notes by the Initial Purchaser.
<PAGE>
-14-
(b) The Company will cooperate with the Initial Purchaser in arranging
for the qualification of the Notes for offering and sale under the securities or
"Blue Sky" laws of such jurisdictions as the Initial Purchaser may reasonably
designate and will continue such qualifications in effect for as long as may be
reasonably necessary to complete the resale of the Notes; provided, however,
-------- -------
that in connection therewith, the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by the
Initial Purchaser of the Notes or the Private Exchange Notes, any event occurs
or information becomes known as a result of which the Final Memorandum as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Company will promptly notify
the Initial Purchaser thereof and will prepare, at the expense of the Company,
an amendment or supplement to the Final Memorandum that corrects such statement
or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial Purchaser
and to counsel for the Initial Purchaser as many copies of the Preliminary
Memorandum and the Final Memorandum or any amendment or supplement thereto as
the Initial Purchaser may reasonably request.
(e) The Company will apply the net proceeds from the sale of the Notes
as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Notes remain outstanding, the Company
will furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee,
or the holders of the Notes and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company with the Commission or
any national securities exchange on which any class of securities of the Company
may be listed.
<PAGE>
-15-
(g) Prior to the Closing Date, the Company will furnish to the Initial
Purchaser, as soon as they have been prepared, a copy of any unaudited interim
financial statements of the Company for any period subsequent to the period
covered by the most recent financial statements appearing in the Final
Memorandum.
(h) None of the Company or any of its Affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Notes in a manner which would require the registration under the Act of the
Notes.
(i) The Company will not, and will not permit any of the Subsidiaries
to, engage in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) in connection with the offering of
the Notes or in any manner involving a public offering within the meaning of
Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the Company
will make available, upon request (and within a reasonable period of time), to
any seller of such Notes the information specified in Rule 144A(d)(4) under the
Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange
Act (or is obligated to file such reports required by Section 13 or 15(d) of the
Exchange Act with the Commission).
(k) The Company will use its best efforts to (i) permit the Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the NASD relating to trading in the Private Offerings, Resales and
Trading through Automated Linkages market (the "Portal Market") and (ii) permit
-------------
the Notes to be eligible for clearance and settlement through The Depository
Trust Company.
(l) In connection with the Notes offered hereby and sold in an offshore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provision of Regulation S, issue
any such Notes in the form of definitive securities.
6. Expenses. The Company agrees to pay all costs and expenses incident
--------
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
<PAGE>
-16-
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the
delivery to the Initial Purchaser of copies of the foregoing documents, (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) preparation (including printing),
issuance and delivery to the Initial Purchaser of the Notes, (v) the
qualification of the Notes under state securities and "Blue Sky" laws, including
filing fees and reasonable fees and disbursements of counsel for the Initial
Purchaser relating thereto, (vi) expenses of the Company in connection with any
meetings with prospective investors in the Notes, (vii) fees and expenses of the
Trustee including fees and expenses of counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
the PORTAL Market and (ix) any fees charged by investment rating agencies for
the rating of the Notes. If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to paragraphs (i) and (v) of Section 11 hereof or because of
any failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder (other than solely by reason of a default by the Initial Purchaser of
its obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company agrees to reimburse promptly the Initial
Purchaser upon demand for all out-of-pocket expenses (including fees,
disbursements and charges of Cahill Gordon & Reindel, counsel for the Initial
Purchaser) that shall have been incurred by the Initial Purchaser in connection
with the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchaser's Obligations. The obligation of
-------------------------------------------------
the Initial Purchaser to purchase and pay for the Notes shall, in its sole
discretion, be subject to the satisfaction or waiver of the following conditions
on or prior to the Closing Date:
(a) All of the conditions contained in the Credit Agreement to be
fulfilled or complied with prior to any borrowing under such agreement (other
than the transactions contemplated by this Agreement) shall have been complied
with; and
<PAGE>
-17-
the financing for the Recapitalization (other than the offering and sale of the
Notes as set forth herein and the application of the proceeds therefrom) shall
have been consummated or shall be consummated simultaneously herewith.
(b) On the Closing Date, the Initial Purchaser shall have received the
opinion, dated as of the Closing Date and addressed to the Initial Purchaser, of
Kirkland & Ellis, counsel for the Company, in form and substance satisfactory to
counsel for the Initial Purchaser substantially in the form set forth on Exhibit
A hereto. In rendering such opinion, Kirkland & Ellis shall have received and
may rely upon such certificates and other documents and information as it may
reasonably request to pass upon such matters.
(c) On the Closing Date, the Initial Purchaser shall have received the
opinion, in form and substance satisfactory to the Initial Purchaser, dated as
of the Closing Date and addressed to the Initial Purchaser, of Cahill Gordon &
Reindel, counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchaser may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(d) The Initial Purchaser shall have received from the Independent
Accountants comfort letters dated the date hereof and the Closing Date, in form
and substance satisfactory to counsel for the Initial Purchaser.
(e) The representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and on and as
of the Closing Date as if made on and as of the Closing Date; the statements of
the Company's officers made pursuant to any certificate delivered in accordance
with the provisions hereof shall be true and correct on and as of the date made
and on and as of the Closing Date; the Company shall have performed all
covenants and agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no event or
development that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
<PAGE>
-18-
(f) The Recapitalization and the sale of the Notes hereunder shall not
be enjoined (temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), the conduct of the business and operations of the Company or any
of the Subsidiaries shall not have been interfered with by strike, fire, flood,
hurricane, accident or other calamity (whether or not insured) or by any court
or governmental action, order or decree, and, except as otherwise stated
therein, the properties of the Company, any of the Subsidiaries shall not have
sustained any loss or damage (whether or not insured) as a result of any such
occurrence, except any such interference, loss or damage which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(h) The Initial Purchaser shall have received a certificate of the
Company, dated the Closing Date, signed by its Chairman of the Board, President
or any Senior Vice President and the Chief Financial Officer (in their
respective capacities as such), to the effect that, to the best of their
knowledge and belief:
(i) The representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date, and the Company has
performed all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the date of the
most recent financial statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), no event or events
have occurred, no information has become known nor does any condition exist
that, individually or in the aggregate, would have a Material Adverse Effect;
(iii) The Recapitalization and the sale of the Notes hereunder have not
been enjoined (temporarily or permanently); and
(iv) There have been no material amendments, alterations, modifications
or waivers of any provisions of the Recapitalization Agreement and related
documents since the date of the execution and delivery thereof by the parties
<PAGE>
-19-
thereto; the Company has complied in all material respects with all agreements
and covenants in the Recapitalization Agreement and related documents and
performed all conditions specified therein required to be complied with or
performed by them at or prior to the Closing Date.
(i) On the Closing Date, the Initial Purchaser shall have received the
Registration Rights Agreement executed by the Company and such agreement shall
be in full force and effect at all times from and after the Closing Date.
(j) The Initial Purchaser shall have received from the Company a true
and correct executed copy of the Credit Agreement, dated on or about the Closing
Date, and there shall have been no material amendments, alterations,
modifications or waivers of any provisions of the Credit Agreement, and there
exists as of the Closing Date (after giving effect to the transactions
contemplated by this Agreement and the application of the proceeds received by
the Company from the sale of the Notes) no condition that would constitute a
Default or an Event of Default (each as defined in the Credit Agreement) under
the Credit Agreement.
(k) The Initial Purchaser shall have received from the Company a true
and correct executed copy of the Recapitalization Agreement, and there shall
have been no material amendments, alterations, modifications or waivers of any
provisions of the Recapitalization Agreement since the date of this Agreement;
all conditions to effect the Acquisition set forth in the Recapitalization
Agreement shall have been satisfied.
(l) On the Closing Date, the Initial Purchaser shall have received an
opinion from Murray, Devine & Co., in a form reasonably satisfactory to the
Initial Purchaser, regarding the solvency of the Company immediately after the
consummation of the Recapitalization and the transactions contemplated thereby.
On or before the Closing Date, the Initial Purchaser and counsel for the
Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are rea-
<PAGE>
-20-
sonably satisfactory in all material respects to the Initial Purchaser and
counsel for the Initial Purchaser. The Company shall furnish to the Initial
Purchaser such conformed copies of such documents, opinions, certificates,
letters, schedules and instruments in such quantities as the Initial Purchaser
shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. The Initial Purchaser
-------------------------------------------
represents and warrants (as to itself only) that it is a QIB. The Initial
Purchaser agrees with the Company that (i) it has not and will not solicit
offers for, or offer or sell, the Notes by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act; and (ii) it has and will solicit offers for the Notes only from, and
will offer the Notes only to (A) in the case of offers inside the United States,
(x) persons whom the Initial Purchaser reasonably believe to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchaser that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by the Initial Purchaser to be
Accredited Investors that, prior to their purchase of the Notes, deliver to the
Initial Purchaser a letter containing the representations and agreements set
forth in Annex A to the Final Memorandum and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that in the case of this clause (B), in
purchasing such Notes such persons are deemed to have represented and agreed as
provided, however, that in the case of this clause (b), in purchasing such
- -------- -------
Notes such persons are deemed to have represented and agreed as provided under
the caption "Transfer Restrictions" contained in the Final Memorandum.
9. Indemnification and Contribution. The Company agrees to indemnify
--------------------------------
and hold harmless the Initial Purchaser and the affiliates, directors, officers,
agents, representatives and employees of the Initial Purchaser or its
affiliates, and each other person, if any, who controls the Initial Purchaser or
its affiliates within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Initial Purchaser or such other person may become subject under the Act, the
Exchange Act
<PAGE>
-21-
or otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Notes under the securities or "Blue Sky" laws thereof or filed with any
securities association or securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or any
amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such other
person for any legal or other expenses incurred by the Initial Purchaser or such
other person in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, the Company will not be liable in any such case to
-------- -------
the extent that any such loss, claim, damage, or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any Memorandum or any amendment or supplement thereto
or any Application in reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to the Company by the Initial
Purchaser, specifically for use therein. This indemnity agreement will be in
addition to any liability that the Company may otherwise have to the indemnified
parties; and provided, further, that the Company will not be liable to the
-------- -------
Initial Purchaser or any person controlling the Initial Purchaser or any of
their respective affiliates, directors, officers, agents, representatives or
employees with respect to any such untrue statement or omission made in the
Preliminary Memorandum that is corrected in the Final Memorandum (or any
amendment or supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Notes from the Initial Purchaser in reliance upon
the Preliminary Memorandum but was not sent or given a copy of the Final
Memorandum (as amended or supplemented) at or prior to the written confirmation
of the sale of such Notes to such
<PAGE>
-22-
person, unless such failure to deliver the Final Memorandum (as amended or
supplemented) was a result of noncompliance by the Company with Section 5(d) of
this Agreement. The Company shall not be liable under this Section 9 for any
settlement of any claim or action effected without its prior written consent,
which shall not be unreasonably withheld.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in any Memorandum or any amendment or supplement thereto or any
Application or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Memorandum or any amendment or
supplement thereto or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
concerning such Initial Purchaser, furnished to the Company by the Initial
Purchaser specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may otherwise have to
the indemnified parties. The Initial Purchaser shall not be liable under this
Section 9 for any settlement of any claim or action effected without its
consent, which shall not be unreasonably withheld. The Company shall not,
without the prior written consent of the Initial Purchaser, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which the Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by the Initial Purchaser, unless such settlement (A)
includes an unconditional written release of the Initial Purchaser, in form and
substance reasonably satisfactory to the Initial Purchaser, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include
<PAGE>
-23-
any statement as to an admission of fault, culpability or failure to act by or
on behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof
in writing; but the omission to so notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a) and (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly wi
th any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if (i) the use of counsel chosen by the indemnifying
- -------- -------
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense
<PAGE>
-24-
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case of
paragraph (a) of this Section 9 or the Company in the case of paragraph (b) of
this Section 9, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions) or
(ii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the prior written consent of
the indemnifying party (which consent shall not be unreasonably withheld),
unless such indemnified party waived in writing its rights under this Section 9,
in which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Notes or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof). The relative benefits received by the Company on the one hand and the
Initial Purchaser on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by the
Company bear to the total discounts and commissions received by the Initial
Purchaser.
<PAGE>
-25-
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or the Initial Purchaser on
the other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Initial Purchaser agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), the
Initial Purchaser shall not be obligated to make contributions hereunder that in
the aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchaser under this Agreement, less the aggregate
amount of any damages that the Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchaser, and each director of the Company, each officer of the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
10. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Company, its
officers and the Initial Purchaser set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, the Initial Purchaser or any other person referred to
in Section 9 hereof and (ii) delivery of and payment for the Notes. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
<PAGE>
-26-
11. Termination. This Agreement may be terminated in the sole
-----------
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) any of the Company or its Subsidiaries shall have sustained any
loss or interference with respect to its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchaser, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in the aggregate,
has or could be reasonably likely to have a Material Adverse Effect
(including without limitation a change in control of the Company), except
in each case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Notes as
contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible
<PAGE>
-27-
downgrading by any nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements
---------------------------------------------
set forth in the last paragraph on the front cover page, the first paragraph on
page (i), and in the last two paragraphs and the last two sentences of the third
paragraph under the heading "Private Placement" in the Final Memorandum (to the
extent such statements relate to the Initial Purchaser) constitute the only
information furnished by the Initial Purchaser to the Company for the purposes
of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Initial Purchaser, shall be mailed or delivered to BT Securities
Corporation, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department; if sent to the Company, shall be mailed or delivered to the
Company at 1250 Reliance Way, Fremont, California, 94539, Attention: Chief
Financial Officer; with a copy to Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois, 60601, Attention: Dennis M. Myers, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and
----------
be binding upon the Initial Purchaser, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company contained in Section 9 of this Agreement shall
also be for the benefit of any person or persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of
<PAGE>
-28-
this Agreement shall also be for the benefit of the directors and officers of
the Company and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of
Notes from the Initial Purchaser will be deemed a successor because of such
purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
-29-
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchaser.
Very truly yours,
THERMA-WAVE, INC.
By: [SIGNATURE APPEARS HERE]
---------------------------
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: [SIGNATURE APPEARS HERE]
---------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Principal
Amount of
Initial Purchaser Notes
- ----------------- ----------
<S> <C>
BT Securities Corporation $115,000,000
-------------
Total $115,000,000
</TABLE>
<PAGE>
SCHEDULE 2
----------
Subsidiaries of the Company
---------------------------
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- ---- ---------------
<S> <C>
Therma-Wave, Ltd. United Kingdom
Therma-Wave (Japan), K.K. Japan
Therma-Wave Foreign Sales Corp. Barbados
Therma-Wave Domestic International California/1/
Sales Corp.
</TABLE>
- ------------------------
/1/ In the process of being dissolved.
<PAGE>
SCHEDULE 3
----------
Material Contracts of the Company
---------------------------------
1. Employment Agreement, each dated as of the date hereof, between the Company
and Dr. Allen Rosencwaig; David L. Willenburg; Lee Smith; Jon Opsal and
Anthony W. Lin.
2. Executive Stock Agreement, each dated as of the date hereof, between the
Company and Dr. Allen Rosencwaig, David L. Willenburg; Lee Smith; Jon Opsal
and Anthony W. Lin.
3. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan.
4. Registration Agreement, dated as of the date hereof, between the Company
and the stockholders named therein.
5. Stockholders Agreement, dated as of the date hereof, between the Company
and the stockholders named therein.
6. Development License Agreement, dated June 16, 1992, between the Company,
Therma-Wave K.K., Toray Industries, Inc. and Shimadzu Corporation.
7. New Development Agreement, dated December 22, 1995, between Therma-Wave,
Inc. and Toray Industries, Inc.
8. Lease Agreement, dated as of May 26, 1995, between the Company and Sobrato
Interests.
9. Advisory Agreement, dated as of the date hereof, between the Company and
Bain Capital, Inc.
10. Voting Agreement, dated as of the date hereof, between the Company and
certain stockholders named therein.
11. Credit Agreement, dated as of the date hereof, between the Company and
Bankers Trust Company, as agent, and certain financial institutions named
therein.
12. Pledge Agreement, dated as of the date hereof, between the Company and
Bankers Trust Company, as agent.
13. Security Agreement, dated as of the date hereof, between the Company and
Bankers Trust Company, as agent.
<PAGE>
-33-
14. Recapitalization Agreement, dated December 18, 1996, by and among Bain
Capital Fund V, L.P., Bain Capital Fund V-B, L.P., BCIP Associates, BCIP
Trust Associates, L.P., Toray Industries, Inc., Toray Industries (America),
Inc. and Shimadzu Corporation.
<PAGE>
-34-
Exhibit A
---------
<PAGE>
Exhibit 4.2
THERMA-WAVE, INC.,
as Issuer
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
--------------------
INDENTURE
Dated as of May 15, 1997
--------------------
$115,000,000
10.625% Senior Notes due 2004
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a) (1)................................................ 7.10
(a) (2)................................................ 7.10
(a) (3)................................................ N.A.
(a) (4)................................................ N.A.
(a) (5)................................................ 7.08; 7.10
(b).................................................... 7.08; 7.10
(c).................................................... N.A.
311(a).................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312(a).................................................... 2.05
(b).................................................... 10.03
(c).................................................... 10.03
313(a).................................................... 7.06
(b) (1)................................................ N.A.
(b) (2)................................................ 7.06
(c).................................................... 7.06
(d).................................................... 7.06
314(a).................................................... 4.07; 4.08
(b).................................................... N.A.
(c) (1)................................................ 10.04
(c) (2)................................................ 10.04
(c) (3)................................................ N.A.
(d).................................................... N.A.
(e).................................................... 10.05
(f).................................................... N.A.
315(a).................................................... 7.01(b)
(b).................................................... 7.05
(c).................................................... 7.01(a)
(d).................................................... 7.01(c)
(e).................................................... 6.11
316(a) (last sentence).................................... 2.09
(a) (1) (A)............................................ 6.05
(a) (1) (B)............................................ 6.04
(a) (2)................................................ N.A.
(b).................................................... 6.07
(c).................................................... 9.04
317(a) (1)................................................ 6.08
(a) (2)................................................ 6.09
(b).................................................... 2.04
318(a).................................................... 10.01
(c).................................................... 10.01
----------------------
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions..............................................1
SECTION 1.02. Incorporation by Reference of TIA.......................29
SECTION 1.03. Rules of Construction...................................29
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.........................................30
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount............................31
SECTION 2.03. Registrar and Paying Agent..............................32
SECTION 2.04. Paying Agent To Hold Assets in Trust....................33
SECTION 2.05. Noteholder Lists........................................33
SECTION 2.06. Transfer and Exchange...................................33
SECTION 2.07. Replacement Notes.......................................34
SECTION 2.08. Outstanding Notes.......................................34
SECTION 2.09. Treasury Notes..........................................35
SECTION 2.10. Temporary Notes.........................................35
SECTION 2.11. Cancellation............................................36
SECTION 2.12. Defaulted Interest......................................36
SECTION 2.13. CUSIP Number............................................36
SECTION 2.14. Deposit of Moneys.......................................37
SECTION 2.15. Restrictive Legends.....................................37
SECTION 2.16. Book-Entry Provisions for Global
Security..............................................39
SECTION 2.17. Special Transfer Provisions.............................40
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee......................................42
SECTION 3.02. Selection of Notes To Be Redeemed.......................43
SECTION 3.03. Notice of Redemption....................................43
SECTION 3.04. Effect of Notice of Redemption..........................45
SECTION 3.05. Deposit of Redemption Price.............................45
SECTION 3.06. Notes Redeemed in Part..................................45
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes........................................46
SECTION 4.02. Maintenance of Office or Agency.........................46
SECTION 4.03. Corporate Existence.....................................46
SECTION 4.04. Payment of Taxes and Other Claims.......................47
SECTION 4.05. Maintenance of Properties and
Insurance.............................................47
SECTION 4.06. Compliance Certificate; Notice of
Default...............................................48
SECTION 4.07. Compliance with Laws....................................49
SECTION 4.08. SEC Reports.............................................49
SECTION 4.09. Waiver of Stay, Extension or Usury
Laws..................................................50
SECTION 4.10. Limitation on Restricted Payments.......................50
SECTION 4.11. Limitation on Transactions with
Affiliates............................................53
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness..........................................55
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries..........................................55
SECTION 4.14. [Reserved]..............................................56
SECTION 4.15. Change of Control.......................................56
SECTION 4.16. Limitation on Asset Sales...............................58
SECTION 4.17. Limitation on Preferred Stock of
Subsidiaries..........................................62
SECTION 4.18. Limitation on Liens.....................................63
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.19. Limitation on Guarantees by Subsidiaries..................... 63
SECTION 4.20. Conduct of Business.......................................... 64
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets..................... 64
SECTION 5.02. Successor Corporation Substituted............................ 66
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................ 66
SECTION 6.02. Acceleration................................................. 68
SECTION 6.03. Other Remedies............................................... 69
SECTION 6.04. Waiver of Past Defaults...................................... 69
SECTION 6.05. Control by Majority.......................................... 69
SECTION 6.06. Limitation on Suits.......................................... 70
SECTION 6.07. Rights of Holders To Receive Payment......................... 70
SECTION 6.08. Collection Suit by Trustee................................... 71
SECTION 6.09. Trustee May File Proofs of Claim............................. 71
SECTION 6.10. Priorities................................................... 72
SECTION 6.11. Undertaking for Costs........................................ 72
SECTION 6.12. Rights and Remedies Cumulative............................... 72
SECTION 6.13. Delay or Omission Not Waiver................................. 73
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee............................................ 73
SECTION 7.02. Rights of Trustee............................................ 74
SECTION 7.03. Individual Rights of Trustee................................. 76
SECTION 7.04. Trustee's Disclaimer......................................... 76
SECTION 7.05. Notice of Default............................................ 76
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.06. Reports by Trustee to Holders................................ 76
SECTION 7.07. Compensation and Indemnity................................... 77
SECTION 7.08. Replacement of Trustee....................................... 78
SECTION 7.09. Successor Trustee by Merger, Etc............................. 79
SECTION 7.10. Eligibility; Disqualification................................ 80
SECTION 7.11. Preferential Collection of Claims Against Company............ 80
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations..................... 80
SECTION 8.02. Legal Defeasance or Covenant Defeasance...................... 82
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance........ 83
SECTION 8.04. Application of Trust Money................................... 85
SECTION 8.05. Repayment to the Company..................................... 86
SECTION 8.06. Reinstatement................................................ 86
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................... 87
SECTION 9.02. With Consent of Holders...................................... 88
SECTION 9.03. Compliance with TIA.......................................... 89
SECTION 9.04. Revocation and Effect of Consents............................ 89
SECTION 9.05. Notation on or Exchange of Notes............................. 90
SECTION 9.06. Trustee To Sign Amendments, Etc.............................. 90
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE TEN
MISCELLANEOUS
<S> <C> <C>
SECTION 10.01. TIA Controls..................................................90
SECTION 10.02. Notices.......................................................91
SECTION 10.03. Communications by Holders with Other Holders..................92
SECTION 10.04. Certificate and Opinion as to Conditions Precedent............92
SECTION 10.05. Statements Required in Certificate or Opinion.................92
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.....................93
SECTION 10.07. Legal Holidays................................................93
SECTION 10.08. Governing Law.................................................93
SECTION 10.09. No Adverse Interpretation of Other Agreements.................93
SECTION 10.10. No Recourse Against Others....................................94
SECTION 10.11. Successors....................................................94
SECTION 10.12. Duplicate Originals...........................................94
SECTION 10.13. Severability..................................................94
Signatures....................................................................95
Exhibit A - Form of Initial Note............................................ A-1
Exhibit B - Form of Exchange Note........................................... B-1
Exhibit C - Form of Certificate To be Delivered in Connection with
Transfers to Non-QIB Accredited Investors..................... C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S............................ D-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-vi-
<PAGE>
INDENTURE, dated as of May 15, 1997, between Therma-Wave, Inc., a
Delaware corporation (the "Company"), and IBJ Schroder Bank & Trust Company, a
New York banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10.625%
Senior Notes due 2004 (the "Initial Notes") and Series B 10.625% Senior Notes
due 2004 (the "Exchange Notes," and together with the Initial Notes, the
"Notes") and, to provide therefor, the Company has duly authorized the execution
and delivery of this Indenture. All things necessary to make the Notes, when
duly issued and executed by the Company, and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acceleration Notice" has the meaning provided in Section 6.02(a).
-------------------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
---------------------
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
such acquisition.
"Affiliate" means a Person who directly or indirectly through one or
---------
more intermediaries controls, or is controlled by, or is under common control
with, the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, no Person (other than the
Company or any Subsidiary of the Company) in whom a Securitization Entity makes
an In-
<PAGE>
-2-
vestment in connection with a Qualified Securitization Transaction shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of such Investment.
"Affiliate Transaction" has the meaning provided in Section 4.11.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Agent Members" has the meaning provided in Section 2.16.
-------------
"all or substantially all" shall have the meaning given such phrase in
------------------------
the Revised Model Business Corporation Act.
"Asset Acquisition" means (a) an Investment by the Company or any
-----------------
Restricted Subsidiary of the Company in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary of the Company or
any Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person which constitute all or substantially all of the assets of such Person,
any division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
----------
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company of (a) any Capital Stock of any Restricted Subsidiary of the Company or
(b) any other property or assets of the Company or any Restricted Subsidiary of
the Company other than in the ordinary course of business; provided, however,
that Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $500,000, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Section 5.01 or any disposition that constitutes a
Change of Control, (iii) the sale or discount, in each case without recourse, of
accounts
<PAGE>
-3-
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (iv) the factoring of accounts
receivable arising in the ordinary course of business pursuant to arrangements
customary in the region, (v) the licensing of intellectual property, (vi)
disposals or replacements of obsolete equipment in the ordinary course of
business, (vii) the sale, lease, conveyance, disposition or other transfer by
the Company or any Restricted Subsidiary of assets or property to one or more
Wholly Owned Restricted Subsidiaries in connection with Investments permitted
under Section 4.10, (viii) sales of accounts receivable, equipment and related
assets (including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof as determined in accordance with GAAP, and (ix)
transfers of accounts receivable, equipment and related assets (including
contract rights) of the type specified in the definition of "Qualified
Securitization Transaction" (or a fractional undivided interest therein) by a
Securitization Entity in a Qualified Securitization Transaction. For the
purposes of clause (viii), Purchase Money Notes shall be deemed to be cash.
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Bain Capital" means Bain Capital, Inc.
------------
"Bain Related Party" means Bain Capital and any Affiliate of Bain
------------------
Capital.
"Bank Credit Agreement" means the Credit Agreement dated as of May 16
---------------------
1997, among the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder or
adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
<PAGE>
-4-
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors
------------------
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a duly adopted
----------------
resolution of the Board of Directors or other equivalent governing body of such
Person.
"Business Day" means a day that is not a Legal Holiday.
------------
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, participations or other equivalents
(however designated) of corporate stock, including each class of common stock
and preferred stock of such Person and (ii) with respect to any Person that is
not a corporation, any and all partnership or other equity interests of such
Person.
"Capitalized Lease Obligation" means, as to any Person, the
----------------------------
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
----------------
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organ-
<PAGE>
-5-
ized under the laws of the United States of America or any state thereof or the
District of Columbia, Japan or any member of the European Economic Community or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $200.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons (for
purposes of Section 13(d) of the Exchange Act a "Group"), together with any
Affiliates thereof (whether or not otherwise in compliance with the provisions
of this Indenture); (ii) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of this
Indenture); (iii) any Person or Group (other than one or both of the Principals
or their respective Related Parties) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day within any two-year period
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Change of Control Date" has the meaning provided in Section 4.15.
----------------------
"Change of Control Offer" has the meaning provided in Section 4.15.
-----------------------
"Change of Control Payment Date" has the meaning provided in
------------------------------
Section 4.15.
"Company" means Therma-Wave, Inc., a Delaware corporation.
-------
"Consolidated EBITDA" means, with respect to any Person, for any
-------------------
period, the sum (without duplication) of (i) Con-
<PAGE>
-6-
solidated Net Income and (ii) to the extent Consolidated Net Income has been
reduced thereby, (A) all income taxes and foreign withholding taxes of such
Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period, (B) Consolidated Interest Expense and (C) Consolidated Non-cash
Charges.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
----------------------------------------
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness or the issuance of any Designated Preferred Stock of such Person or
any of its Restricted Subsidiaries (and the application of the proceeds thereof)
giving rise to the need to make such calculation and any incurrence or repayment
of other Indebtedness or the issuance or redemption of other Designated
Preferred Stock (and the application of the proceeds thereof) occurring during
the Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such incurrence,
repayment, issuance or redemption, as the case may be (and the application of
the proceeds thereof), occurred on the first day of the Four Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any Consolidated EBITDA, including any pro forma expense and cost reductions,
which are directly attributable and factually supportable, applied to the assets
which are the subject of the Asset Acquisition or Asset Sale during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a
<PAGE>
-7-
third Person, the preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of (i) Consolidated Interest Expense
(before amortization or write-off of debt issuance costs) plus (ii) the amount
of all cash dividend payments on any series of Preferred Stock of such Person;
provided that with respect to any series of Designated Preferred Stock that was
not paid cash dividends during such period but that accrues dividends according
to its terms during any period prior to the maturity date of the Notes, cash
dividends shall be deemed to have been paid with respect to such series of
Designated Preferred Stock during such period for purposes of clause (ii) of
this definition.
"Consolidated Interest Expense" means, with respect to any Person for
-----------------------------
any period, the sum of, without duplication, (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
<PAGE>
-8-
"Consolidated Net Income" of the Company means, for any period, the
-----------------------
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
- --------
Sales (without regard to the $500,000 limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b) gains and losses due solely to fluctuations in
currency values and the related tax effects according to GAAP, (c) items
classified as extraordinary, unusual or nonrecurring gains and losses
(including, without limitation, restructuring costs), and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of the Company
of that income is restricted by contract, operation of law or otherwise, (f) the
net loss of any Person, other than a Restricted Subsidiary of the Company, (g)
the net income of any Person, other than a Restricted Subsidiary of the Company,
except to the extent of cash dividends or distributions paid to the Company or a
Restricted Subsidiary of the Company by such Person, (h) only for purposes of
clause (iii)(w) of the first paragraph of Section 4.10, any amounts included
pursuant to clause (iii)(z) of Section 4.10, (i) non-cash compensation charges,
including any arising from stock options and (j) start-up costs and duplicative
costs incurred in connection with the transition service and distribution
agreements in effect on the Issue Date (as the same may be amended from time to
time).
"Consolidated Net Worth" means, with respect to any Person for any
----------------------
date of determination, the sum of (i) stated capital with respect to Capital
Stock of such Person and additional paid-in capital, and (ii) retained earnings
(or minus accumulated deficit) of such Person and its Subsidiaries (or, in the
case of the Company, the Restricted Subsidiaries), less, to the extent included
in the foregoing, amounts attributable to Disqualified Capital Stock, each item
determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
-----------------------------
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such
<PAGE>
-9-
Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge
constituting an extraordinary item or loss which requires an accrual of or a
reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any
--------------------
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date or (ii) was nominated for election or
elected to such Board of Directors with, or whose election to such Board of
Directors was approved by, the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election or (iii) is any designee of the Principals or their
Affiliates or was nominated by the Principals or their Affiliates or any
designees of the Principals or their Affiliates on the Board of Directors.
"Covenant Defeasance" has the meaning provided in Section 8.02.
-------------------
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
-------
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depositary" means The Depository Trust Company, its nominees and
----------
successors.
"Designated Preferred Stock" means Preferred Stock that is so
--------------------------
designated as Designated Preferred Stock, pursuant to an Officers' Certificate
executed by the principal executive officer and the principal financial officer
of the Company, on the issuance date thereof, the cash proceeds of which are
excluded from the calculation set forth in clause (iii) (x) of the first
paragraph of Section 4.10.
<PAGE>
-10-
"Disqualified Capital Stock" means that portion of any Capital Stock
--------------------------
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any event
(other than an event which would constitute a Change of Control), matures
(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof (except, in
each case, upon the occurrence of a Change of Control) on or prior to the final
maturity date of the Notes.
"Equity Offering" means the issuance and sale of Qualified Capital
---------------
Stock of the Company.
"Event of Default" has the meaning provided in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Notes" has the meaning provided in the preamble to this
--------------
Indenture.
"Exchange Offer" means the registration by the Company under the
--------------
Securities Act pursuant to a registration statement of the offer by the Company
to each Holder of the Initial Notes to exchange all the Initial Notes held by
such Holder for the Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Initial Notes held by such Holder, all in
accordance with the terms and conditions of the Registration Rights Agreement.
"fair market value" means, unless otherwise specified, with respect to
-----------------
any asset or property, the price which could be negotiated in an arm's-length,
free market transaction, for cash, between a willing seller and a willing and
able buyer, neither of whom is under undue pressure or compulsion to complete
the transaction. Fair market value shall be determined by the Board of Directors
of the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" is defined to mean generally accepted accounting principles in
----
the United States of America as in effect as of the date of this Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Ac-
<PAGE>
-11-
counting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession. All ratios and computations
based on GAAP contained in this Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of this Indenture shall be made without giving effect to (i) the
deduction or amortization of any premiums, fees, and expenses incurred in
connection with the acquisition in 1991 and the Recapitalization and related
financings or any other permitted incurrence of Indebtedness or refinancing of
Indebtedness and (ii) except as otherwise provided, the amortization of any
amounts required or permitted by Accounting Principles Board Opinion ("APB") No.
16 (including non-cash write-ups and non-cash charges relating to inventory,
fixed assets and in-process research and development, in each case arising in
connection with the Recapitalization and the acquisition of the Company in 1991
or future acquisitions) and APB No. 17 (including non-cash charges relating to
intangibles and goodwill arising in connection with the Recapitalization and the
acquisition of the Company in 1991 or future acquisitions).
"Global Note" has the meaning provided in Section 2.01.
-----------
"Holder" or "Noteholder" means the Person in whose name a Note is
------
registered on the Registrar's books.
"incur" has the meaning provided Section 4.12.
-----
"Indebtedness" means with respect to any Person, without duplication,
------------
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable and warranty and service
obligations arising in the ordinary course of business), (v) all obligations for
the reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations in
respect of Indebtedness referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all obligations of any
<PAGE>
-12-
other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the obligation so secured, (viii) all
obligations under currency swap agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital Stock
and (y) any transfer of accounts receivable, equipment or other assets
(including contract rights) which constitute a sale for purposes of GAAP and any
related recourse provisions under instrument sales programs entered into in the
ordinary course of business shall not constitute Indebtedness hereunder.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
"Initial Notes" has the meaning provided in the preamble to this
-------------
Indenture.
"Initial Public Offering" means the first underwritten public offering
-----------------------
of Qualified Capital Stock by the Company pursuant to a registration statement
filed with the SEC in accordance with the Securities Act for aggregate net cash
proceeds of at least $25.0 million.
"Initial Purchaser" means BT Securities Corporation.
-----------------
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
<PAGE>
-13-
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person,
-------------------------
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Subsidiary, as the case may be.
For the purposes of Section 4.10, (i) "Investment" shall include and be valued
at the book value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the book value of the net assets of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
and (ii) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any of
its Restricted Subsidiaries, without any adjustments for increases or decreases
in value, or write-ups, write-downs or write-offs with respect to such
Investment. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the book value of the Common Stock of such Restricted Subsidiary not
sold or disposed of.
<PAGE>
-14-
"Issue Date" means the date of original issuance of the Notes.
----------
"Legal Defeasance" has the meaning provided in Section 8.02.
----------------
"Legal Holiday" has the meaning provided in Section 10.07.
-------------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means May 15, 2004.
-------------
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Net Cash Proceeds" means, (i) with respect to any Asset Sale, the
-----------------
proceeds in the form of cash or Cash Equivalents received by the Company or
any of its Subsidiaries from such Asset Sale net of (a) out-of-pocket expenses
and fees relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and sales commissions), (b) taxes paid or
payable after taking into account any reduction in consolidated tax liability
due to available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) any portion of cash proceeds which the Company determines in
good faith should be reserved for post-closing adjustments, it being understood
and agreed that on the day that all such post-closing adjustments have been
determined, the amount (if any) by which the reserved amount in respect of such
Asset Sale exceeds the actual post-closing adjustments payable by the Company or
any of its Subsidiaries shall constitute Net Cash Proceeds on such date and (ii)
with respect to any Equity Offering the cash proceeds received by the Company in
connection with such Equity Offering net of out-of-pocket expenses and fees
relating to such Equity Offering (including, but without limitation, legal,
accounting and underwriting discounts and commissions); provided that the Net
Cash Proceeds shall be determined without regard to an over-allotment option
granted to the Company by the underwriters except to the extent of proceeds
received from such over-allotment option upon the consummation of the initial
sale of
<PAGE>
-15-
Qualified Capital Stock of the Company pursuant to the Initial Public
Offering.
"Net Proceeds Offer" has the meaning provided in Section 4.16.
------------------
"Net Proceeds Offer Amount" has the meaning provided in Section 4.16.
-------------------------
"Net Proceeds Offer Payment Date" has the meaning provided in
-------------------------------
Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning provided in
-------------------------------
Section 4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
---------------
Regulation S.
"Notes" means the Initial Notes and the Exchange Notes (and Private
-----
Exchange Notes, if any) treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium, interest,
-----------
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness, without duplication.
"Offering Memorandum" means the Offering Memorandum dated May 9, 1997,
-------------------
pursuant to which the Initial Notes were offered, and any supplement thereto.
"Officer" means, with respect to any Person, the Chairman of the Board,
-------
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means, with respect to any Person, a certificate
---------------------
signed by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of such Person and otherwise complying with the requirements
of Sections 10.04 and 10.05, as they relate to the making of an Officers'
Certificate.
<PAGE>
-16-
"Offshore Physical Notes" has the meaning provided in Section 2.01.
-----------------------
"Opinion of Counsel" means a written opinion from legal counsel, who may
------------------
be counsel for the Company, and who is reasonably acceptable to the Trustee
complying with the requirements of Sections 10.04 and 10.05, as they relate to
the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Permitted Indebtedness" means, without duplication, (i) the Notes, (ii)
----------------------
Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate
principal amount at any time outstanding not to exceed $30.0 million less the
aggregate amount of Indebtedness of Securitization Entities in Qualified
Securitization Transactions (other than Qualified Securitization Transactions
involving equipment and related assets) less the aggregate amount then
outstanding pursuant to clause (iii) less any required permanent repayments
(which are accompanied by a corresponding permanent commitment reduction)
thereunder; provided that the amount of Indebtedness permitted to be incurred
--------
pursuant to the Bank Credit Agreement in accordance with this clause (ii) shall
be in addition to any Indebtedness permitted to be incurred pursuant to the Bank
Credit Agreement in reliance on, and in accordance with, clauses (x), (xi) and
(xvi) of this definition, (iii) Indebtedness of foreign Restricted Subsidiaries
of the Company in an aggregate principal amount not to exceed $5.0 million at
any one time outstanding; provided the aggregate amount then outstanding under
--------
this clause (iii) when added to the aggregate amount then outstanding under
clause (ii) shall not exceed the aggregate amount permitted under clause (ii),
(iv) other Indebtedness of the Company and its Subsidiaries outstanding on the
Issue Date reduced by the amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent reductions thereon, (v)
Interest Swap Obligations of the Company or any of its Subsidiaries covering
Indebtedness of the Company or any of its Subsidiaries; provided that any
--------
Indebtedness to which any such Interest Swap Obligations correspond is otherwise
permitted to be incurred under this Indenture; provided, further, that such
-------- -------
Interest Swap Obligations are entered into, in the judgment of the Company, to
protect the Company from fluctuation in interest rates on their respective
outstanding Indebtedness, (vi) Indebtedness under Currency Agreements, (vii)
intercompany Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or by any Re-
<PAGE>
-17-
stricted Subsidiary of the Company to the Company or any Wholly Owned Restricted
Subsidiary of the Company, (viii) Acquired Indebtedness to the extent the
Company could have incurred such Indebtedness in accordance with Section 4.12 on
the date such Indebtedness became Acquired Indebtedness, (ix) guarantees by the
Company and its Wholly Owned Restricted Subsidiaries of each other's
Indebtedness; provided that such Indebtedness is permitted to be incurred under
--------
this Indenture, including, with respect to guarantees by Wholly Owned Restricted
Subsidiaries of the Company, Section 4.19, (x) Indebtedness (including
Capitalized Lease Obligations) incurred by the Company or any of its Restricted
Subsidiaries to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate principal amount
outstanding not to exceed 5% of Total Assets at the time of any incurrence
thereof (including any Refinancing Indebtedness with respect thereto) (which
amount may, but need not, be incurred in whole or in part under the Bank Credit
Agreement), (xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including, without limitation,
letters of credit in respect of workers' compensation claims or self-insurance,
or other Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims, (xii) Indebtedness arising from agreements of the
Company or a Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum assumable liability in respect of all
--------
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition, (xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course of business, (xiv) any refinancing,
modification, replacement, renewal, restatement, refunding, deferral, extension,
substitution, supplement, reissuance or resale of existing or future
Indebtedness, including any additional Indebtedness incurred to pay interest or
premiums required by the instruments governing such existing or future
Indebtedness as in effect at the time of issuance thereof ("Required Premiums")
and fees in connec-
<PAGE>
-18-
tion therewith ("Refinancing Indebtedness"); provided that any such event shall
--------
not (1) result in an increase in the aggregate principal amount of Permitted
Indebtedness (except to the extent such increase is a result of a simultaneous
incurrence of additional Indebtedness (A) to pay Required Premiums and related
fees or (B) otherwise permitted to be incurred under this Indenture) of the
Company and its Subsidiaries and (2) create Indebtedness with a Weighted Average
Life to Maturity at the time such Indebtedness is incurred that is less than the
Weighted Average Life to Maturity at such time of the Indebtedness being
refinanced, modified, replaced, renewed, restated, refunded, deferred, extended,
substituted, supplemented, reissued or resold (except that this subclause (2)
will not apply in the event the Indebtedness being refinanced, modified,
replaced, renewed, restated, refunded, deferred, extended, substituted,
supplemented, reissued or resold was originally incurred in reliance upon
clauses (vii) or (xvi) of this definition), (xv) the incurrence by a
Securitization Entity of Indebtedness in a Qualified Securitization Transaction
that is not recourse to the Company or any Subsidiary of the Company (except for
Standard Securitization Undertakings) and (xvi) additional Indebtedness of the
Company and its Restricted Subsidiaries in an aggregate principal amount not to
exceed $10.0 million at any one time outstanding (which amount may, but need
not, be incurred in whole or in part under the Bank Credit Agreement).
"Permitted Investments" means (i) Investments by the Company or any
---------------------
Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary
of the Company (whether existing on the Issue Date or created thereafter) or in
any other Person (including by means of any transfer of cash or other property)
if as a result of such Investment such Person shall become a Wholly Owned
Restricted Subsidiary of the Company and Investments in the Company by any
Restricted Subsidiary of the Company; (ii) cash and Cash Equivalents; (iii)
Investments existing on the Issue Date; (iv) loans and advances to management
and other employees of the Company and its Restricted Subsidiaries in the
ordinary course of business in an aggregate principal amount not to exceed $3.0
million at any one time outstanding; (v) accounts receivable created or acquired
in the ordinary course of business; (vi) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vii) Investments in Unrestricted Subsidiaries in an amount at any
one time outstanding not to exceed $3.0 million; (viii) Investments in
securities of trade creditors or customers received pursuant to
<PAGE>
-19-
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (ix) guarantees (A) by the
Company of Indebtedness otherwise permitted to be incurred by Restricted
Subsidiaries of the Company under this Indenture or (B) permitted by Section
4.19; (x) additional Investments having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (x) that are at
that time outstanding, not to exceed 5% of Total Assets at the time of such
Investment at any one time outstanding; (xi) any Investment by the Company or a
Wholly Owned Subsidiary of the Company in a Securitization Entity or any
Investment by a Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
--------
Securitization Entity is in the form of a Purchase Money Note or an equity
interest; (xii) any transaction to the extent it constitutes an Investment that
is permitted by, and made in accordance with, clause (b) of Section 4.11 (other
than transactions described in clause (v) of such clause (b)); (xiii)
Investments the payment for which consists exclusively of Qualified Capital
Stock of the Company and (xiv) Investments received by the Company or its
Restricted Subsidiaries as consideration for asset sales, including Asset Sales;
provided in the case of an Asset Sale, such Asset Sale is effected in compliance
- --------
with Section 4.16.
"Permitted Liens" means the following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the
<PAGE>
-20-
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary course
of business; provided, however, that (A) the related purchase money
-------- -------
Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any Restricted
Subsidiary of the Company other than the property and assets so acquired
and (B) the Lien securing such Indebtedness shall be created within 90 days
of such acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment, or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
<PAGE>
-21-
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Indebtedness of foreign Restricted
Subsidiaries of the Company incurred in reliance on clause (iii) and
(xvi) of the definition of Permitted Indebtedness;
(xiv) Liens securing Acquired Indebtedness incurred in reliance on
clause (viii) of the definition of Permitted Indebtedness;
(xv) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary with respect to obligations that do not in the
aggregate exceed $10.0 million at any one time outstanding;
(xvi) Liens on assets transferred to a Securitization Entity or on
assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction;
(xvii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries;
(xviii) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xix) Liens in favor of customs and revenue authorities connection with
the importation of goods; and
(xx) Liens existing on the Issue Date, together with any Liens securing
Indebtedness incurred in reliance on clause (xiv) of the definition of
Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; provided that the Liens securing the
--------
refinancing Indebtedness shall not extend to property other than that
pledged under the Liens securing the Indebtedness being refinanced.
<PAGE>
-22-
"Person" means an individual, partnership, corporation, unincorporated
------
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
--------------
"Plan of Liquidation" means, with respect to any Person, a plan that
-------------------
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"Preferred Stock" of any Person means any Capital Stock of such Person
---------------
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
---------
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Principals" means Bain Capital and Sutter Hill Ventures.
----------
"Private Exchange Notes" has the meaning provided in the Registration
----------------------
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Notes in the form set forth in Section 2.15.
"Proceeds Purchase Date" has the meaning provided in Section 4.16.
----------------------
"Productive Assets" means properties or assets (including Capital Stock)
-----------------
of a kind used or usable in the businesses of the Company and its Restricted
Subsidiaries permitted by Section 4.20.
"pro forma" means, with respect to any calculation made or required to
---------
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regula-
<PAGE>
-23-
tion S-X under the Securities Act, as determined by the Board of Directors of
the Company in consultation with its independent public accountants.
"Purchase Money Note" means a promissory note of a Securitization
-------------------
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity, which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment.
"Qualified Capital Stock" means any stock that is not Disqualified
-----------------------
Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Qualified Securitization Transaction" means any transaction or series
------------------------------------
of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether now existing or
arising or acquired in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable and equipment, all contracts and contract
rights and all guarantees or other obligations in respect of such accounts
receivable and equipment, proceeds of such accounts receivable and equipment and
other assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable and equipment.
"Recapitalization" refers to those transactions contemplated by the
----------------
Recapitalization Agreement dated December 18, 1996 as amended by Amendment No.
1, dated May 16, 1997, by and among Bain Capital Fund V, L.P., Bain Capital Fund
V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and designees, if
<PAGE>
-24-
any, and Toray Industries, Inc. and Toray Industries (America) Inc., and
Shimadzu Corporation and the Company.
"Record Date" means the Record Dates specified in the Notes, whether or
-----------
not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be redeemed,
---------------
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price," when used with respect to any Note to be redeemed,
----------------
means the price fixed for such redemption pursuant to this Indenture and the
Notes.
"Reference Date" has the meaning provided in Section 4.10.
--------------
"Refinancing Indebtedness" has the meaning provided in clause (xiv) of
------------------------
the definition of Permitted Indebtedness.
"Refunding Capital Stock" has the meaning provided in Section 4.10.
-----------------------
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration Rights Agreement" means the Registration Rights Agreement
-----------------------------
dated May 15, 1997 among the Company and the Initial Purchaser for the benefit
of themselves and the Holders, as the same may be amended or modified from time
to time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
------------
"Related Party" means, with respect to Bain Capital, any Bain Related
-------------
Party and with respect to Sutter Hill Ventures, any Sutter Hill Ventures Related
Party.
"Required Premiums" has the meaning provided in clause (xiv) of the
-----------------
definition of Permitted Indebtedness.
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Payment" has the meaning provided in Section 4.10.
------------------
<PAGE>
-25-
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
--------
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
---------------------
Person which at the time of determination is not an Unrestricted Subsidiary.
"Retiring Capital Stock" has the meaning provided in Section 4.10.
----------------------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"S&P" means Standard & Poor's Ratings Services, a division of The
---
McGraw-Hill Companies, Inc. and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
------------------------------
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means, the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company
---------------------
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of Obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates the
<PAGE>
-26-
Company or any Subsidiary of the Company in any way other than pursuant to
Standard Securitization Undertakings or (iii) subjects any property or asset of
the Company or any Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings, (b) with which neither the Company nor any
Subsidiary of the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such
Subsidiary than those that might be obtained at the time from Persons that are
not Affiliates of the Company, other than fees payable in the ordinary course of
business in connection with servicing receivables of such entity, and (c) to
which neither the Company nor any Subsidiary of the Company has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Significant Subsidiary" means, as of any date of determination, for
----------------------
any Person, each Subsidiary of such Person which (i) for the most recent fiscal
year of such Person (on or prior to December 31, 1996, the fiscal period
beginning on the Issue Date and ending on the most recently completed fiscal
quarter of such Person) accounted for more than 10% of consolidated revenues or
consolidated net income of such Person or (ii) as at the end of such fiscal year
(on or prior to December 31, 1996, the fiscal period beginning on the Issue Date
and ending on the most recently completed fiscal quarter of such Person), was
the owner of more than 10% of the consolidated assets of such Person.
"Standard Securitization Undertakings" means representations,
------------------------------------
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable or equipment transaction.
"Subsidiary", with respect to any Person, means (i) any corporation of
----------
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the vot-
<PAGE>
-27-
ing interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Sutter Hill Ventures" means Sutter Hill Ventures, a California limited
--------------------
partnership and certain other investors designated by Sutter Hill Ventures.
"Sutter Hill Ventures Related Party" means (a) any stockholder or
----------------------------------
partner of Sutter Hill Ventures on the Issue Date or (b) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest which
consist of Sutter Hill Ventures and/or such other Persons referred to in the
immediately preceding clause(a).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.03.
"Total Assets" means the total consolidated assets of the Company and
------------
its Restricted Subsidiaries, as set forth on the Company's most recent
consolidated balance sheet.
"Trust Officer" means any officer of the Trustee assigned by the
-------------
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
-----------------------
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
--------
Company certifies to the Trustee that such designation complies with Section
4.10 and (y) each Subsidiary to be
<PAGE>
-28-
so designated and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any of the assets of the Company or any of
its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12 and (y) immediately before and immediately after
giving effect to such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations of, and
---------------------------
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
-----------------
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
-------------------
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
----------------------------------
Subsidiary of such Person of which all the outstanding voting securities (other
than directors' qualifying shares or an immaterial amount of shares required to
be owned by other Persons pursuant to applicable law) are owned by such
<PAGE>
-29-
Person or any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE>
-30-
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto. The Exchange Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit B hereto. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or depository rule or usage. The Company shall
approve the form of the Notes and any notation, legend or endorsement on them.
Each Note shall be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Notes"). Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A
may be issued, in the form of permanent certificated Notes in registered form,
in substantially the form set forth in Exhibit A (the "U.S. Physical Notes").
The Offshore Physical Notes and the U.S. Physical Notes are sometimes
collectively herein referred to as the
<PAGE>
-31-
"Physical Notes." Physical Notes shall initially be registered in the name of
the Depository or the nominee of such Depository and be delivered to the Trustee
as custodian for such Depository. Beneficial owners of Physical Notes, however,
may request registration of such Physical Notes in their names or the names of
their nominees.
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
-----------------------------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Notes.
If an Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $115,000,000, and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes, in each case upon written orders of the Company in the form of
an Officers' Certificate. The Officers' Certificate shall specify the amount of
Notes to be authenticated, the date on which the Notes are to be authenticated
and the aggregate principal amount of Notes outstanding on the date of
authentication, whether the Notes are to be Initial Notes or Exchange Notes, and
shall further specify the amount of such Notes to be issued as the Global Note,
Offshore Physical Notes or U.S. Physical Notes. The aggregate principal amount
of Notes outstanding at any time may not exceed $115,000,000, except as provided
in Section 2.07.
The Trustee shall not be required to authenticate Notes if the issuance
of such Notes pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities un-
<PAGE>
-32-
der the Notes and this Indenture in a manner which is not reasonably acceptable
to the Trustee.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in The City of New York) where (a) Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying
Agent") and (c) notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company, upon prior written
notice to the Trustee, may have one or more co-Registrars and one or more
additional paying agents acceptable to the Trustee. The term "Paying Agent"
includes any additional paying agent. Neither the Company nor any Affiliate may
act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee of the name and address of
any such Agent at least 30 days prior to entering into such agreement.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days notice to the Company.
<PAGE>
-33-
SECTION 2.04. Paying Agent To Hold Assets
in Trust.
---------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that it shall hold in trust for the benefit of the Holders or
the Trustee all assets it holds for the payment of principal of, or interest on,
the Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and notify the Trustee of any Default in making any
such payment. The Company at any time may require a Paying Agent to distribute
all assets held by it to the Trustee and account for any assets disbursed and
the Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no further liability
for such assets.
SECTION 2.05. Noteholder Lists.
----------------
The Trustee shall maintain the most recent list available to it of the
names and addresses of the Holders. If the Trustee is not the Registrar, the
Company shall furnish or cause the Registrar to furnish to the Trustee at least
two Business Days before each Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
Subject to the provisions of Sections 2.16 and 2.17, when Notes are
presented to the Registrar or a co-Registrar with a request from the Holder to
register the transfer of such Notes or to exchange such Notes for an equal
principal amount of Notes of other authorized denominations, the Registrar or
co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the Notes
-------- -------
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate
<PAGE>
-34-
new Notes at the Registrar's or co-Registrar's request. No service charge shall
be made to the Holder for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or transfers
pursuant to Section 2.10, 3.06, 4.15, 4.16 or 9.06, in which event the Company
shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days immediately preceding the mailing of a notice of redemption
of Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and upon its request the Trustee shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an affidavit of lost
certificate and an indemnity bond or other indemnity, sufficient in the judgment
of both the Company and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Note is replaced. The
Company may charge such Holder for its reasonable, out-of-pocket expenses in
replacing a Note, including reasonable fees and expenses of counsel. Every
replacement Note shall constitute an additional obligation of the Company.
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to it
for cancellation and those de-
<PAGE>
-35-
scribed in this Section as not outstanding. Subject to the provisions of Section
2.09, a Note does not cease to be outstanding because the Company or any of its
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives an Opinion of Counsel that the replaced Note is held by a bona
----
fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such
- ----
Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or any of its Affiliates shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Notes, of the aggregate
principal amount of such Notes so repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall
<PAGE>
-36-
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest to the Persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date fixed
by the Company for the payment of defaulted interest or the next succeeding
Business Day if such date is not a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder, as of a
recent date selected by the Company, with a copy to the Trustee, a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use a "CUSIP" number, and if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that no representation is hereby deemed to be
--------
made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed
<PAGE>
-37-
on the Notes. The Company shall promptly notify the Trustee of any change in the
CUSIP number.
SECTION 2.14. Deposit of Moneys.
-----------------
Prior to 11:00 a.m. New York City time on each Interest Payment Date and
on the Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Restrictive Legends.
-------------------
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until May 16, 1999, unless otherwise agreed by the Company and the
Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT
IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE
<PAGE>
-38-
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY
SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF
SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF
<PAGE>
-39-
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. Book-Entry Provisions for
Global Security.
-------------------------
(a) The Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall
<PAGE>
-40-
(if one or more Physical Notes are to be issued) reflect on its books and
records the date and a decrease in the principal amount of the Global Note in an
amount equal to the principal amount of the beneficial interest in the Global
Note to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
----------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note constituting
a Restricted Security, whether or not such Note bears the Private Placement
Legend, if (x) the requested transfer is after May 16, 1999 or (y) (1) in
the case of a transfer to an Institutional Accredited Investor which is not
a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered
to the Registrar a certificate substantially in the form of Exhibit C
hereto or (2) in the case of a transfer to a Non-U.S. Person, the
<PAGE>
-41-
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a beneficial
interest in the Global Note, upon receipt by the Registrar of (x) the
certificate, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on the
form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to be
transferred consist of Physical Notes
<PAGE>
-42-
which after transfer are to be evidenced by an interest in the Global Note,
upon receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Global Note in an amount equal to the principal amount of the Physical
Notes to be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section
2.17 exist or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Initial Notes or Paragraph 5 of the Exchange
<PAGE>
-43-
Notes, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01 at
least 60 days before the Redemption Date (unless the Trustee shall agree to a
shorter notice period, which agreement shall be evidenced in a writing signed on
behalf of the Trustee and shall not be unreasonably withheld), together with an
Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes. The Trustee shall agree to such
shorter period as shall be acceptable to it.
SECTION 3.02. Selection of Notes To Be
Redeemed.
------------------------
In case of a partial redemption, selection of the Notes or portions
thereof for redemption shall be made by the Trustee by lot, pro rata or in such
--- ----
manner as it shall deem appropriate and fair and in such manner as complies with
any applicable legal requirements; provided, however, that if a partial
-------- -------
redemption is made with the proceeds of an Equity Offering, selection of the
Notes or portion thereof for redemption shall be made by the Trustee only on a
pro rata basis, unless such method is otherwise prohibited. Notes may be
- --- ----
redeemed in part in multiples of $1,000 principal amount only. Notice of
redemption will be sent, by first-class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to each Holder
whose Notes are to be redeemed at the last address for such Holder then shown on
the registry books. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after any redemption date, interest
will cease to accrue on the Notes or part thereof called for redemption as long
as the company has deposited with the Paying Agent funds in satisfaction of the
redemption price pursuant to this Indenture.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause to be mailed a notice of redemption by first-
class mail, postage prepaid, to each Holder whose Notes are to be redeemed at
the last address
<PAGE>
-44-
for such Holder then shown on the registry books, with a copy to the Trustee and
any Paying Agent; provided, however, that if a partial redemption is made with
-------- -------
the proceeds of an Equity Offering, the notice of redemption must be made at
least 15 days prior to the date fixed for such redemption. At the Company's
written request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. The Trustee shall have no liability
for any error contained in any such notice unless such error was the result of
the Trustee's gross negligence or willful misconduct. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the Holder receives the notice. In any case, failure to
duly give notice by mail, or any defect in the notice, to the Holder of any Note
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of such Note or any other Note.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price plus accrued
interest, if any, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Note, a new Note or Notes in the aggregate
principal
<PAGE>
-45-
amount equal to the unredeemed portion thereof will be issued;
and
(8) if fewer than all the Notes are to be redeemed, the identification
of the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date), but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant record dates referred to in the Notes.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus
accrued interest, if any, of all Notes to be redeemed on that date. The Paying
Agent shall promptly return to the Company any U.S. Legal Tender so deposited
which is not required for that purpose, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Notes to be redeemed will cease to accrue on and after
the applicable Redemption Date, whether or not such Notes are presented for
payment.
SECTION 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder a new Note or
Notes equal in aggregate principal amount to the unredeemed portion of the Note
surrendered.
<PAGE>
-46-
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
----------------
The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate) holds on that date U.S. Legal Tender designated for and sufficient to
pay the installment in full.
The Company shall pay, to the extent such payments are lawful, interest
on overdue principal and on overdue installments of interest (without regard to
any applicable grace periods) from time to time on demand at the rate borne by
the Notes plus 2% per annum. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in this Indenture,
the Company may, to the extent it is required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five and Section 4.16, the
Company shall do or cause to be done, at its own cost and expense, all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate existence of each of its Restricted Subsidiaries in accordance
with the respective organizational documents of each such
<PAGE>
-47-
Restricted Subsidiary and the material rights (charter and statutory) and
franchises of the Company and each such Restricted Subsidiary; provided,
--------
however, that the Company shall not be required to preserve, with respect to
- -------
itself, any material right or franchise and, with respect to any of its
Restricted Subsidiaries, any such existence, material right or franchise, if the
Board of Directors of the Company shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Restricted Subsidiaries, taken as a whole.
SECTION 4.04. Payment of Taxes and Other
Claims.
--------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of it or any of its Subsidiaries; provided, however, that the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted for which adequate reserves, to the extent
required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and
Insurance.
-----------------------------
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business; provided, however, that nothing in
-------- -------
this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the good faith judgment of the Board
of Directors of the Company or the Restricted Subsidiary, as the case may be,
desirable in the conduct of their respective businesses and is not
disadvantageous in any material respect to the Holders.
<PAGE>
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(b) The Company shall provide or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the good faith judgment
of the Board of Directors of the Company, are adequate and appropriate for the
conduct of the business of the Company and its Restricted Subsidiaries in a
prudent manner, with reputable insurers or with the government of the United
States of America or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in the good faith
judgment of the Board of Directors of the Company, for companies similarly
situated in the industry.
SECTION 4.06. Compliance Certificate; Notice
of Default.
------------------------------
(a) The Company shall deliver to the Trustee, within 90 days after the
end of the Company's fiscal year, an Officers' Certificate from any of its
principal executive officer, principal financial officer, principal accounting
officer or controller stating that a review of its activities and the activities
of its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
that to the best of such Officer's knowledge the Company during such preceding
fiscal year has kept, observed, performed and fulfilled each and every covenant
in this Indenture and no Default or Event of Default occurred during year and at
the date of such certificate there is no Default or Event of Default that has
occurred and is continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event of Default and
its status with particularity. The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.
(b) The annual financial statements delivered pursuant to Section 4.08
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
<PAGE>
-49-
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 10.02, by
registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as are not in the aggregate
reasonably likely to have a material adverse effect on the financial condition
or results of operations of the Company and its Restricted Subsidiaries, taken
as a whole.
SECTION 4.08. SEC Reports.
-----------
(a) Upon consummation of the Exchange Offer and the issuance of the
Exchange Notes, the Company (at its own expense) shall file with the SEC and
shall file with the Trustee within 15 days after it files them with the SEC
copies of the quarterly and annual reports and of the information, documents,
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) to be filed pursuant to Section 13 or
15(d) of the Exchange Act (without regard to whether the Company is subject to
the requirements of such Section 13 or 15(d) of the Exchange Act); provided that
--------
prior to the consummation of the Exchange Offer and the issuance of the Exchange
Notes, the Company (at its own expense) will mail to the Trustee and Holders in
accordance with paragraph (b) of this Section 4.08 substantially the same
information that would have been required by the foregoing documents within 15
days of when any such document would otherwise have been required to be filed
with the SEC. Upon quali-
<PAGE>
-50-
fication of this Indenture under the TIA, the Company shall also comply with the
provisions of TIA ss. 314(a).
(b) At the Company's expense, the Company shall cause an annual report
if furnished by it to stockholders generally and each quarterly or other
financial report if furnished by it to stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar at the time of such mailing or
furnishing to stockholders.
(c) The Company shall provide to any Holder any information reasonably
requested by such Holder concerning the Company (including financial statements)
necessary in order to permit such Holder to sell or transfer Notes in compliance
with Rule 144A under the Securities Act. The Company shall have a reasonable
period of time to provide such Holder with any such information.
SECTION 4.09. Waiver of Stay, Extension or
Usury Laws.
----------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted
Payments.
------------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or op-
<PAGE>
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tions to purchase or acquire shares of any class of such Capital Stock, or (c)
make any Restricted Investment (each of the foregoing actions set forth in
clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto, (i)
a Default or an Event of Default shall have occurred and be continuing, (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.12, or (iii) the
aggregate amount of Restricted Payments made subsequent to the Issue Date shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date") (treating such period as a
single accounting period); plus (x) 100% of the aggregate net proceeds received
by the Company (including the fair market value of property other than cash)
from any Person (other than a Subsidiary of the Company) from the issuance and
sale subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company (including Capital Stock issued upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness); plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net proceeds (including the fair market
value of property other than cash) of any equity contribution received by the
Company from a holder of the Company's Capital Stock (excluding any net proceeds
from an Equity Offering to the extent used to redeem Notes in accordance with
the optional redemption provisions of the Notes) plus (z) 100% of the aggregate
net proceeds (including the fair market value of property other than cash) of
any (i) sale or other disposition of Restricted Investments made by the Company
and its Restricted Subsidiaries or (ii) dividend from, or the sale of the stock
of, an Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
or the consummation of any irrevocable redemption within 60 days after the date
of declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Event of Default shall have
occurred and be continuing as a consequence thereof, the acquisition of any
shares of Capital Stock of the Company (the "Retired Capital Stock"), either (i)
solely in exchange for shares of Qualified Capital Stock of the Company (the
"Refunding Capital Stock"), or
<PAGE>
-52-
(ii) if no Default or Event of Default shall have occurred and be continuing,
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company; (3) if no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof, the declaration and
payment of dividends to holders of any class or series of Designated Preferred
Stock (other than Disqualified Capital Stock) issued after the Issue Date
(including, without limitation, the declaration and payment of dividends on
Refunding Capital Stock in excess of the dividends declarable and payable
thereon pursuant to clause (2)); provided that, at the time of the issuance of
--------
such Designated Preferred Stock, the Company, after giving effect to such
issuance on a pro forma basis, would have had a Consolidated Fixed Charge
--- -----
Coverage Ratio of at least 2.0 to 1.0; (4) payments for the purpose of and in an
amount equal to the amount required to permit the Company to redeem or
repurchase its common equity or options in respect thereof, in each case in
connection with the repurchase provisions under employee stock option or stock
purchase agreements or other agreements to compensate management or other
employees; provided that such redemptions or repurchases pursuant to this clause
--------
(4) shall not exceed $5.0 million (which amount shall be increased by the amount
of any proceeds to the Company from (x) sales of Capital Stock of the Company to
management or other employees subsequent to the Issue Date in excess of such
amounts as provided a basis for a Restricted Payment pursuant to clause (iii) in
the foregoing paragraph and (y) any "key-man" life insurance policies which are
used to make such redemptions or repurchases) in the aggregate; provided,
--------
further, that the cancellation of Indebtedness owing to the Company from
- -------
management or other employees of the Company or any of its Restricted
Subsidiaries in connection with a repurchase of Capital Stock of the Company
will not be deemed to constitute a Restricted Payment under this Indenture; (5)
repurchases of Capital Stock deemed to occur upon the exercise of stock options
if such Capital Stock represents a portion of the exercise price thereof; (6) so
long as no Default or Event of Default shall have occurred and be continuing,
payments not to exceed $500,000 in the aggregate, to enable the Company to make
payments to holders of its Capital Stock in lieu of issuance of fractional
shares of its Capital Stock; (7) payments made in connection with the
application of the net proceeds of the Recapitalization; and (8) loans made in
the ordinary course of business to management or other employees to purchase
common equity of the Company and to make tax payments associated with the
receipt of cash distributions in connection with the Recapitalization. In
determining the aggregate amount
<PAGE>
-53-
of Restricted Payments made subsequent to the Issue Date in accordance with
clause (iii) of the immediately preceding paragraph, (a) amounts expended (to
the extent such expenditure is in the form of cash) pursuant to clauses (1),
(2), (4) and (6) shall be included in such calculation; provided such
--------
expenditures pursuant to clause (4) shall not be included to the extent of cash
proceeds received by the Company from any "key man" life insurance policies and
(b) amounts expended pursuant to clauses (3), (5), (7) and (8) shall be excluded
from the such calculation.
SECTION 4.11. Limitation on Transactions with
Affiliates.
-------------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates involving aggregate
consideration in excess of $1.0 million (an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are not materially less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate; provided,
--------
however, that for a transaction or series of related transactions with an
- -------
aggregate value of $2.5 million or more, at the Company's option (i) such
determination shall be made in good faith by a majority of the disinterested
members of the Board of the Directors of the Company or (ii) the Board of
Directors of the Company or any such Restricted Subsidiary party to such
Affiliate Transaction shall have received an opinion from a nationally
recognized investment banking firm that such Affiliate Transaction is on terms
not materially less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate; and provided, further, that for a transaction
-------- -------
or series of related transactions with an aggregate value of $5.0 million or
more, the Board of Directors of the Company or any such Restricted Subsidiary
party to such Affiliate Transaction shall have received an opinion from a
nationally recognized investment banking firm that such Affiliate Transaction is
on terms not materially less favorable than those that might reasonably have
been obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate.
<PAGE>
-54-
(b) The foregoing restrictions shall not apply to (i) reasonable fees
and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries; provided such transactions are not otherwise prohibited by this
--------
Indenture; (iii) transactions effected as part of a Qualified Securitization
Transaction; (iv) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) or in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on the
Issue Date; (v) Restricted Payments permitted by this Indenture; (vi) the
payment of customary annual management, consulting and advisory fees and related
expenses to the Principals and their Affiliates; (vii) payments by the Company
or any of its Restricted Subsidiaries to the Principals and their Affiliates
made pursuant to any financial advisory or financing agreement, including,
without limitation, in connection with acquisitions or divestitures which are
approved by the Board of Directors of the Company or such Restricted Subsidiary
in good faith; (viii) payments or loans to employees or consultants which are
approved by the Board of Directors of the Company in good faith; (ix) the
existence of, or the performance by the Company or any of its Restricted
Subsidiaries of its obligations under the terms of, any stockholders agreement
(including any registration rights agreement or purchase agreement related
thereto) to which it is a party as of the Issue Date and any similar agreements
which it may enter into thereafter; provided, however, that the existence of, or
-------- -------
the performance by the Company or any of its Restricted Subsidiaries of
obligations under, any future amendment to any such existing agreement or under
any similar agreement entered into after the Issue Date shall only be permitted
by this clause (ix) to the extent that the terms of any such amendment or new
agreement are not otherwise disadvantageous to the Holders of the Notes in any
material respect; (x) transactions permitted by, and complying with, the
provisions of Section 5.01; and (xi) transactions with customers, clients,
suppliers, joint venture partners or purchasers or sellers of goods or services,
in each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with the terms
of this Indenture which are fair to the Company or its Restricted Subsidiaries,
in the reason-
<PAGE>
-55-
able determination of the Board of Directors of the Company or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party.
SECTION 4.12. Limitation on Incurrence of
Additional Indebtedness.
---------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
-------- -------
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of any such Indebtedness, the Company may incur
Indebtedness if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.50 to 1.0, if the date of such incurrence is on
or prior to May 15, 1998 (subject to clause (c)(y) below), (b) 2.25 to 1.0, if
the date of such incurrence is after May 15, 1998 and on or prior to November
15, 1998 (subject to clause (c)(y) below), or (c) 2.00 to 1.00, if date of such
incurrence is after (x) November 15, 1998 or (y) an Initial Public Offering has
been consummated.
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries.
--------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) non-assignment provisions
of any contract or any lease entered into in the ordinary course of business;
(4) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person or the properties
<PAGE>
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or assets of the Person so acquired; (5) agreements existing on the Issue Date
(including, without limitation, the Bank Credit Agreement); (6) restrictions on
the transfer of assets subject to any Lien permitted under this Indenture
imposed by the holder of such Lien; (7) restrictions imposed by any agreement to
sell assets or Capital Stock permitted under this Indenture to any Person
pending the closing of such sale; (8) any agreement or instrument governing
Capital Stock of any Person that is acquired; (9) Indebtedness or other
contractual requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided that such restrictions apply only
--------
to such Securitization Entity; (10) any agreement or instrument governing
Indebtedness (whether or not outstanding) of foreign Restricted Subsidiaries of
the Company incurred in reliance on clauses (iii) and (xvi) of the definition of
Permitted Indebtedness; (11) other Indebtedness permitted to be incurred
subsequent to the Issue Date pursuant to Section 4.12; provided that any such
--------
restrictions are ordinary and customary with respect to the type of Indebtedness
being incurred (under the relevant circumstances); (12) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business; and (13) any encumbrances or restrictions
imposed by any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (1) through (12) above;
provided that such amendments, modifications, restatements, renewals increases,
- --------
supplements, refundings, replacements or refinancings are, in the good faith
judgment of the Company's Board of Directors, no more restrictive with respect
to such dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
SECTION 4.14. [Reserved]
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described in paragraph (b) below (the
"Change of Control Offer") at a purchase price equal to 101% of the principal
amount thereof plus accrued interest thereon to the date of purchase.
<PAGE>
-57-
(b) Within 30 days following the date upon which the Change of Control
occurred (the "Change of Control Date"), the Company shall send, by first-class
mail, a notice to each Holder, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn will be accepted
for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal to the unpurchased portion of the
Notes surrendered; provided that each Note purchased and each new Note
--------
issued
<PAGE>
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shall be in an original principal amount of $1,000 or integral multiples
thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price plus accrued interest, if any, of all Notes so
tendered and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any. For purposes of this Section 4.15, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Notes pursuant to a Change
of Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section 4.15, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
--------------------------
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; (iii) upon the consummation of an Asset Sale, the
Company shall apply, or cause such Restricted
<PAGE>
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Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof either (A) to prepay any Indebtedness under the Bank
Credit Agreement and effect a permanent reduction in the availability
thereunder, (B) to reinvest in Productive Assets, or (C) a combination of
prepayment (and reduction), repurchase and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). Pending the final application of any such Net
Cash Proceeds, the Company or such Restricted Subsidiary may temporarily reduce
Indebtedness under a revolving credit facility, if any, or otherwise invest such
Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or of such
Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (iii)(A), (iii)(B) or (iii)(C) of the
next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B)
or (iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that
--- ----
amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the Notes to be purchased, plus accrued interest
thereon, if any, to the date of purchase; provided, however, that if at any time
-------- -------
any non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less
than $5.0 million, the application of the Net Cash Proceeds constituting such
Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such
time as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $5.0 million, at
which time the Company or such Restricted Subsidiary shall apply all Net
<PAGE>
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Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so
deferred to make a Net Proceeds Offer (the first date the aggregate of all such
deferred Net Proceeds Offer Amounts is equal to $5.0 million or more shall be
deemed to be a "Net Proceeds Offer Trigger Date").
Notwithstanding the two immediately preceding paragraphs, the Company
and its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (i) at least 75% of the
consideration for such Asset Sale constitutes any combination of Productive
Assets, cash or Cash Equivalents and (ii) such Asset Sale is for fair market
value (as determined in good faith by the Company's Board of Directors);
provided the portion of such consideration that constitutes cash and Cash
- --------
Equivalents received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall be deemed Net Cash Proceeds subject to the provisions of the two preceding
paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
--- ----
Proceeds Offer shall remain open for a period of 20 business days or such longer
period as may be required by law. To the extent that the aggregate amount of
Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds
Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for
general corporate purposes. Upon completion of any such Net Proceeds Offer, the
Net Proceeds Offer Amount shall be reset at zero.
(b) Subject to the deferral of the Net Proceeds Offer Trigger Date
contained in the second paragraph of subsection (a) above, each notice of a Net
Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be
mailed, by first-class mail, by the Company not more than 25 days after the Net
Proceeds Offer Trigger Date to all Holders at their last registered addresses as
of a date within 15 days of the mailing of such notice, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
en-
<PAGE>
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able such Holders to tender Notes pursuant to the Net Proceeds Offer and shall
state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section 4.16
and that all Notes tendered will be accepted for payment; provided,
--------
however, that if the aggregate principal amount of Notes tendered in a Net
-------
Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis (with such adjustments
--- ----
as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 20 Business Days from the date of mailing
of notice of such Net Proceeds Offer, or such longer period as required by
law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Proceeds
Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal
<PAGE>
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to the unpurchased portion of the Notes surrendered; provided that each
--------
Note purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase
price plus accrued interest, if any, of all Notes to be purchased and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
stating the Notes or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued interest, if any, and the
Trustee shall promptly authenticate and mail to such Holders new Notes equal in
principal amount to any unpurchased portion of the Notes surrendered. Any Notes
not so accepted shall be promptly mailed by the Company to the Holder thereof.
For purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock of
Subsidiaries.
--------------------------------
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
<PAGE>
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SECTION 4.18. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom, unless
(i) in the case of Liens securing Indebtedness that is expressly subordinate or
junior in right of payment to the Notes, the Notes are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes are equally and ratably secured, except for (A)
Liens existing as of the Issue Date and any extensions, renewals or replacements
thereof; (B) Liens securing obligations under the Bank Credit Agreement; (C)
Liens securing the Notes; (D) Liens of the Company or a Wholly Owned Restricted
Subsidiary of the Company on assets of any Subsidiary of the Company; (E) Liens
securing Indebtedness which is incurred to refinance Indebtedness which has been
secured by a Lien permitted under this Indenture and which has been incurred in
accordance with the provisions of this Indenture; provided, however, that such
-------- -------
Liens (x) are no less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (y) do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so refinanced, and (F) Permitted Liens.
SECTION 4.19. Limitation on Guarantees by
Subsidiaries.
---------------------------
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, by way of the pledge of any intercompany note or otherwise, to
assume, guarantee or in any other manner become liable with respect to any
Indebtedness of the Company or any other Subsidiary (other than (A) Indebtedness
and other obligations under the Bank Credit Agreement, (B) Permitted
Indebtedness of a Restricted Subsidiary, (C) Indebtedness under Currency
Agreements in reliance on clause (vi) of the definition of Permitted
Indebtedness or (D) Interest Swap Obligations incurred in reliance on clause (v)
of the definition of Permitted Indebtedness), unless, in any such case such
Restricted Subsidiary executes and delivers a supplemental indenture to this
Indenture, providing a guarantee of payment of the Notes by such Restricted
Subsidiary (the "Guarantee").
Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms
<PAGE>
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that it shall be automatically and unconditionally released and discharged,
without any further action required on the part of the Trustee or any Holder,
upon: (i) the unconditional release of such Restricted Subsidiary from its
liability in respect of the Indebtedness in connection with which such Guarantee
was executed and delivered pursuant to the preceding paragraph; or (ii) any sale
or other disposition (by merger or otherwise) to any Person which is not a
Restricted Subsidiary of the Company, of all of the Company's Capital Stock in,
or all or substantially all of the assets of, such Restricted Subsidiary;
provided that (a) such sale or disposition of such Capital Stock or assets is
- --------
otherwise in compliance with the terms of this Indenture and (b) such
assumption, guarantee or other liability of such Restricted Subsidiary has been
released by the holders of the other Indebtedness so guaranteed.
SECTION 4.20. Conduct of Business.
-------------------
The Company and its Restricted Subsidiaries shall not engage in any
businesses a majority of whose revenues are not derived from the same or
reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which the Company and its
Restricted Subsidiaries are engaged on the Issue Date.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale
of Assets.
------------------------------
(a) The Company shall not, in a single transaction or a series of
related transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, another Person or Persons or adopt a Plan of Liquidation unless:
(1) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person (the "Surviving Entity") is a
corporation, partnership, limited liability company or trust organized and
existing under the laws of the United States, any state thereof or the
District of Columbia and such Surviving Entity shall
<PAGE>
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expressly assume all the obligations of the Company under the Notes and
this Indenture;
(2) immediately after giving effect to such transaction (on a pro
forma basis, including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company or the Surviving
Entity, as the case may be, (A) shall have a Consolidated Net Worth equal
to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction and (B) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance
with Section 4.12;
(3) immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be
incurred in connection with the transaction), no Default or Event of
Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition (and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture) complies
with the applicable provisions of this Indenture and that all conditions
precedent in this Indenture relating to such transaction have been
satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company. Notwithstanding the foregoing clauses (2) and (3), (a) any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company and (b) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction.
<PAGE>
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SECTION 5.02. Successor Corporation
Substituted.
---------------------
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with the
foregoing, the surviving entity shall succeed to, and be substituted for, and
may exercise every right and power of and shall assume all obligations of, the
Company under this Indenture and the Notes with the same effect as if such
surviving entity had been named as such and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Notes; provided that solely for purposes of
--------
computing amounts described in clause (iii) of the first paragraph of Section
4.10, any such surviving entity to the Company shall only be deemed to have
succeeded to and be substituted for the Company with respect to periods
subsequent to the effective time of such consolidation, combination, merger or
transfer of assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Notes when the same
becomes due and payable and the default continues for a period of 30 days;
or
(2) the Company fails to pay the principal on any Notes when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer); or
(3) the Company defaults in the observance or performance of any
other covenant or agreement contained in this Indenture and which default
continues for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes; or
<PAGE>
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(4) the Company fails to pay at final stated maturity (giving effect
to any extensions thereof) the principal amount of any Indebtedness of the
Company or any Restricted Subsidiary (other than a Securitization Entity)
of the Company, and such failure continues for a period of 20 days or more,
or the acceleration of the final stated maturity of any such Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured within 20
days of receipt by the Company or such Restricted Subsidiary of notice of
any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final stated
maturity or which has been accelerated, in each case with respect to which
the 20-day period described above has passed, aggregates $5.0 million or
more at any time; or
(5) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable; or
(6) the Company or any Significant Subsidiary (A) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (B) consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding under any Bankruptcy Law,
(C) consents to the appointment of a Custodian of it or for substantially
all of its property, (D) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (E) makes a general
assignment for the benefit of its creditors, or (F) takes any corporate
action to authorize or effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Subsidiary in
an involuntary case or proceeding under any Bankruptcy Law, which shall (A)
approve as properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any Significant
Subsidiary, (B) appoint a Custodian of the Company or any Significant
Subsidiary or for substantially all of its property or (C) order the
winding-up or liquidation of its affairs; and such judg-
<PAGE>
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ment, decree or order shall remain unstayed and in effect for a period of
60 consecutive days.
Any Event of Default shall not be deemed to have occurred under clause
(4) or (5) until the Trustee shall have received written notice from the Company
or any of the Holders or unless a Trust Officer shall have actual knowledge of
such Event of Default.
SECTION 6.02. Acceleration.
------------
(a) If an Event of Default (other than an Event of Default specified
in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, then the Trustee or the
Holders of at least 25% in principal amount of outstanding Notes may declare all
of the unpaid principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same shall become immediately due and payable.
(b) If an Event of Default specified in Section 6.01(6) or (7) occurs
with respect to the Company, all unpaid principal and accrued interest on the
Notes then outstanding shall ipso facto become and be immediately due and
---- -----
payable without any declaration or other act on the part of the Trustee or any
Noteholder.
(c) At any time after a declaration of acceleration with respect to
the Notes in accordance with Section 6.02(a), the Holders of a majority in
principal amount of the Notes by notice to the Trustee and the Company may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(6) or (7), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived. The holders of a majority in
principal amount of the
<PAGE>
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Notes may waive any existing Default or Event of Default under this Indenture,
and its consequences, except a default in the payment of the principal of or
interest on any Notes.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
in respect of which such judgment has been recovered. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09 and 6.07, the Holders of a majority in
principal amount of the outstanding Notes by notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of or interest on any Note as specified in clauses (1)
and (2) of Section 6.01 in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each outstanding Note affected. When a Default or Event of Default is waived, it
is cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03. However, the Trustee may refuse to
<PAGE>
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follow any direction that the Trustee reasonably believes conflicts with any law
or this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or that may involve the Trustee in personal liability;
provided that the Trustee may take any other action deemed proper by the Trustee
- --------
which is not inconsistent with such direction; and provided, further, that this
-------- -------
provision shall not affect the rights of the Trustee set forth in Section
7.01(d).
SECTION 6.06. Limitation on Suits.
-------------------
A Noteholder may not pursue any remedy with respect to this Indenture
or the Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the outstanding
Notes make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity; and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over such other
Noteholder.
SECTION 6.07. Rights of Holders To Receive
Payment.
----------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, and interest on
a Note, on or after the respective due dates expressed in such Note, or to bring
suit for the enforcement of any such payment on or after such re-
<PAGE>
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spective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified
in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest at the rate set forth in Section 4.01 and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Noteholder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Noteholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07 hereunder. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
<PAGE>
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SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money in the following order, upon presentation of the
several Notes and stamping thereon the payment, if only partially paid and upon
surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and
interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Noteholders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Notes.
SECTION 6.12. Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of
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any other right or remedy, and every remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.13. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Six or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates
<PAGE>
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and opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own grossly negligent action,
its own grossly negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
grossly negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) The Trustee may refuse to perform any duty or exercise any right
or power not expressly provided for hereunder unless it receives indemnity
reasonably satisfactory to it against any loss, liability or expense which might
be incurred by it in connection with any such performance or exercise.
(e) Whether or not herein expressly provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper
<PAGE>
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Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate, an Opinion of
Counsel or both, which shall conform to Sections 10.04 and 10.05. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly or by or through
agents or attorneys and the Trustee shall not be responsible for the
misconduct or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to
the Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney and to consult with the officers and
representatives of the Company, including the Company's accountants and
attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
<PAGE>
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(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The recitals contained herein and in the Notes shall be taken as
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use or application of the proceeds from the Notes, and it shall not be
responsible for any statement of the Company in this Indenture or the Notes
other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If an Event of Default occurs and is continuing and if it is known to
the employees of the Trustee with responsibility for the Notes, the Trustee
shall mail to each Noteholder notice of the uncured Default or Event of Default
within 90 days after such Default or Event of Default occurs. Except in the case
of a Default or an Event of Default in payment of principal of, or interest on,
any Note, including but not limited to an accelerated payment and the failure to
make payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Proceeds Purchase Date pursuant to a Net Proceeds Offer
and, except in the case of a failure to comply with Article V hereof, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Noteholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Based on an Opinion of Counsel to the Trustee if required by TIA (S)
313(a), within 60 days after each May 15 begin-
<PAGE>
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ning with May 15, 1998, the Trustee shall, to the extent that any of the events
described in TIA (S) 313(a) occurred within the previous twelve months, but not
otherwise, mail to each Noteholder a brief report dated as of such date that
complies with TIA (S) 313(a) that complies with TIA . The Trustee also shall
provide reports in form and substance which comply with TIA (S)(S) 313(b) and
(c).
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange, or upon the delisting of any such Notes.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable fees and expenses,
including out-of-pocket expenses incurred or made by it in connection with the
performance of its duties under this Indenture. Such expenses shall include the
reasonable compensation, fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any gross negligence or willful misconduct on its part arising
out of or in connection with the administration of this trust including the
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense with counsel satisfactory to the
Trustee; provided, that any settlement of a claim shall be approved in writing
--------
by the Trustee. Alternatively, the Trustee may at its option have separate
counsel of its own choosing and the Company shall pay the reasonable fees and
expenses of such counsel; provided, that the Company will not be required to pay
--------
<PAGE>
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such fees and expenses if it assumes the Trustee's defense and there is no
conflict of interest between the Company and the Trustee in connection with such
defense as reasonably determined by the Trustee. The Company need not pay for
any settlement made without its written consent which shall not be unreasonably
withheld or delayed. The Company need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
gross negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes. The Trustee's
right to receive payment of any amounts due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company (even though
the Notes may be subordinate to such other liability or indebtedness).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
-------- -------
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign upon 30 days' notice to the Company. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee and may appoint a
successor Trustee with the Company's written consent. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company
<PAGE>
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shall notify each Holder of such event and shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Notes may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall, upon payment of its charges, transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee, which must satisfy the eligibility
requirements of Section 7.10.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
--------
corporation shall be otherwise qualified and eligible under this Article Seven.
<PAGE>
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SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
-------- -------
TIA (S) 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company, as
obligor of the Notes.
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311 shall apply to the Company, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's
Obligations.
----------------------------
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segregated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered
<PAGE>
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to the Trustee for cancellation and the Company has paid all sums payable by it
hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each
Holder of the redemption of all of the Notes or (ii) all Notes have
otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, as
trust funds in trust solely for the benefit of the Holders for that
purpose, U.S. Legal Tender in such amount as is sufficient without
consideration of reinvestment of such interest, to pay principal of,
premium, if any, and interest on the outstanding Notes to maturity or
redemption; provided that the Trustee shall have been irrevocably
--------
instructed to apply such U.S. Legal Tender to the payment of said
principal, premium, if any, and interest with respect to the Notes.
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company is a
party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under
the Notes and this Indenture have been complied with. Such Opinion of
Counsel shall also state that such termination does not result in a default
under the Bank Credit Agreement (if then in effect) or any other agreement
or instrument then known to such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
<PAGE>
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After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.02. Legal Defeasance or Covenant
Defeasance.
----------------------------
(a) The Company may, at its option by Board Resolution of the Board
of Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall be deemed to have
been discharged from its obligations with respect to all outstanding Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 and the other Sections of this Indenture referred
to in (i) and (ii) below, and to have satisfied all its other obligations under
such Notes and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Notes when such payments are due, (ii) the Company's obligations with
respect to such Notes under Article Two and Section 4.02, (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (iv) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall be released from its
obligations under the covenants contained in Sections 4.10 through 4.20 and
Article Five with respect to the outstanding Notes on and after the date the
con-
<PAGE>
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ditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and
the Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3), but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby. In addition, upon the Company's exercise
under paragraph (a) hereof of the option applicable to this paragraph (c)
Sections 6.01(4) and 6.01(5) shall not constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance or Covenant
------------------------------------------
Defeasance.
----------
The following shall be the conditions to the application of
either Section 8.02(b) or 8.02(c) to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, U.S. Legal Tender or U.S.
Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of and interest
on the Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal or
installment of principal of or interest on the Notes; provided that
the Trustee shall have received an irrevocable written order from the
Company instructing the Trustee to apply such U.S. Legal Tender or
the proceeds of such U.S. Government Obligations to said payments
with respect to the Notes;
<PAGE>
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(b) in the case of an election under Section 8.02(b) hereof
unless all Notes not theretofore delivered to the Trustee for
cancellation (i) have become due and payable, (ii) will become due
and payable on the Maturity Date within one year, or (iii) are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.02(c)
hereof, the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default or event which with
notice or lapse of time or both would become a Default or an Event of
Default with respect to the Notes shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence);
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its
<PAGE>
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Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that (i) the trust funds will not be
subject to any rights of any holders of Indebtedness of the Company
other than the Notes, and (ii) assuming no intervening bankruptcy or
insolvency of the Company between the date of deposit and the 91st
day following the deposit and that no Holder is an insider of the
Company, after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law.
SECTION 8.04. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender
or U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Article Eight or the principal and
interest received in respect thereof.
Anything in this Article Eight to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
Company's request any U.S. Legal Tender or U. S. Government Obligations held by
it as provided
<PAGE>
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in Article Eight which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.05. Repayment to the Company.
------------------------
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; provided that the
--------
Trustee or such Paying Agent, before being required to make any payment, may at
the expense of the Company cause to be published once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein which shall be at least 30 days from the date of such publication or
mailing any unclaimed balance of such money then remaining will be repaid to the
Company. After payment to the Company, Noteholders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person.
SECTION 8.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Article
Eight until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Article
Eight; provided that if the Company has made any payment of interest on or
--------
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the U.S. Legal Tender or U.S. Government Obligations
held by the Trustee or Paying Agent.
<PAGE>
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the
Trustee, together, may amend or supplement this Indenture or the Notes without
notice to or consent of any Noteholder:
(1) to cure any ambiguity, defect or inconsistency;
provided that such amendment or supplement does not, in the opinion
--------
of the Trustee, adversely affect the rights of any Holder in any
material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional
benefit or rights to the Noteholders or that does not adversely affect
the rights of any Noteholder;
(6) to provide for issuance of the Exchange Notes and
the Private Exchange Notes, which will have terms substantially
identical in all material respects to the Initial Notes (except that
the transfer restrictions contained in the Initial Notes will be
modified or eliminated, as appropriate), and which will be treated
together with any outstanding Initial Notes, as a single issue of
securities; or
(7) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any
Noteholders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
- --------
stating that such amendment or supplement complies with the provisions of this
Section 9.01.
<PAGE>
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SECTION 9.02. With Consent of Holders.
-----------------------
The Company, when authorized by a Board Resolution, and the
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount of the outstanding Notes, may amend or
supplement this Indenture or the Notes, without notice to any other Noteholders.
The Holder or Holders of a majority in aggregate principal amount of the
outstanding Notes may waive compliance by the Company with any provision of this
Indenture or the Notes without notice to any other Noteholder. No amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, shall,
without the consent of each Holder of each Note affected thereby:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing
the time for payment of interest, including defaulted interest, on any
Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor;
(4) make any Notes payable in money other than that stated in
the Notes;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and
interest on such Holder's Note on or after the due date thereof or to
bring suit to enforce such payment, permitting holders of a majority in
principal amount of Notes to waive Defaults or Events of Default, other
than ones with respect to the payment of principal of or interest on
the Notes, or relating to certain amendments of this Indenture;
(6) amend, modify or change in any material respect the
obligation of the Company to make or consummate a Change of Control
Offer in the event of a Change of Control or make and consummate a
Net Proceeds Offer in respect of any Asset Sale that has been
consummated or modify any of the provisions or definitions with
respect
<PAGE>
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thereto after a Change of Control has occurred or the subject Asset
Sale has been consummated; or
(7) modify the ranking of the Notes to adversely affect the
Holders in any material respect.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not
<PAGE>
-90-
such Persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Noteholder, unless it makes a change described in any of
clauses (1) through (7) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Note who has consented to
it and every subsequent Holder of a Note or portion of a Note that evidences the
same debt as the consenting Holder's Note.
SECTION 9.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a
Note, the Company may direct the Trustee to require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Company so determines, the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms. Any such
notation or exchange shall be made at the sole cost and expense of the Company.
SECTION 9.06. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided that the Trustee may, but
--------
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be
<PAGE>
-91-
included in this Indenture by the TIA, the required provision shall control.
SECTION 10.02. Notices.
-------
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Company:
Therma-Wave, Inc.
1250 Reliance Way
Fremont California 94539
Facsimile No.: (510) 490-0843
Attn: Chief Financial Officer
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Facsimile No.: (212) 858-2952
Attention: Corporate Trust Department
Each of the Company and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
faxed; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communica-
<PAGE>
-92-
tion is mailed in the manner provided above, it is duly given, whether or not
the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA ss. 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions
----------------------------------------
Precedent.
---------
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent to be performed by the
Company, if any, provided for in this Indenture relating to the
proposed action have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
<PAGE>
-93-
(3) statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee, Paying Agent,
Registrar.
-------------------------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Noteholders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 10.09. No Adverse Interpretation of
Other Agreements.
----------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
<PAGE>
-94-
SECTION 10.10. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as such,
of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Noteholder by accepting a Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the Notes.
SECTION 10.11. Successors.
----------
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 10.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 10.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
<PAGE>
-95-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
Issuer:
THERMA-WAVE, INC.
By: /s/ [SIGNATURE APPEARS HERE]
------------------------------
Name:
Title:
Trustee:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: /s/ Luis Perez
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
---------
CUSIP No.:
THERMA-WAVE, INC.
10.625% SENIOR NOTE DUE 2004
No. $
THERMA-WAVE, INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of
Dollars, on May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
THERMA-WAVE, INC.
By:
-----------------------
Name:
Title:
By:
------------------------
Name:
Dated: May 16, 1997 Title:
Certificate of Authentication.
This is one of the 10.625% Senior Notes due 2004 referred to in the
within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: May 16, 1997 By:
-------------------------
Authorized Signatory
A-1
<PAGE>
(REVERSE OF SECURITY)
10.625% SENIOR NOTE DUE 2004
1. Interest. THERMA-WAVE, INC., a Delaware corporation (the
--------
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from May 16, 1997. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing November 15, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank &
--------------------------
Trust Company, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
---------
dated as of May 15, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 10.625% Senior Notes due 2004 (the "Initial Notes"). The Notes
are limited in aggregate principal amount to $115,000,000. The Notes include the
Initial Notes and the Exchange Notes, as defined below, issued in exchange for
the Initial Notes pursuant to the Indenture. The Initial Notes and
A-2
<PAGE>
the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company.
5. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement among the Company and the Holders of the Initial Notes, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's Series
B 10.625% Senior Notes due 2004 (the "Exchange Notes"), which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respects to the Initial Notes. The Holders of the
Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
6. Redemption.
----------
(a) Optional Redemption. The Notes will be redeemable, at the
-------------------
Company's option, in whole at any time or in part from time to time, on and
after May 15, 2001, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 15 of the
year set forth below, plus, in each case, accrued interest to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001................................................... 105.313%
2002................................................... 102.656
2003................................................... 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. At any time, or from
-----------------------------------------
time to time, on or prior to May 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Equity Offerings to redeem up to 40%
(provided that such percentage shall decrease to 35% if an Initial Public
--------
Offering has not been consummated on or prior to November 15, 1998 and any other
Notes previously redeemed pursuant to this provision shall be included in
determining such percentage) of
A-3
<PAGE>
the aggregate principal amount of Notes originally issued at a redemption price
equal to 110.625% of the principal amount thereof plus accrued interest to the
date of redemption; provided that at least $69.0 million aggregate principal
amount of Notes remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 120 days after
the consummation of any such Equity Offering; provided that in the case of an
--------
Initial Public Offering, the Company shall first comply with the provisions set
forth below in paragraph (c).
(c) Mandatory Redemption Following Initial Public Offering. If the
------------------------------------------------------
Company consummates an Initial Public Offering prior to May 15, 2000, the
Company shall apply the Net Cash Proceeds relating to such Initial Public
Offering to make an offer to purchase on a date not less than 30 nor more than
45 days following the consummation of the Initial Public Offering (such
consummation date to be determined without regard to any over-allotment option
granted by the Company to underwriters) from all Holders on a pro rata basis
--- ----
that amount of Notes equal to the Net Cash Proceeds at a price equal to 110.625%
of the aggregate principal amount of Notes to be repurchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
-------- -------
that the aggregate amount of Net Cash Proceeds required to be applied pursuant
to this provision shall be reduced dollar for dollar (i) to the extent such Net
Cash Proceeds are used to prepay indebtedness under the Bank Credit Agreement
and effect a permanent reduction in the availability thereunder and (ii) by the
aggregate amount of Net Cash Proceeds of one or more Equity Offerings
consummated prior to the consummation of the Initial Public Offering to the
extent used to redeem Notes as set forth under paragraph (b) above; and
provided, further, that notwithstanding the foregoing, the Company shall not be
- -------- -------
required pursuant to this provision to redeem an aggregate principal amount of
Notes in excess of 40% of the aggregate principal amount of Notes originally
issued (or 35% if the Initial Public Offering is consummated on or after
November 15, 1998), less the aggregate principal amount of Notes previously
redeemed pursuant to the terms set forth above under paragraph (b) above.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60days before the Redemption Date to each Holder
of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Re-
A-4
<PAGE>
demption Date, then, unless the Company defaults in the payment of such
Redemption Price plus accrued interest, if any, the Notes called for redemption
will cease to bear interest from and after such Redemption Date and the only
right of the Holders of such Notes will be to receive payment of the Redemption
Price plus accrued interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at
-----------------------------------------
any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions,
-----------------------------
the Indenture or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the
A-5
<PAGE>
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
A-6
<PAGE>
18. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The Laws of the State of New York shall govern
-------------
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Therma-Wave, Inc., 1250 Reliance Way,
Fremont, California 94539, Attn: Chief Financial Officer.
A-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Signed:
--------------------------------- -----------------------
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:
-----------------------------------------
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) May 16, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
[Check One]
---------
(1) to the Company or a subsidiary thereof; or
--
(2) pursuant to and in compliance with Rule 144A under the Securities Act;
--
or
A-8
<PAGE>
(3) to an institutional "accredited investor" (as defined in Rule
-- 501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) outside the United states to a "foreign person" in compliance with
-- Rule 904 of Regulation S under the Securities Act; or
(5) pursuant to the exemption from registration provided by Rule 144 under
-- the Securities Act; or
(6) pursuant to an effective registration statement under the Securities
-- Act; or
(7) pursuant to another available exemption from the registration
-- requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
--------
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
----------------------- ------------------------------
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:.
----------------------------------------------------
A-9
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
------------------------- -----------------------------
NOTICE: To be executed by
an executive officer
A-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
--------------------------
Dated:
--------------------------- -----------------------------------
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement or
any change whatsoever and be
guaranteed by the endorser's bank or
broker.
Signature Guarantee:
----------------------------------------
A-11
<PAGE>
EXHIBIT B
---------
CUSIP No.:
THERMA-WAVE, INC.
SERIES B 10.625% SENIOR NOTE DUE 2004
No. $
THERMA-WAVE, INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
THERMA-WAVE, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
Dated: , 199
Certificate of Authentication
This is one of the Series B 10.625% Senior Notes due 2004 referred to
in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: , 1997 By:
------------------------
Authorized Signatory
B-1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 10.625% SENIOR NOTE DUE 2004
1. Interest. THERMA-WAVE, INC., a Delaware corporation (the
--------
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from May 16, 1997. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing November 15, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
--------------------------
Company, a New York banking corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of May 15, 1997 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Exchange Notes of the Company
designated as its Series B 10.625% Senior Notes due 2004 (the "Exchange Notes").
The Notes are limited in aggregate principal amount to $115,000,000. The Notes
include the Initial Notes (the 10.625% Senior Notes due 2004) and the Exchange
Notes, issued in exchange for the Initial Notes pursuant to the Indenture.
B-2
<PAGE>
The Initial Notes and the Exchange Notes are treated as a single class of
securities under the Indenture. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are general unsecured obligations of the Company.
5. Redemption.
----------
(a) Optional Redemption. The Notes will be redeemable, at the
-------------------
Company's option, in whole at any time or in part from time to time, on and
after May 15, 2001, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 15 of the
year set forth below, plus, in each case, accrued interest to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001....................................... 105.313%
2002....................................... 102.656
2003....................................... 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. At any time, or from
-----------------------------------------
time to time, on or prior to may 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Equity Offerings to redeem up to 40%
(provided that such percentage shall decrease to 35% if an Initial Public
Offering has not been consummated on or prior to November 15, 1998 and any other
Notes previously redeemed pursuant to this provision shall be included in
determining such percentage) of the aggregate principal amount of Notes
originally issued at a redemption price equal to 110.625% of the principal
amount thereof plus accrued interest to the date of redemption; provided that at
least $69.0 million aggregate principal amount of Notes remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Company shall make such
redemption not more than 120 days after the consummation of any such Equity
Offering; provided that in the case of an Initial Public Offering, the Company
--------
shall first comply with the provisions set forth below in paragraph (c).
B-3
<PAGE>
(c) Mandatory Redemption Following Initial Public Offering. If the
------------------------------------------------------
Company consummates an Initial Public Offering prior to May 15, 2000, the
Company shall apply the Net Cash Proceeds relating to such Initial Public
Offering to make an offer to purchase on a date not less than 30 nor more than
45 days following the consummation of the Initial Public Offering (such
consummation date to be determined without regard to any over-allotment option
granted by the Company to underwriters) from all Holders on a pro rata basis
--- ----
that amount of Notes equal to the Net Cash Proceeds at a price equal to 110.625%
of the aggregate principal amount of Notes to be repurchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
-------- -------
that the aggregate amount of Net Cash Proceeds required to be applied pursuant
to this provision shall be reduced dollar for dollar (i) to the extent such Net
Cash Proceeds are used to prepay indebtedness under the Bank Credit Agreement
and effect a permanent reduction in the availability thereunder and (ii) by the
aggregate amount of Net Cash Proceeds of one or more Equity Offerings
consummated prior to the consummation of the Initial Public Offering to the
extent used to redeem Notes as set forth under paragraph (b) above; and
provided, further, that notwithstanding the foregoing, the Company shall not be
- -------- -------
required pursuant to this provision to redeem an aggregate principal amount of
Notes in excess of 40% of the aggregate principal amount of Notes originally
issued (or 35% if the Initial Public Offering is consummated on or after
November 15, 1998), less the aggregate principal amount of Notes previously
redeemed pursuant to the terms set forth above under paragraph (b) above.
6. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer
B-4
<PAGE>
to purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
12. Amendment; Supplement; Waiver. Subject to certain exceptions, the
-----------------------------
Indenture or the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
B-5
<PAGE>
13. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
14. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
16. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
B-6
<PAGE>
18. Authentication. This Note shall not be valid until the Trustee or
--------------
Authenticating Agent manually signs the certificate of authentication on this
Note.
19. Governing Law. The Laws of the State of New York shall govern
-------------
this Note and the Indenture, without regard to principles of conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture. Each Holder, by accepting a Note, agrees to be bound
---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Therma-Wave, Inc., 1250 Reliance Way,
Fremont, California 94539, Attn: Chief Financial Officer.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: Signed:
------------------ ----------------------
(Sign exactly as name appears
on the other side of this
Note)
Signature Guarantee:
---------------------
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
-------------------
Dated:
------------------ -------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change
whatsoever and be guaranteed by
the endorser's bank or broker.
B-9
<PAGE>
Exhibit C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-----------, ----
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing
Window Level SC1
Re: Therma-Wave, Inc. 10.625% Senior
Notes due 2004
--------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10.625% Senior Notes due
2004 (the "Notes") of Therma-Wave, Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated May 9, 1997 relating to the Notes and such other information
as we deem necessary in order to make our investment decision. We acknowledge
that we have read and agreed to the matters stated on pages (i)-(ii) of the
Offering Memorandum and in the section entitled "Transfer Restrictions" of the
Offering Memorandum, including the restrictions on duplication and circulation
of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Notes (as described in the Offering Memorandum) and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes, we will do so only (i)
to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institu-
C-1
<PAGE>
tional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside
the United States to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Trustee (as defined in the Indenture relating to the
Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (iv) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in the
section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
------------------------
Name
Title:
C-3
<PAGE>
Exhibit D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
--------------, ----
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing
Window Level SC1
Re: Therma-Wave, Inc. (the "Company")
10.625% Senior Notes due 2004
(the "Notes")
---------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------
Authorized Signature (1)
(i) (2)
(i) (3) (i)
D-2
<PAGE>
Exhibit 4.3
CUSIP No.:
THERMA-WAVE, INC.
10.625% SENIOR NOTE DUE 2004
No. $
THERMA-WAVE, INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of
Dollars, on May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
THERMA-WAVE, INC.
By:
-----------------------
Name:
Title:
By:
------------------------
Name:
Dated: May 16, 1997 Title:
Certificate of Authentication.
This is one of the 10.625% Senior Notes due 2004 referred to in the
within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: May 16, 1997 By:
-------------------------
Authorized Signatory
1
<PAGE>
(REVERSE OF SECURITY)
10.625% SENIOR NOTE DUE 2004
1. Interest. THERMA-WAVE, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from May 16, 1997. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing November 15, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank &
Trust Company, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
dated as of May 15, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 10.625% Senior Notes due 2004 (the "Initial Notes"). The Notes
are limited in aggregate principal amount to $115,000,000. The Notes include the
Initial Notes and the Exchange Notes, as defined below, issued in exchange for
the Initial Notes pursuant to the Indenture. The Initial Notes and
2
<PAGE>
the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company.
5. Registration Rights. Pursuant to the Registration Rights
Agreement among the Company and the Holders of the Initial Notes, the Company
will be obligated to consummate an exchange offer pursuant to which the Holder
of this Note shall have the right to exchange this Note for the Company's Series
B 10.625% Senior Notes due 2004 (the "Exchange Notes"), which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respects to the Initial Notes. The Holders of the
Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
6. Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after May 15, 2001, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 15 of the
year set forth below, plus, in each case, accrued interest to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001................................................... 105.313%
2002................................................... 102.656
2003................................................... 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. At any time, or from
time to time, on or prior to May 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Equity Offerings to redeem up to 40%
(provided that such percentage shall decrease to 35% if an Initial Public
Offering has not been consummated on or prior to November 15, 1998 and any other
Notes previously redeemed pursuant to this provision shall be included in
determining such percentage) of
3
<PAGE>
the aggregate principal amount of Notes originally issued at a redemption price
equal to 110.625% of the principal amount thereof plus accrued interest to the
date of redemption; provided that at least $69.0 million aggregate principal
amount of Notes remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 120 days after
the consummation of any such Equity Offering; provided that in the case of an
Initial Public Offering, the Company shall first comply with the provisions set
forth below in paragraph (c).
(c) Mandatory Redemption Following Initial Public Offering. If the
Company consummates an Initial Public Offering prior to May 15, 2000, the
Company shall apply the Net Cash Proceeds relating to such Initial Public
Offering to make an offer to purchase on a date not less than 30 nor more than
45 days following the consummation of the Initial Public Offering (such
consummation date to be determined without regard to any over-allotment option
granted by the Company to underwriters) from all Holders on a pro rata basis
that amount of Notes equal to the Net Cash Proceeds at a price equal to 110.625%
of the aggregate principal amount of Notes to be repurchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
that the aggregate amount of Net Cash Proceeds required to be applied pursuant
to this provision shall be reduced dollar for dollar (i) to the extent such Net
Cash Proceeds are used to prepay indebtedness under the Bank Credit Agreement
and effect a permanent reduction in the availability thereunder and (ii) by the
aggregate amount of Net Cash Proceeds of one or more Equity Offerings
consummated prior to the consummation of the Initial Public Offering to the
extent used to redeem Notes as set forth under paragraph (b) above; and
provided, further, that notwithstanding the foregoing, the Company shall not be
required pursuant to this provision to redeem an aggregate principal amount of
Notes in excess of 40% of the aggregate principal amount of Notes originally
issued (or 35% if the Initial Public Offering is consummated on or after
November 15, 1998), less the aggregate principal amount of Notes previously
redeemed pursuant to the terms set forth above under paragraph (b) above.
7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60days before the Redemption Date to each Holder
of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Re-
4
<PAGE>
demption Date, then, unless the Company defaults in the payment of such
Redemption Price plus accrued interest, if any, the Notes called for redemption
will cease to bear interest from and after such Redemption Date and the only
right of the Holders of such Notes will be to receive payment of the Redemption
Price plus accrued interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at
any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the
5
<PAGE>
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or comply
with Article Five of the Indenture or make any other change that does not
adversely affect in any material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
6
<PAGE>
18. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The Laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Therma-Wave, Inc., 1250 Reliance Way,
Fremont, California 94539, Attn: Chief Financial Officer.
7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Signed:
--------------------------------- -----------------------
(Sign exactly as your name
appears on the other side
of this Note)
Signature Guarantee:
-----------------------------------------
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) May 16, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
[Check One]
---------
(1) to the Company or a subsidiary thereof; or
--
(2) pursuant to and in compliance with Rule 144A under the Securities Act;
--
or
8
<PAGE>
(3) to an institutional "accredited investor" (as defined in Rule
-- 501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
(4) outside the United states to a "foreign person" in compliance with
-- Rule 904 of Regulation S under the Securities Act; or
(5) pursuant to the exemption from registration provided by Rule 144 under
-- the Securities Act; or
(6) pursuant to an effective registration statement under the Securities
-- Act; or
(7) pursuant to another available exemption from the registration
-- requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
----------------------- ------------------------------
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:.
----------------------------------------------------
9
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
------------------------- -----------------------------
NOTICE: To be executed by
an executive officer
10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
--------------------------
Dated:
--------------------------- -----------------------------------
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement or
any change whatsoever and be
guaranteed by the endorser's bank or
broker.
Signature Guarantee:
----------------------------------------
11
<PAGE>
Exhibit 4.4
CUSIP No.:
THERMA-WAVE, INC.
SERIES B 10.625% SENIOR NOTE DUE 2004
No. $
THERMA-WAVE, INC., a Delaware corporation (the "Company," which term
includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
May 15, 2004.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
THERMA-WAVE, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
Dated: , 199
Certificate of Authentication
This is one of the Series B 10.625% Senior Notes due 2004 referred to
in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: , 1997 By:
------------------------
Authorized Signatory
1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 10.625% SENIOR NOTE DUE 2004
1. Interest. THERMA-WAVE, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from May 16, 1997. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing November 15, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company, a New York banking corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of May 15, 1997 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Exchange Notes of the Company
designated as its Series B 10.625% Senior Notes due 2004 (the "Exchange Notes").
The Notes are limited in aggregate principal amount to $115,000,000. The Notes
include the Initial Notes (the 10.625% Senior Notes due 2004) and the Exchange
Notes, issued in exchange for the Initial Notes pursuant to the Indenture.
2
<PAGE>
The Initial Notes and the Exchange Notes are treated as a single class of
securities under the Indenture. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are general unsecured obligations of the Company.
5. Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after May 15, 2001, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 15 of the
year set forth below, plus, in each case, accrued interest to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001....................................... 105.313%
2002....................................... 102.656
2003....................................... 100.000
</TABLE>
(b) Optional Redemption Upon Equity Offerings. At any time, or from
time to time, on or prior to may 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Equity Offerings to redeem up to 40%
(provided that such percentage shall decrease to 35% if an Initial Public
Offering has not been consummated on or prior to November 15, 1998 and any other
Notes previously redeemed pursuant to this provision shall be included in
determining such percentage) of the aggregate principal amount of Notes
originally issued at a redemption price equal to 110.625% of the principal
amount thereof plus accrued interest to the date of redemption; provided that at
least $69.0 million aggregate principal amount of Notes remains outstanding
immediately after any such redemption. In order to effect the foregoing
redemption with the proceeds of any Equity Offering, the Company shall make such
redemption not more than 120 days after the consummation of any such Equity
Offering; provided that in the case of an Initial Public Offering, the Company
shall first comply with the provisions set forth below in paragraph (c).
3
<PAGE>
(c) Mandatory Redemption Following Initial Public Offering. If the
Company consummates an Initial Public Offering prior to May 15, 2000, the
Company shall apply the Net Cash Proceeds relating to such Initial Public
Offering to make an offer to purchase on a date not less than 30 nor more than
45 days following the consummation of the Initial Public Offering (such
consummation date to be determined without regard to any over-allotment option
granted by the Company to underwriters) from all Holders on a pro rata basis
that amount of Notes equal to the Net Cash Proceeds at a price equal to 110.625%
of the aggregate principal amount of Notes to be repurchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
that the aggregate amount of Net Cash Proceeds required to be applied pursuant
to this provision shall be reduced dollar for dollar (i) to the extent such Net
Cash Proceeds are used to prepay indebtedness under the Bank Credit Agreement
and effect a permanent reduction in the availability thereunder and (ii) by the
aggregate amount of Net Cash Proceeds of one or more Equity Offerings
consummated prior to the consummation of the Initial Public Offering to the
extent used to redeem Notes as set forth under paragraph (b) above; and
provided, further, that notwithstanding the foregoing, the Company shall not be
required pursuant to this provision to redeem an aggregate principal amount of
Notes in excess of 40% of the aggregate principal amount of Notes originally
issued (or 35% if the Initial Public Offering is consummated on or after
November 15, 1998), less the aggregate principal amount of Notes previously
redeemed pursuant to the terms set forth above under paragraph (b) above.
6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer
4
<PAGE>
to purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
12. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
5
<PAGE>
13. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
14. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
16. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
6
<PAGE>
18. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
19. Governing Law. The Laws of the State of New York shall govern
this Note and the Indenture, without regard to principles of conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Therma-Wave, Inc., 1250 Reliance Way,
Fremont, California 94539, Attn: Chief Financial Officer.
7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: Signed:
------------------ ----------------------
(Sign exactly as name appears
on the other side of this
Note)
Signature Guarantee:
---------------------
8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
-------------------
Dated:
------------------ -------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change
whatsoever and be guaranteed by
the endorser's bank or broker.
9
<PAGE>
Exhibit 4.5
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May 15, 1997
Between
THERMA-WAVE, INC.
and
BT SECURITIES CORPORATION,
as Initial Purchaser
10.625% Senior Notes due 2004
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions............................................................. 1
2. Exchange Offer.......................................................... 5
3. Shelf Registration...................................................... 9
4. Additional Interest..................................................... 11
5. Registration Procedures................................................. 13
6. Registration Expenses................................................... 24
7. Indemnification......................................................... 26
8. Rule 144A............................................................... 30
9. Underwritten Registrations.............................................. 30
10. Miscellaneous.......................................................... 31
(a) No Inconsistent Agreements........................................ 31
(b) Adjustments Affecting Registrable Notes........................... 31
(c) Amendments and Waivers............................................ 31
(d) Notices........................................................... 32
(e) Successors and Assigns............................................ 33
(g) Counterparts...................................................... 33
(h) Headings.......................................................... 33
(i) Governing Law..................................................... 33
(j) Severability...................................................... 33
(k) Securities Held by the Company or its Affiliates.................. 33
(l) Third-Party Beneficiaries......................................... 34
(m) Entire Agreement.................................................. 34
</TABLE>
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
---------
May 15, 1997, by and among THERMA-WAVE, INC., a Delaware corporation (the
"Company") and BT SECURITIES CORPORATION, as initial purchaser (the "Initial
------- -------
Purchaser").
- ---------
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 16, 1997, between the Company and the Initial
Purchaser (the "Purchase Agreement"), which provides for the sale by the Company
------------------
to the Initial Purchaser of $115,000,000 aggregate principal amount of the
Company's 10.625% Senior Notes due 2004 (the "Notes"). In order to induce the
-----
Initial Purchaser to enter into the Purchase Agreement, the Company has agreed
to provide the registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
-------------------
Advice: See Section 5 hereof.
------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2 hereof.
-----------------
Company: See the introductory paragraphs hereto.
-------
Effectiveness Date: The 120th day after the Issue Date: provided,
------------------ --------
however, that with respect to any Shelf Registration, the Effectiveness Date
- -------
shall be the later of the 150th day after the Issue Date or the 60th day after
the Filing Date with respect thereto.
Effectiveness Period: See Section 3 hereof.
--------------------
Event Date: See Section 4 hereof.
----------
<PAGE>
-2-
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
--------------
Exchange Offer: See Section 2 hereof.
--------------
Exchange Offer Registration Statement: See Section 2 hereof.
-------------------------------------
Filing Date: (A) If no Registration Statement has been filed by the
-----------
Company pursuant to this Agreement, the 60th day after the Issue Date; provided,
--------
however, that if a Shelf Notice is given after the 50th day after the Issue
- -------
Date, then the Filing Date with respect to the Initial Shelf Registration shall
be the 15th calendar day after the date of the giving of such Shelf Notice; and
(B) in each other case (which may be applicable notwithstanding the consummation
of the Exchange Offer), the 30th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of May 15, 1997, between the
---------
Company and IBJ Schroder Bank & Trust Company, as trustee, pursuant to which the
Notes are being issued, as the same may be amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraphs hereto.
-----------------
Initial Shelf Registration: See Section 3(a) hereof.
--------------------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: May 16, 1997, the date of original issuance of the Notes.
----------
NASD: See Section 5(t) hereof.
----
Participant: See Section 7(a) hereof.
-----------
<PAGE>
-3-
Participating Broker-Dealer: See Section 2 hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, joint stock
------
company, trust, unincorporated association, union, business association, firm or
other legal entity.
Private Exchange: See Section 2 hereof.
----------------
Private Exchange Notes: See Section 2 hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act and any term sheet filed pursuant to Rule
434 under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Note upon its original issuance and at all
-----------------
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement (unless
such Note could have been tendered for exchange by the Holder thereof under
applicable law and currently prevailing interpretations of the staff of the SEC
and such Note was not tendered for exchange by the Holder thereof), (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note,
<PAGE>
-4-
as the case may be, ceases to be outstanding for purposes of the Indenture or
(iv) such Note, Exchange Note or Private Exchange Note, as the case may be, may
be resold without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Company
----------------------
that covers any of the Notes, the Exchange Notes or the Private Exchange Notes
filed with the SEC under the Securities Act, including the Prospectus,
amendments and supplements to such registration statement, including post-
effective amendments, all exhibits, and all material incorporated by reference
or deemed to be incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
------------
Shelf Registration: See Section 3(b) hereof.
------------------
Subsequent Shelf Registration: See Section 3(b) hereof.
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
<PAGE>
-5-
Trustee: The trustee under the Indenture and the trustee under any
-------
indenture (if any) governing the Exchange Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Company shall file with the SEC, no later than the Filing
Date, a Registration Statement (the "Exchange Offer Registration Statement") on
-------------------------------------
an appropriate registration form with respect to a registered offer (the
"Exchange Offer") to exchange any and all of the Registrable Notes for a like
--------------
aggregate principal amount of notes (the "Exchange Notes") of the Company that
--------------
are identical in all material respects to the Notes (other than such changes to
the Indenture or any such identical trust indenture as are necessary to comply
with any requirements of the SEC to effect or maintain the qualification thereof
under the TIA) except that the Exchange Notes shall contain no restrictive
legend thereon. The Exchange Offer shall comply with all applicable tender offer
rules and regulations under the Exchange Act and other applicable law. The
Company shall use its best efforts to (x) cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or
longer if required by applicable law) after the date that notice of the Exchange
Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to
the 45th day following the date on which the Exchange Offer Registration
Statement is declared effective by the SEC.
Each Holder that participates in the Exchange Offer will be required,
as a condition to its participation in the Exchange Offer, to represent to the
Company in writing (which may be contained in the applicable letter of
transmittal or agent's message transmitted by a book entry transfer facility)
that any Exchange Notes to be received by it will be acquired in the ordinary
course of its business, that at the time of the consummation of the Exchange
Offer such Holder will have no arrangement or understanding with any Person to
participate in the distribution of the Exchange Notes in violation of the
provisions of the Securities Act, and that such Holder is not an affiliate of
the Company within the meaning of the Securities Act.
<PAGE>
-6-
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Notes that are Private Exchange
- --------
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange
Notes held by Participating Broker-Dealers (as defined), and the Company shall
have no further obligation to register Registrable Notes (other than Private
Exchange Notes and other than in respect of any Exchange Notes as to which
clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included in the
Exchange Offer Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Holders, which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
---------------------------
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies represent the prevailing views of the
staff of the SEC. Such "Plan of Distribution" section shall also expressly
permit, to the extent permitted by applicable policies and regulations of the
SEC, the use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted by
applicable policies and regulations of the SEC, all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes in compliance with the Securities
Act.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes covered thereby; provided,
--------
however, that such period shall not exceed 180 days after such Exchange Offer
- -------
Registration Statement is declared effective (or such longer period if extended
pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period").
-----------------
Notwithstanding the foregoing, the
<PAGE>
-7-
Company shall have no obligation to keep the Exchange Offer Registration
Statement effective or to amend and supplement the Prospectus contained therein
in the event that the Company has not received written notice within 30 days
following the completion of the Exchange Offer that a participating Broker-
Dealer received Exchange Notes in the Exchange Offer.
If, prior to consummation of the Exchange Offer, any Holder holds any
Notes acquired by it that have, or that are reasonably likely to be determined
to have, the status of an unsold allotment in an initial distribution, or any
Holder is not entitled to participate in the Exchange Offer (other than due
solely to the status of such Holder as an affiliate of the Company within the
meaning of the Securities Act), the Company upon the request of any such Holder
shall simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to any such Holder, in exchange (the "Private
-------
Exchange") for such Notes held by any such Holder, a like principal amount of
- --------
notes (the "Private Exchange Notes") of the Company that are identical in all
----------------------
material respects to the Exchange Notes. The Private Exchange Notes shall be
issued pursuant to the same indenture as the Exchange Notes and bear the same
CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, the Company shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
<PAGE>
-8-
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company and
(iii) all governmental approvals shall have been obtained, which approvals the
Company deems necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such other indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
<PAGE>
-9-
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 165 days
of the Issue Date, (iii) any holder of Private Exchange Notes so requests in
writing to the Company within 60 days after the consummation of the Exchange
Offer, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act), then in the case of each of
clauses (i) to and including (iv) of this sentence, the Company shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
-----
Notice") and shall file a Shelf Registration pursuant to Section 3 hereof
- ------
(provided, that the Company shall have no obligation to deliver a Shelf Notice
or file a Shelf Registration pursuant to clause (ii) if the Exchange Offer
Registration Statement has been declared effective by the SEC and the scheduled
expiration date of the Exchange Offer is less than 195 days from the Issue Date.
3. Shelf Registration
------------------
If at any time a Shelf Notice is delivered as contemplated by Section
2(c) hereof, then:
(a) Shelf Registration. The Company shall file with the SEC a
------------------
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Company shall use its
--------------------------
reasonable best efforts to file with the SEC the Initial Shelf Registration on
or before the applicable Filing Date. The Initial Shelf Registration shall be on
Form S-1 or another appropriate form permitting registration of such Registrable
Notes for resale by Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Company
shall not permit any securities other than the Registrable Notes to be included
in the Initial Shelf Registration or any Subsequent Shelf Registration (as
defined below).
The Company shall use its reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date
<PAGE>
-10-
and to keep the Initial Shelf Registration continuously effective under the
Securities Act until the date which is two years from the Effectiveness Date,
subject to extension pursuant to the last paragraph of Section 5 hereof (the
"Effectiveness Period"), or such shorter period ending when (i) all Registrable
--------------------
Notes covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Notes covered by and not sold
under the Initial Shelf Registration or an earlier Subsequent Shelf Registration
has been declared effective under the Securities Act; provided, however, that
-------- -------
the Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the securities registered thereunder), the Company shall use its reasonable
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
----------
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
- ------------------
shall use its reasonable best efforts to cause the Subsequent Shelf Registration
to be declared effective under the Securities Act as soon as practicable after
such filing and to keep such subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration or
any Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
------------------
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the
<PAGE>
-11-
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchaser agree that the Holders
will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
-------------------
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Company has consummated or will
consummate the Exchange Offer, the Company is required to file a Shelf
Registration and such Shelf Registration is not filed on or prior to the
Filing Date applicable thereto, then, commencing on the day after such
Filing Date, Additional Interest shall accrue on the principal amount of
the Notes at a rate of 0.25% per annum for the first 90 days immediately
following each such Filing Date, and such Additional Interest rate shall
increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the relevant Effectiveness Date or (B) notwithstanding that the Company has
consummated or will consummate the Exchange Offer, the Company is required
to file a Shelf Registration and such Shelf Registration is not declared
effective by the SEC on or prior to the Effectiveness Date in respect of
such Shelf Registration, then, commencing on the day after such
Effectiveness Date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.25% per annum for the first 90 days
immediately following the day after such Effectiveness Date, and such
Additional Interest rate shall increase by an additional 0.25% per annum at
the beginning of each subsequent 90-day period; or
<PAGE>
-12-
(iii) if (A) the Company has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 45th day after the date on which the Exchange Offer
Registration Statement relating thereto was declared effective or (B) if
applicable, a Shelf Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue on the principal amount of
the Notes at a rate of 0.25% per annum for the first 90 days commencing on
the (x) 46th day after such effective date, in the case of (A) above, or
(y) the day such Shelf Registration ceases to be effective in the case of
(B) above, and such Additional Interest rate shall increase by an
additional 0.25% per annum at the beginning of each such subsequent 90-day
period (it being understood and agreed that, notwithstanding any provision
to the contrary, so long as any Note which is the subject of the Shelf
Notice is then covered by an effective Shelf Registration Statement, no
Additional Interest shall accrue on such Note);
provided, however, that the Additional Interest rate on the Notes may not exceed
- -------- -------
at any one time in the aggregate 1.0% per annum; provided, further, however,
-------- ------- -------
that (1) upon the filing of the applicable Exchange Offer Registration Statement
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes validly tendered (in
the case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within three business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
----------
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each April 15 and October 15 (to the
holders of record on the April 1 and October 1 immediately preceding such
dates), commencing with the first
<PAGE>
-13-
such date occurring after any such Additional Interest commences to accrue. The
amount of Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Registrable Notes,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of which
is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder the Company
shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such filing is pursuant to Section
-------- -------
3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of
the Registrable Notes covered by such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each
case at least five days prior to such filing, or such later date as is
reasonable under the circumstances).
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the
<PAGE>
-14-
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
applicable provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Company
shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Effective Period or the Applicable Period,
as the case may be, relating thereto if the Company voluntarily takes any
action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker-Dealers seeking to sell Exchange
Notes not being able to sell such Registrable Notes or such Exchange Notes
during that period unless such action is required by applicable law or
permitted by this Agreement, including, without limitation, the provisions
of paragraph 5(k) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto from whom
the Company has received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but
in any event within one day), and confirm such notice in writing, (i) when
a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements
<PAGE>
-15-
and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection
with sales of the Registrable Notes or resales of Exchange Notes by
Participating Broker-Dealers the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct in all
material respects, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in or amendments or supplements to such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of
<PAGE>
-16-
any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order
at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to their respective counsel and each managing
underwriter, if any, at the sole expense of the Company, one conformed copy
of the Registration Statement or Registration Statements and each post-
effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver
<PAGE>
-17-
to each selling Holder of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their respective counsel, and the
underwriters, if any, at the sole expense of the Company, as many copies of
the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request;
and, subject to the last paragraph of this Section 5, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and
sale of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters reasonably request in writing;
provided, however, that where Exchange Notes held by Participating Broker-
-------- -------
Dealers or Registrable Notes are offered other than through an underwritten
offering, upon the request of such persons, the Company agrees to cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h), use its
best efforts to process such registrations or qualifications to
effectiveness, keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the
<PAGE>
-18-
Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
-------- -------
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject them to general service
of process in any such jurisdiction where it is not then so subject or (C)
subject themselves to taxation in excess of a nominal dollar amount in any
such jurisdiction where they are not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to
enable the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Notes, except as may
be required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file with the
SEC, at the sole expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
<PAGE>
-19-
thereafter delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company shall not
be required to amend or supplement a Registration Statement, any related
Prospectus or any document incorporated therein by reference, in the event
that, and for a period not to exceed an aggregate of 45 days in any
calendar year if, (i) an event occurs and is continuing as a result of
which the Shelf Registration would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (ii) (a) the
Company determines in its good faith judgment that the disclosure of such
event at such time would have a material adverse effect on the business,
operations or prospects of the Company or (b) the disclosure otherwise
relates to a pending material business transaction that has not yet been
publicly disclosed.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
(m) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes in form and substance reasonably satisfactory to the
Company and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company
(including any acquired business, properties or entity, if applicable) and
the Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each
<PAGE>
-20-
case, as are customarily made by issuers to underwriters in underwritten
offerings of debt securities similar to the Notes, and confirm the same in
writing if and when requested in form and substance reasonably satisfactory
to the Company; (ii) obtain the written opinions of counsel to the Company
and written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions
reasonably requested in underwritten offerings and such other matters as
may be reasonably requested by the managing underwriter or underwriters;
(iii) use its best efforts to obtain "cold comfort" letters and updates
thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent auditors of the
Company(and, if necessary, any other independent auditors of the Company or
of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
sellers and underwriters, if any, than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents, if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes,
<PAGE>
-21-
if any, and any attorney, accountant or other agent retained by any such
selling Holder or each such Participating Broker-Dealer, as the case may
be, or underwriter (collectively, the "Inspectors"), at the offices where
----------
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and instruments of the
Company(collectively, the "Records") as shall be reasonably necessary to
-------
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company to supply all
information reasonably requested by any such Inspector in connection with
such Registration Statement and Prospectus. Each Inspector shall agree in
writing that it will keep the Records confidential and that it will not
disclose any of the Records that the Company determines, in good faith, to
be confidential and notifies the Inspectors in writing are confidential
unless (i) the disclosure of such Records is necessary to avoid or correct
a material misstatement or material omission in such Registration Statement
or Prospectus, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is necessary or advisable, in the opinion of
counsel for any Inspector, in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to, or involving this
Agreement or the Purchase Agreement, or any transactions contemplated
hereby or thereby or arising hereunder or thereunder, or (iv) the
information in such Records has been made generally available to the
public; provided, however, that prior notice shall be provided as soon as
-------- -------
practicable to the Company of the potential disclosure of any information
by such Inspector pursuant to clauses (i), (ii) or (iii) of this sentence
to permit the Company to obtain a protective order (or waive the provisions
of this paragraph (n)) and that such Inspector shall take such actions as
are reasonably necessary to protect the confidentiality of such information
(if practicable) to the extent such action is otherwise not inconsistent
with, an impairment of or in derogation of the rights and interests of the
Holder or any Inspector. Each selling Holder of such Registrable Notes and
each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such
informa-
<PAGE>
-22-
tion is generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at the Company's sole
expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(p) Make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 60 days after the end of any fiscal quarter
(or 120 days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Notes are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may
<PAGE>
-23-
be, and the related indenture constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with its respective terms, subject to customary exceptions and
qualifications.
(r) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
----
(t) Use its best efforts to take all other steps reasonably necessary
to effect the registration of the Exchange Notes and/or Registrable Notes
covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading and to promptly notify the Company following any sale
or other transfer of Registrable Notes covered by the Shelf Registration, which
notice shall specify the amount of securities involved and the market, if any,
on which such sale or transfer occurred.
<PAGE>
-24-
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to the Company and such Holder, to the effect
that the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
------
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event that the Company shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice; provided, however, nothing in this paragraph shall be
-------- -------
construed to mean that the Company is required to keep a Registration Statement
effective at a time when the Registrable Notes covered thereby may be sold
without restriction under Rule 144.
6. Registration Expenses
---------------------
<PAGE>
-25-
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and reasonable fees and disbursements of one special
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company desires such insurance, (vii) fees and
expenses of all other Persons retained by the Company, (viii) internal expenses
of the Company(including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any annual audit, (x) any fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, inden-
<PAGE>
-26-
tures and any other documents necessary in order to comply with this Agreement.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers, directors, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
-----------
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the case of the Prospectus in light of the
circumstances under which they were made, not misleading, except (i) insofar as
------
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Company
in writing by such Participant expressly for use therein and (ii) with respect
to any preliminary Prospectus, to the extent such losses, claims, damages or
liabilities arise solely from the fact that a Participant sold securities to a
person to whom there was not sent or given, on or prior to the written
confirmation of such sale, a copy of the Final Prospectus, as amended and
supplemented, if (A) the Company shall have previously furnished copies thereof
to such Participant in accordance with this Agreement and (B) the final
Prospectus, as amended or supplemented, would have corrected any such untrue
statement or omission.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, officers who sign the Registration
Statement and each Person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
(but on a several, and not joint, basis) as
<PAGE>
-27-
the foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Persons against whom such indemnity may be sought (the "Indemnifying
------------
Persons") in writing, and the Indemnifying Persons, upon request of the
- -------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
-------- -------
Persons shall not relieve any of them of any obligation or liability which any
of them may have hereunder or otherwise. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless (i)
the Indemnifying Persons and the Indemnified Person shall have mutually agreed
to the contrary, (ii) the Indemnifying Persons shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both any Indemnifying Person and the Indemnified
Person or any affiliate thereof and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Persons shall not, in connection with such
proceeding or separate but substantially similar related proceedings in the same
jurisdiction arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing
<PAGE>
-28-
by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and shall be reasonably acceptable
to the Company, and any such separate firm for the Company, its directors,
officers and such control Persons of the Company shall be designated in writing
by the Company and shall be reasonably acceptable to the Holders holding a
majority in interest of Registrable Notes and Exchange Notes.
The Indemnifying Persons shall not be liable for any settlement of any
proceeding effected without its prior written consent (which consent shall not
be unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other hand from the
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or
<PAGE>
-29-
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Participants
on the other hand shall be deemed to be in the same proportion as the total
proceeds from the offering (net of discounts and commissions but before
deducting expenses) of the Notes received by the Company bears to the total
proceeds received by such Participant from the sale of Registrable Notes or
Exchange Notes, as the case may be, in each case as set forth in the table on
the cover page of the Offering Memorandum in respect of the sale of the Notes.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such Participant or such
other Indemnified Person, as the case may be, on the other hand, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
<PAGE>
-30-
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Company, its directors, officers, employees or agents or any person
controlling the Company, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rule 144A
---------
The Company covenants and agrees that it will file the reports
required to be filed by them under the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act and,
if at any time the Company is not required to file such reports, the Company
will, upon the request of any Holder or beneficial owner of Registrable Notes,
make available in a reasonable period of time such information necessary to
permit sales pursuant to Rule 144A under the Securities Act. The Company further
covenants and agrees, for so long as any Registrable Notes remain outstanding,
that they will take such further reasonable action as any Holder of Registrable
Notes may reasonably request, all to the extent required from time to time to
enable such holder to sell Registrable Notes without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144A
under the Securities Act, as such Rules may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
<PAGE>
-31-
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements. The Company has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to any Registration
Statement.
(b) Adjustments Affecting Registrable Notes. The Company shall not,
---------------------------------------
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(c) may not be amended,
- -------- -------
modified or supplemented without the prior written consent of each Holder and
each Par-
<PAGE>
-32-
ticipating Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be,
disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications (including, without
-------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture.
(ii) if to the Company, at the address as follows:
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Facsimile No.: (510) 490-0843
Attention: Chief Financial Officer
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and
<PAGE>
-33-
assigns of each of the parties hereto, the Holders and the Participating
Broker-Dealers; provided, however, that this Agreement shall not inure to the
-------- -------
benefit of or be binding upon a successor or assign of a Holder or Participating
Broker-Dealer unless and to the extent such successor or assign holds
Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company or its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third-
<PAGE>
-34-
party beneficiaries of this Agreement, and this Agreement may be enforced by
such Persons.
(1) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and the Company on the other hand, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
Don't know what info will be provided by Participants.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THERMA-WAVE, INC.
By: /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Name:
Title: PRESIDENT & CEO
The foregoing Agreement is
hereby confirmed and ac-
cepted as of the date first
above written.
BT SECURITIES CORPORATION,
as Initial Purchaser
By: /s/ Daniel D. McCready
--------------------------
Name: DANIEL D. MCCREADY
Title: VICE PRESIDENT
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and Allan Rosencwaig ("Executive").
------- ---------
The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
---------------
will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, as amended on
January 24, 1996, between Executive and the Company (the "Prior Agreement").
---------------
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 6 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the
Chairman of the Board, President and Chief Executive Officer of the Company and
shall have the normal duties, responsibilities and authority of the Chairman of
the Board, President and Chief Executive Officer, subject to the overall
direction and authority of the Company's board of directors (the "Board").
-----
(b) Executive shall report to the Board, and Executive shall devote
his best efforts and his full business time and attention to the business and
affairs of the Company and its Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
<PAGE>
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
at least $400,000 per annum, subject to review by the Board on an annual basis
(the "Base Salary"), which salary shall be payable in regular installments in
-----------
accordance with the Company's general payroll practices and shall be subject to
customary withholding. Beginning on January 1, 1998, the Base Salary shall be
adjusted annually by an amount which, at a minimum, reflects comparable
adjustments in the seventy-fifth percentile of the Radford Survey, as approved
by the Board of Directors. In addition, during the Employment Period, Executive
shall be entitled to the fringe benefits listed on Exhibit A attached hereto and
---------
(to the extent not listed on Exhibit A) shall be entitled to participate in all
---------
of the Company's employee benefit programs for which senior executive employees
of the Company and its Subsidiaries are generally eligible (collectively, the
"Benefits").
--------
(b) Executive shall be entitled to personal time off ("PTO") on the
---
same terms and conditions as Executive is entitled to pursuant to the Therma-
Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's fiscal
years beginning with the 1998 fiscal year, Executive will be eligible to earn a
bonus (the "Bonus") based on the Company achieving certain corporate performance
-----
goals and Executive achieving certain individual goals. The target amount of
the Bonus, the corporate performance goals and the individual goals each shall
be set annually by the Board. The amount of the Bonus shall be determined in
accordance with the procedures set forth on Exhibit B attached hereto.
---------
4. Deferred Signing Bonus.
----------------------
(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
-----------------
continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
--------------
cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
------ ------
EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
- ------ ------------
less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
--------------
Bonus equal to $8,346,031.25 (the "Maximum Bonus") will be paid, and (iii)
-------------
between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid
within five days after the determination of Actual EBITDA (the date of such
payment, the "Bonus Payment
-------------
-2-
<PAGE>
Date"); provided that if (i) Executive has exercised any Management Options (as
- ----
defined in the Stock Agreement) prior to such date and issued to the Company a
promissory note or notes as payment of the exercise price therefor and (ii) any
of such promissory notes are outstanding on the Fifth Anniversary, then the
"Bonus Payment Date" shall be the date all of such notes are paid in full (it
------------------
being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth Anniversary,
a Sale of the Company occurs (as defined in the Stock Agreement), then Actual
EBITDA shall mean the sum of (i) cumulative actual EBITDA of the Company for the
period from May 16, 1997 through the end of the last completed calendar month
prior to such sale (determined as set forth in Section 4(a) above) and (ii)
projected EBITDA utilized to sell the Company for the remaining portion of the
period through the Fifth Anniversary (which will not be greater than the EBITDA
planned for such period as reflected in a performance plan for the Company
attached hereto as Exhibit C).
---------
(c) If Executive has been terminated prior to the Fifth Anniversary,
on the Bonus Payment Date, the Company will pay to Executive a Deferred Bonus
equal to the result of (x) the Deferred Bonus Executive would have received
pursuant to Section 4(a) if he were employed as of the Fifth Anniversary (the
"Target Bonus") multiplied by (y) a fraction, the numerator of which is the
------------
number of completed 3-Month Periods elapsed between May 16, 1997 and the date of
termination and the denominator of which is 20; provided that if, as of the date
of Executive's termination, the Company's cumulative actual EBITDA for the
period from April 1, 1997 through the end of the Company's then most recently
completed fiscal year (determined by reference to the Company's annual audited
financial statements) equals or exceeds the applicable cumulative EBITDA target
(the "Management Target") set forth below, then the Deferred Bonus to be paid to
-----------------
the Key Employee shall equal the result of (i) the Target Bonus multiplied by
(ii) a fraction, the numerator of which is the number of 3-Month Periods elapsed
between May 16, 1997 and the date of Executive's termination plus 10, and the
denominator of which is 20, but in any event not more than the Target Bonus.
<TABLE>
<CAPTION>
Fiscal Year Ending Management Target
------------------ -----------------
<S> <C>
3/31/98 $16.5 million
3/31/99 $42.2 million
3/31/00 $81.0 million
3/31/01 $127.3 million
3/31/02 $177.7 million
</TABLE>
(d) Notwithstanding anything to the contrary in this Section 4 if,
prior to the Bonus Payment Date, Executive (i) resigns (other than for Good
Reason where the applicable Performance Hurdle (as defined below) has been met),
(ii) is terminated for Cause, (iii) is terminated without Cause after March 31,
1998 and the applicable Performance Hurdle has not been met, (iv) Competes in
any material respect with the Company or breaches Section 7 hereof or Section 11
of the Stock Agreement, no Deferred Bonus will be paid; provided that the
Company shall notify
-3-
<PAGE>
Executive of any breach referred to in clause (iv) and, if such breach is
capable of being cured, provided Executive with 10 days to cure such breach.
(e) The "Performance Hurdles" shall equal: (i) if Executive is
-------------------
terminated after the end of the Company's fiscal year ending March 31, 1998 but
prior to the end of the second quarter of the Company's fiscal year ending March
31, 1999, EBITDA for the twelve-month period ending as of the end of the month
immediately preceding the termination of at least $6 million; (ii) if Executive
is terminated after the end of the second quarter of the Company's fiscal year
ending March 31, 1999 but prior to the end of the Company's fiscal year ending
March 31, 1999, EBITDA for the twelve-month period ending as of the end of the
month immediately preceding the termination of at least $9 million; (iii) if
Executive is terminated after the end of the Company's fiscal year ending March
31, 1999 but prior to the end of the Company's fiscal year ending March 31,
2000, EBITDA for the twenty-four month period ending as of the end of the month
immediately preceding the termination of at least $24 million; and (iv) if
Executive is terminated after the end of the Company's fiscal year ending March
31, 2000, EBITDA for the twenty-four month period ending as of the end of the
month immediately preceding the termination of at least $28 million. For
purposes of determining whether the Performance Hurdle has been achieved, the
Company's actual cumulative EBITDA will be determined by reference to the
Company's annual audited financial statements (for all completed fiscal years
within the measurement period) and monthly or other interim financial statements
provided to the Company's lenders (for interim periods).
(f) For purposes hereof, "3-Month Period" means a periods of three
--------------
months (i) beginning on May 16 and ending on the next following August 16, (ii)
beginning on August 16 and ending on the next following November 16, (iii)
beginning on November 16 and ending on the next following February 16, or (iv)
beginning on February 16 and ending on the next following May 16.
5. Board Membership. With respect to all regular elections of
----------------
directors during the Employment Period, the Company shall nominate and shall
cause Executive to be elected to serve as a member and Chairman of the Board.
Upon the termination of the Employment Period, Executive shall resign as a
director of the Company and its Subsidiaries, as the case may be.
6. Term.
----
(a) The Employment Period shall end on May 16, 2002; provided that
the Employment Period (i) shall terminate upon Executive's resignation (other
than for Good Reason) or death (ii) shall terminate upon Executive's Disability,
(iii) may be terminated by the Company at any time for Cause (as defined below)
or without Cause and (iv) may be terminated by Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 50% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
---------
Payment"), in each case until the date which is thirty months after the date of
- -------
such termination (the "Severance Period"); provided that the portion of the
----------------
Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced
-4-
<PAGE>
proportionately by the ratio of the number of days of such fiscal year not
included in the Severance Period to the total number of days in such fiscal
year. The Severance Payment will be payable at such times as such payments would
have been payable had Executive not been terminated. Notwithstanding anything in
this Agreement to the contrary, the Company shall have no obligation to pay any
part or all of the Severance Payment if at any time during the Severance Period
Executive Competes with the Company or its Subsidiaries or Executive breaches
Section 7 hereof or Section 11 of the Stock Agreement; provided that the Company
shall notify Executive of any such breach and, if such breach is capable of
being cured, provide Executive with 10 days to cure such breach. As a condition
to the Company's obligations (if any) to make the Severance Payment pursuant to
this Section 6(b), Executive will execute and deliver a general release in form
and substance satisfactory to the Company; provided that such release shall
cease to be effective if the Company fails to pay any amounts owed to Executive
pursuant to this Section 6(b).
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 6(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
(d) All of Executive's rights to Benefits and bonuses which accrue
or become payable after the termination of the Employment Period by the Company
for Cause or pursuant to subsection 5(a)(i) above shall cease upon such
termination.
(e) For purposes of this Agreement, "Disability" shall mean any
----------
physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, removal of the Executive from
office shall not be deemed for "Cause" unless:
-----
(i) such removal shall have been the result of embezzlement on
the part of the Executive; or
(ii) there has occurred a willful breach of Section 7 of this
Agreement or Section 11 of the Stock Agreement which materially and adversely
injures the Company; or
(iii) Executive has been convicted of or has pled guilty or no
contest to any felony and such conviction or plea has had or, in the reasonable
opinion of the Board may have, a material adverse effect upon the business or
operations of the Company;
(iv) Executive has interfered in any material respect in the
initiation or completion of a sale of all or substantially all of the Company's
capital stock or assets or other change in control transaction involving the
Company or a public offering of the Company's or any of its Subsidiaries' debt
or equity securities proposed by the Board; or
-5-
<PAGE>
(v) Executive has materially failed to discharge his duties,
responsibilities or obligations under this Agreement in a way which materially
and adversely injures the Company provided, however, that if any such
determination is based on a course of conduct (rather than any specific event,
transaction or omission), the Board shall not terminate this Agreement or remove
the Executive pursuant to this subparagraph unless (x) the Board shall have
notified the Executive and given him an opportunity to explain such course of
conduct to the Board and (y) the Board shall have reasonably concluded, after
any such presentation the Executive may make, that (a) it is unlikely that the
Executive will be able to properly resume and fully discharge his duties and
obligations hereunder or (b) such course of conduct has materially and adversely
affected the Company and that Executive was aware of the foregoing effect at the
time he engaged in the misconduct.
(g) For purposes of this Agreement, "Good Reason" shall mean the
-----------
occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as Chairman of the Board, President and Chief Executive
Officer of the Company, except in the event Executive is unable to or fails to
perform his normal full-time duties and responsibility with the Company as a
result of incapacity due to physical or mental illness or incapacity; (ii) a
reduction in the Base Salary as in effect on the date hereof; (iii) the
relocation of the Company's principal executive offices to a location outside
the counties of Alameda and Contra Costa or the Company's requiring Executive to
be based anywhere other than the Company's principal executive offices (but not
including required travel on the Company's business); (iv) the wrongful failure
by the Company to pay to Executive any portion of the Base Salary, Bonus or
Benefits, or to pay to Executive any portion of an installment of deferred
compensation or Benefits under any deferred compensation or benefits program of
the Company, within 45 days of the date such Base Salary, Bonus, compensation or
Benefit is due; (v) the occurrence of a Sale of the Company in which no Option
Shares (as defined therein) become vested pursuant to Section 1(c) of the Option
Agreement, dated as of the date hereof, between Executive and the Investors
named therein; or (vi) any other material breach of this Agreement by the
Company.
7. Noncompetition; Confidentiality; Nonsolicitation.
------------------------------------------------
(a) Noncompetition. Executive agrees that while he is employed by
--------------
the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean without the
------- ---------
prior written consent of the Company, providing consultive service, owning,
managing, operating, joining, controlling, participating in, or being connected
as a stockholder, partner or otherwise with any business, individual, partner,
firm corporation or other entity that (i) is in competition with the Company or
any Subsidiary or Related Entity (as defined in Section 7(d) below) to the
extent its products are similar or materially related to those of the Company or
any Subsidiary or Related Entity (including products under development by the
Company or any Subsidiary or Related Entity during the time Executive was
employed by the Company) or (ii) otherwise engages in any business in which the
Company or any Subsidiary or Related Entity is engaged or proposes to engage, in
either case as of the date of the termination of Executive's employment;
provided that "Compete" and "Competing" shall not mean being a
------- ---------
-6-
<PAGE>
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that while he is
------------------------
employed by the Company and for a period of five years thereafter, he will not,
directly or indirectly, divulge, furnish or make accessible to any party or
otherwise use or exploit any of the proprietary or confidential information or
knowledge, including without limitation, any financial information, marketing
plans, strategies, trade secrets (as defined by California Civil Code Section
3426), data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 7(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
--------------------------
designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
----------------
available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof. Notwithstanding the foregoing, Executive may, in any
litigation contesting whether a termination of Executive by the Company was for
Cause or whether a resignation by Executive was for Good Reason (or any
substantially similar question), retain copies or excerpts of Company Materials
to the extent such materials are utilized by Executive in connection with such
litigation; provided that Executive shall return all such materials immediately
upon resolution or cessation of such litigation or proceedings.
(d) Antisolicitation. Executive promises and agrees that while he
----------------
is employed by the Company, during the Severance Period, and for a period of
thirty months thereafter (the "Antisolicitation Period"), he will not induce or
-----------------------
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
--------------
either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
--------------------
period of thirty months following the date of termination of employment
hereunder, he will not directly or indirectly (i) solicit any management
employee of the Company to work for any business, individual, partnership, firm,
corporation, or other entity in competition with the business of the Company or
-7-
<PAGE>
any subsidiary of the Company or Related Entity at any time during such period
or (ii) hire any person who was a management employee of the Company or any
Subsidiary or Related Entity at any time during the last year of the Employment
Period.
(f) Disclosure to Company; Inventions as Sole Property of the
---------------------------------------------------------
Company.
- --------
(i) Executive agrees promptly to disclose to the Company any and
all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to the Effective Date of this Agreement), either
alone or jointly with others, which relate to or result from the actual or
planned business, work, research or investigations of the Company or any
subsidiary or affiliate of the Company, or which result, to any material
extent, from its use of the Company's premises or property (the work being
hereinafter collectively referred to as the "Inventions").
----------
(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue for a period of eight years beyond the
termination of his employment with the Company, but the Company shall
compensate Executive at a reasonable rate (including all expenses and loss
of income) after such termination for the time actually spent by Executive
at the Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit D is a
------------------------ ---------
complete list of all inventions, discoveries or improvements relating to the
Company's actual and current business activities (or the actual and current
business activities of any Subsidiary or affiliate of the Company) which have
been made by Executive prior to the date of the Prior Agreement and which are
not owned by the Company (or any Subsidiary or affiliate thereof). Executive
represents and warrants that such list is complete and accurate in all respects
and acknowledges and agrees that the Company owns the entire right and interest
to each of the inventions, discoveries or improvements relating to the Company's
or any Subsidiary's or affiliate's actual and current business that have been
made by Executive and not listed in Exhibit D.
---------
-8-
<PAGE>
(h) Injunction. Executive agrees that it would be difficult to
----------
measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 7, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a) through (g) of this Section 7 or any of them, the Company shall
be entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Executive without
showing or proving any actual damage sustained by the Company.
8. Other Businesses. As long as Executive is employed by the Company
----------------
or any of its Subsidiaries, Executive agrees that he will not, except with the
express written consent of the Board, become engaged in, or render services for,
any business other than the business of the Company, any of its Subsidiaries or
any corporation or partnership in which the Company or any of its Subsidiaries
have an equity interest; provided that Executive may devote a de minimis portion
----------
of his time to engaging in, or rendering services for, any such business if such
activities do not in any material way interfere with the performance by
Executive of his obligations hereunder and such activities do not in any way
materially and adversely affect the Company. Executive shall notify the Company
prior to engaging in any such activities. Nothing contained in this Section 8
shall limit the provisions of Section 7 above.
9. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
10. Survival. Section 7 and the Company's obligation to make Severance
--------
Payments, if any, shall survive and continue in full force in accordance with
its terms notwithstanding any termination of the Employment Period.
11. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
Notices to Executive:
---------------------
Allan Rosencwaig
3304 Deer Hollow Drive
Danville, CA 94506
-9-
<PAGE>
Notices to the Company:
-----------------------
Therma-Wave, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
With a copy to:
---------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way
including, without limitation, the Prior Agreement.
14. No Strict Construction. The language used in this Agreement shall
----------------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
16. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and
-10-
<PAGE>
assigns, except that Executive may not assign his rights or delegate his
obligations hereunder without the prior written consent of the Company.
17. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
18. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
19. Adjustment of Performance Hurdles and Management Targets. If the
--------------------------------------------------------
Company acquires all or substantially all of the assets or capital stock of
another business or if the Company sells a substantial portion of its assets,
the Company and the Executive will negotiate in good faith to make any
appropriate adjustments to the Performance Hurdles and Management Targets based
on the EBITDA of the acquired business or the EBITDA associated with the sold
assets (as the case may be). In addition, for purposes of determining whether
the Performance Hurdles and the Management Targets have been achieved, EBITDA
shall be determined without giving effect to any (i) extraordinary items of loss
or gain, (ii) fees payable by the Company to Bain Capital, Inc. or its
Affiliates under the Advisory Agreement, dated May 16, 1997 or otherwise, (iii)
non-cash charges incurred in connection with the transactions contemplated by
the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, the Investors named therein and the Sellers named therein or (iv) any
expenses incurred by the Company in connection with the modification of the
lease of the Company's Fremont facility in connection with the transaction
contemplated by the Recapitalization Agreement including, without limitation,
any expenses incurred by the Company as a result of any increased level of
letter of credit support required by such modification or any allowance
payments, for rent or otherwise, payable to Sobrato or his designees.
* * * * *
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
THERMA-WAVE, INC.
By:
--------------------------------
Its:
-------------------------------
-----------------------------------
ALLAN ROSENCWAIG
<PAGE>
EXHIBIT "A"
1. Full medical, dental, vision coverage for employee and family
2. PTO as per corporate policy
3. Car allowance of $1,500 per month (not W2)
4. Education allowance (courses, seminars, etc.) of up to $15,000 per year
(not W2)
5. Tax and financial advice reimbursement
6. Life insurance for $3 million
7. Disability insurance of 60% of total compensation (base salary + 50% for
bonus)
8. Expense reimbursements as per corporate policy
9. Business class air travel on corporate business
10. Salary maintenance: to be maintained as the highest paid employee at all
times
<PAGE>
EXHIBIT "D"
None
-14-
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
----------
as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and David L. Willenborg ("Executive").
------- ---------
The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
---------------
will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, between
Executive and the Company (the "Prior Agreement").
---------------
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the Vice
President, Marketing, of the Company and shall have the normal duties,
responsibilities and authority of the Vice President, Marketing, subject to the
overall direction and authority of the Company's board of directors (the
"Board") and the Company's President and/or Chief Executive Officer.
-----
(b) Executive shall report to the Company's President and/or Chief
Executive Officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
at least $168,480 per annum, subject to review by the Board and the President
and/or Chief Executive
<PAGE>
Officer (who shall consider the Radford Survey in such review) on an annual
basis (the "Base Salary"), which salary shall be payable in regular installments
-----------
in accordance with the Company's general payroll practices and shall be subject
to customary withholding. In addition, during the Employment Period, Executive
shall be entitled to participate in all of the Company's employee benefit
programs for which senior executive employees of the Company and its
Subsidiaries are generally eligible (collectively, the "Benefits").
--------
(b) Executive shall be entitled to personal time off ("PTO") on
---
substantially the same terms and conditions as Executive is entitled to
pursuant to the Therma-Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's
fiscal years beginning with the 1998 fiscal year, Executive will be eligible to
earn a bonus (the "Bonus") based on the Company achieving certain corporate
-----
performance goals and Executive achieving certain individual goals. The target
amount of the Bonus, the corporate performance goals and the individual goals
each shall be set annually by the Board and the Company's President and/or Chief
Executive Officer. The amount of the Bonus shall be determined in accordance
with the procedures set forth on Exhibit A attached hereto.
---------
4. Deferred Signing Bonus.
----------------------
(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
-----------------
continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
--------------
cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
------ ------
EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
- ------ ------------
less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
--------------
Bonus equal to $1,251,904.69 (the "Maximum Bonus") will be paid, and (iii)
-------------
between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid
within five days after the determination of Actual EBITDA (the date of such
payment, the "Bonus Payment Date"); provided that if (i) Executive has exercised
------------------
any Management Options (as defined in the Stock Agreement) prior to such date
and issued to the Company a promissory note or notes as payment of the exercise
price therefor and (ii) any of such promissory notes are outstanding on the
Fifth Anniversary, then the "Bonus Payment Date" shall be the date all of such
------------------
notes are paid in full
-2-
<PAGE>
(it being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth
Anniversary, a Sale of the Company occurs (as defined in the Stock Agreement),
then Actual EBITDA shall mean the sum of (i) cumulative actual EBITDA of the
Company for the period from May 16, 1997 through the end of the last completed
calendar month prior to such sale (determined as set forth in Section 4(a)
above) and (ii) projected EBITDA utilized to sell the Company for the remaining
portion of the period through the Fifth Anniversary (which will not be greater
than the EBITDA planned for such period as reflected in a performance plan for
the Company attached hereto as Exhibit B).
---------
5. Term.
----
(a) The Employment Period (i) shall terminate upon Executive's
resignation (other than for Good Reason) or death, (ii) shall terminate upon
Executive's Disability, (iii) may be terminated by the Company at any time for
Cause (as defined below) or without Cause and (iv) may be terminated by
Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 30% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
---------
Payment"), in each case until the date which is fifteen months after the date of
- -------
such termination (the "Severance Period"); provided that the portion of the
----------------
Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced proportionately by the
ratio of the number of days of such fiscal year not included in the Severance
Period to the total number of days in such fiscal year. The Severance Payment
will be payable at such times as such payments would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to pay any part or all of the
Severance Payment if at any time during the Severance Period Executive is in
breach of Section 6 hereof or Section 11 of the Stock Agreement. The Severance
Payment shall be reduced by fifty percent (50%) of the amount of any
compensation Executive receives in respect of any other employment during the
Severance Period. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. As a condition to the Company's obligations (if any)
to make the Severance Payment pursuant to this Section 5(b), Executive will
execute and deliver a general release in form and substance satisfactory to the
Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 5(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
(d) Except as specifically provided herein, all of Executive's
rights to Benefits and bonuses which accrue or become payable after the
termination of the Employment Period shall cease upon such termination.
-3-
<PAGE>
(e) For purposes of this Agreement, "Disability" shall mean any
----------
physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries, or (v) any other material breach of this Agreement
or the Stock Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean the
-----------
occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as a senior executive officer of the Company, except in
the event Executive is unable to or fails to perform his normal full-time duties
and responsibility with the Company as a result of incapacity due to physical or
mental illness or incapacity; (ii) a reduction in the Base Salary as in effect
on the date hereof; (iii) the relocation of the Company's principal executive
offices to a location outside the San Francisco Bay Area (which includes the
counties of San Francisco, Alameda, Santa Clara, Contra Costa, San Mateo and
Marin) or the Company's requiring Executive to be based anywhere other than the
Company's principal executive offices (but not including required travel on the
Company's business); or (iv) the wrongful failure by the Company to pay to
Executive any portion of the Base Salary, Bonus or Benefits, or to pay to
Executive any portion of an installment of deferred compensation or Benefits
under any deferred compensation or benefits program of the Company, within 45
days of the date such Base Salary, Bonus, compensation or Benefit is due.
6. Noncompetition; Confidentiality; Nonsolicitation.
------------------------------------------------
(a) Noncompetition. Executive agrees that while he is employed by
--------------
the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean, directly or
------- ---------
indirectly, without the prior written consent of the Company, providing
consultive service with or without pay, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or Related
Entity (as defined in Section 6(d) below) to the extent its products are similar
or materially related to those of the Company or any Subsidiary or Related
Entity (including products under development by the Company, or to Executive's
knowledge, by any Subsidiary or Related Entity) or (ii) otherwise engages in any
business in which the Company or any Subsidiary or Related Entity is engaged or
proposes to engage, in either case as of the date of the termination of
Executive's employment; provided that "Compete" and "Competing" shall not mean
------- ---------
-4-
<PAGE>
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that he will not at
------------------------
any time, during and/or after the term of this Agreement, directly or
indirectly, divulge, furnish or make accessible to any party or otherwise use or
exploit any of the proprietary or confidential information or knowledge,
including without limitation, any financial information, marketing plans,
strategies, trade secrets (as defined by California Civil Code Section 3426),
data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 6(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
--------------------------
designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
----------------
available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof.
(d) Antisolicitation. Executive promises and agrees that while he
----------------
is employed by the Company, during the Severance Period, and for a period of two
(2) years thereafter (the "Antisolicitation Period"), he will not induce or
-----------------------
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
--------------
either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
--------------------
period of five years following the date of termination of employment hereunder,
he will not directly or indirectly (i) solicit any employee of the Company to
work for any business, individual, partnership, firm, corporation, or other
entity in competition with the business of the Company or any subsidiary of the
Company or Related Entity at any time during such period or (ii) hire any person
who was an employee of the Company or any Subsidiary or Related Entity at any
time during the last year of the Employment Period.
-5-
<PAGE>
(f) Disclosure to Company; Inventions as Sole Property of the
---------------------------------------------------------
Company.
- -------
(i) Executive agrees promptly to disclose to the Company any
and all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to date hereof), either alone or jointly with
others, which relate to or result from the actual or anticipated business,
work, research or investigations of the Company or any subsidiary or
affiliate of the Company, or which result, to any extent, from its use of
the Company's premises or property (the work being hereinafter collectively
referred to as the "Inventions").
----------
(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue beyond the termination of his employment with
the Company, but the Company shall compensate Executive at a reasonable
rate after such termination for the time actually spent by Executive at the
Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit C is a
------------------------ ---------
complete list of all inventions, discoveries or improvements relating to the
Company's business (or the business of any Subsidiary or affiliate of the
Company) which have been made by Executive prior to the date of the Prior
Agreement and which are not owned by the Company (or any Subsidiary or affiliate
thereof). Executive represents and warrants that such list is complete and
accurate in all respects and acknowledges and agrees that the Company owns the
entire right and interest to each of the inventions, discoveries or improvements
relating to the Company's or any Subsidiary's or affiliate's business that have
been made by Executive and not listed in Exhibit C.
---------
(h) Injunction. Executive agrees that it would be difficult to
----------
measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 6, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a)
-6-
<PAGE>
through (g) of this Section 6 or any of them, the Company shall be entitled, in
addition to all other remedies it may have, to injunctions or other appropriate
orders to restrain any such breach by Executive without showing or proving any
actual damage sustained by the Company.
7. Other Businesses. As long as Executive is employed by the
----------------
Company or any of its Subsidiaries, Executive agrees that he will not, except
with the express written consent of the Board, become engaged in, or render
services for, any business other than the business of the Company, any of its
Subsidiaries or any corporation or partnership in which the Company or any of
its Subsidiaries have an equity interest.
8. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Survival. Section 6 and the Company's obligation to make
--------
Severance Payments, if any, shall survive and continue in full force in
accordance with its terms notwithstanding any termination of the Employment
Period.
10. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
-7-
<PAGE>
Notices to Executive:
--------------------
David L. Willenborg
8873 Creekside Drive
Dublin, California 94568
Notices to the Company:
-----------------------
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attention: President
With a copy to:
---------------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way
including, without limitation, the Prior Agreement.
-8-
<PAGE>
13. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
17. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THERMA-WAVE, INC.
By:
--------------------------------
Its:
--------------------------------
------------------------------------
David L. Willenborg
[Signature page to David L. Willenborg Employment Agreement]
<PAGE>
EXHIBIT "C"
None
<PAGE>
Exhibit 10.3
------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and W. Lee Smith ("Executive").
------- ---------
The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
---------------
will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, between
Executive and the Company (the "Prior Agreement").
---------------
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the Vice
President, Strategic Marketing, of the Company and shall have the normal duties,
responsibilities and authority of the Vice President, Strategic Marketing,
subject to the overall direction and authority of the Company's board of
directors (the "Board") and the Company's President and/or Chief Executive
-----
Officer.
(b) Executive shall report to the Company's President and/or Chief
Executive Officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
<PAGE>
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
at least $143,859 per annum, subject to review by the Board and the President
and/or Chief Executive Officer (who shall consider the Radford Survey in such
review) on an annual basis (the "Base Salary"), which salary shall be payable in
-----------
regular installments in accordance with the Company's general payroll practices
and shall be subject to customary withholding. In addition, during the
Employment Period, Executive shall be entitled to participate in all of the
Company's employee benefit programs for which senior executive employees of the
Company and its Subsidiaries are generally eligible (collectively, the
"Benefits").
--------
(b) Executive shall be entitled to personal time off ("PTO") on
---
substantially the same terms and conditions as Executive is entitled to pursuant
to the Therma-Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's fiscal
years beginning with the 1998 fiscal year, Executive will be eligible to earn a
bonus (the "Bonus") based on the Company achieving certain corporate performance
-----
goals and Executive achieving certain individual goals. The target amount of
the Bonus, the corporate performance goals and the individual goals each shall
be set annually by the Board and the Company's President and/or Chief Executive
Officer. The amount of the Bonus shall be determined in accordance with the
procedures set forth on Exhibit A attached hereto.
---------
4. Deferred Signing Bonus.
----------------------
(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
-----------------
continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
--------------
cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
------ ------
EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
- ------ ------------
less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
--------------
Bonus equal to $1,251,904.69 (the "Maximum Bonus") will be paid, and (iii)
-------------
between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid within
five days after the determination of Actual EBITDA (the date of such payment,
the "Bonus Payment
-------------
-2-
<PAGE>
Date"); provided that if (i) Executive has exercised any Management Options (as
- ----
defined in the Stock Agreement) prior to such date and issued to the Company a
promissory note or notes as payment of the exercise price therefor and (ii) any
of such promissory notes are outstanding on the Fifth Anniversary, then the
"Bonus Payment Date" shall be the date all of such notes are paid in full (it
------------------
being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth
Anniversary, a Sale of the Company occurs (as defined in the Stock Agreement),
then Actual EBITDA shall mean the sum of (i) cumulative actual EBITDA of the
Company for the period from May 16, 1997 through the end of the last completed
calendar month prior to such sale (determined as set forth in Section 4(a)
above) and (ii) projected EBITDA utilized to sell the Company for the remaining
portion of the period through the Fifth Anniversary (which will not be greater
than the EBITDA planned for such period as reflected in a performance plan for
the Company attached hereto as Exhibit B).
---------
5. Term.
----
(a) The Employment Period (i) shall terminate upon Executive's
resignation (other than for Good Reason) or death, (ii) shall terminate upon
Executive's Disability, (iii) may be terminated by the Company at any time for
Cause (as defined below) or without Cause and (iv) may be terminated by
Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 30% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
---------
Payment"), in each case until the date which is fifteen months after the date of
- -------
such termination (the "Severance Period"); provided that the portion of the
----------------
Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced proportionately by the
ratio of the number of days of such fiscal year not included in the Severance
Period to the total number of days in such fiscal year. The Severance Payment
will be payable at such times as such payments would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to the
contrary, the Company shall have no obligation to pay any part or all of the
Severance Payment if at any time during the Severance Period Executive is in
breach of Section 6 hereof or Section 11 of the Stock Agreement. The Severance
Payment shall be reduced by fifty percent (50%) of the amount of any
compensation Executive receives in respect of any other employment during the
Severance Period. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. As a condition to the Company's obligations (if any)
to make the Severance Payment pursuant to this Section 5(b), Executive will
execute and deliver a general release in form and substance satisfactory to the
Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 5(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
-3-
<PAGE>
(d) Except as specifically provided herein, all of Executive's rights
to Benefits and bonuses which accrue or become payable after the termination of
the Employment Period shall cease upon such termination.
(e) For purposes of this Agreement, "Disability" shall mean any
----------
physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries, or (v) any other material breach of this Agreement
or the Stock Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean the
-----------
occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as a senior executive officer of the Company, except in
the event Executive is unable to or fails to perform his normal full-time duties
and responsibility with the Company as a result of incapacity due to physical or
mental illness or incapacity; (ii) a reduction in the Base Salary as in effect
on the date hereof; (iii) the relocation of the Company's principal executive
offices to a location outside the San Francisco Bay Area (which includes the
counties of San Francisco, Alameda, Santa Clara, Contra Costa, San Mateo and
Marin) or the Company's requiring Executive to be based anywhere other than the
Company's principal executive offices (but not including required travel on the
Company's business); or (iv) the wrongful failure by the Company to pay to
Executive any portion of the Base Salary, Bonus or Benefits, or to pay to
Executive any portion of an installment of deferred compensation or Benefits
under any deferred compensation or benefits program of the Company, within 45
days of the date such Base Salary, Bonus, compensation or Benefit is due.
6. Noncompetition: Confidentiality: Nonsolicitation.
------------------------------------------------
(a) Noncompetition. Executive agrees that while he is employed by
--------------
the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean, directly or
------- ---------
indirectly, without the prior written consent of the Company, providing
consultive service with or without pay, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or Related
Entity (as defined in Section 6(d) below) to the extent its products are similar
or materially related to those of the Company or any Subsidiary or Related
-4-
<PAGE>
Entity (including products under development by the Company, or to Executive's
knowledge, by any Subsidiary or Related Entity) or (ii) otherwise engages in any
business in which the Company or any Subsidiary or Related Entity is engaged or
proposes to engage, in either case as of the date of the termination of
Executive's employment; provided that "Compete" and "Competing" shall not mean
------- ---------
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that he will not at
------------------------
any time, during and/or after the term of this Agreement, directly or
indirectly, divulge, furnish or make accessible to any party or otherwise use or
exploit any of the proprietary or confidential information or knowledge,
including without limitation, any financial information, marketing plans,
strategies, trade secrets (as defined by California Civil Code Section 3426),
data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 6(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
--------------------------
designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
----------------
available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof.
(d) Antisolicitation. Executive promises and agrees that while he
----------------
is employed by the Company, during the Severance Period, and for a period of two
(2) years thereafter (the "Antisolicitation Period"), he will not induce or
-----------------------
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
--------------
either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
--------------------
period of five years following the date of termination of employment hereunder,
he will not directly or indirectly (i) solicit any employee of the Company to
work for any business, individual, partnership, firm, corporation, or other
entity in competition with the business of the Company or any subsidiary of
-5-
<PAGE>
the Company or Related Entity at any time during such period or (ii) hire any
person who was an employee of the Company or any Subsidiary or Related Entity at
any time during the last year of the Employment Period.
(f) Disclosure to Company; Inventions as Sole Property of the
---------------------------------------------------------
Company.
-------
(i) Executive agrees promptly to disclose to the Company any
and all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to date hereof), either alone or jointly with
others, which relate to or result from the actual or anticipated business,
work, research or investigations of the Company or any subsidiary or
affiliate of the Company, or which result, to any extent, from its use of
the Company's premises or property (the work being hereinafter collectively
referred to as the "Inventions").
----------
(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue beyond the termination of his employment with
the Company, but the Company shall compensate Executive at a reasonable
rate after such termination for the time actually spent by Executive at the
Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit C is a
------------------------ ---------
complete list of all inventions, discoveries or improvements relating to the
Company's business (or the business of any Subsidiary or affiliate of the
Company) which have been made by Executive prior to the date of the Prior
Agreement and which are not owned by the Company (or any Subsidiary or affiliate
thereof). Executive represents and warrants that such list is complete and
accurate in all respects and acknowledges and agrees that the Company owns the
entire right and interest to each of the inventions, discoveries or improvements
relating to the Company's or any Subsidiary's or affiliate's business that have
been made by Executive and not listed in Exhibit C.
---------
-6-
<PAGE>
(h) Injunction. Executive agrees that it would be difficult to
----------
measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 6, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a) through (g) of this Section 6 or any of them, the Company shall
be entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Executive without
showing or proving any actual damage sustained by the Company.
7. Other Businesses. As long as Executive is employed by the
----------------
Company or any of its Subsidiaries, Executive agrees that he will not, except
with the express written consent of the Board, become engaged in, or render
services for, any business other than the business of the Company, any of its
Subsidiaries or any corporation or partnership in which the Company or any of
its Subsidiaries have an equity interest.
8. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Survival. Section 6 and the Company's obligation to make
--------
Severance Payments, if any, shall survive and continue in full force in
accordance with its terms notwithstanding any termination of the Employment
Period.
10. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
-7-
<PAGE>
Notices to Executive:
---------------------
W. Lee Smith
4660 Kingswood Drive
Danville, California 94506
Notices to the Company:
-----------------------
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attention: President
With a copy to:
---------------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
-8-
<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way including, without limitation,
the Prior Agreement.
13. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
17. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THERMA-WAVE, INC.
By:
----------------------------------
Its:
----------------------------------
--------------------------------------
W. Lee Smith
[Signature page to W. Lee Smith Employment Agreement]
<PAGE>
EXHIBIT "C"
None
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and Jon L. Opsal ("Executive").
------- ---------
The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
---------------
will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, between
Executive and the Company (the "Prior Agreement").
---------------
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in Section 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the Vice
President, Research and Development, of the Company and shall have the normal
duties, responsibilities and authority of the Vice President, Research and
Development, subject to the overall direction and authority of the Company's
board of directors (the "Board") and the Company's President and/or Chief
-----
Executive Officer.
- ------------------
(b) Executive shall report to the Company's President and/or Chief
Executive Officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
<PAGE>
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
at least $197,077 per annum, subject to review by the Board and the President
and/or Chief Executive Officer (who shall consider the Radford Survey in such
review) on an annual basis (the "Base Salary"), which salary shall be payable in
-----------
regular installments in accordance with the Company's general payroll practices
and shall be subject to customary withholding. In addition, during the
Employment Period, Executive shall be entitled to participate in all of the
Company's employee benefit programs for which senior executive employees of the
Company and its Subsidiaries are generally eligible (collectively, the
"Benefits").
--------
(b) Executive shall be entitled to personal time off ("PTO") on
---
substantially the same terms and conditions as Executive is entitled to
pursuant to the Therma-Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's fiscal
years beginning with the 1998 fiscal year, Executive will be eligible to earn a
bonus (the "Bonus") based on the Company achieving certain corporate performance
-----
goals and Executive achieving certain individual goals. The target amount of
the Bonus, the corporate performance goals and the individual goals each shall
be set annually by the Board and the Company's President and/or Chief Executive
Officer. The amount of the Bonus shall be determined in accordance with the
procedures set forth on Exhibit A attached hereto.
---------
4. Deferred Signing Bonus.
-----------------------
(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
-----------------
continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
--------------
cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
------ ------
EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
- ------ ------------
less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
--------------
Bonus equal to $1,585,745.94 (the "Maximum Bonus") will be paid, and (iii)
-------------
between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid
within five days after the determination of Actual EBITDA (the date of such
payment, the "Bonus Payment
-------------
-2-
<PAGE>
Date"); provided that if (i) Executive has exercised any Management Options (as
- ----
defined in the Stock Agreement) prior to such date and issued to the Company a
promissory note or notes as payment of the exercise price therefor and (ii) any
of such promissory notes are outstanding on the Fifth Anniversary, then the
"Bonus Payment Date" shall be the date all of such notes are paid in full (it
------------------
being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth
Anniversary, a Sale of the Company occurs (as defined in the Stock Agreement),
then Actual EBITDA shall mean the sum of (i) cumulative actual EBITDA of the
Company for the period from May 16, 1997 through the end of the last completed
calendar month prior to such sale (determined as set forth in Section 4(a)
above) and (ii) projected EBITDA utilized to sell the Company for the remaining
portion of the period through the Fifth Anniversary (which will not be greater
than the EBITDA planned for such period as reflected in a performance plan for
the Company attached hereto as Exhibit B).
---------
5. Term.
----
(a) The Employment Period (i) shall terminate upon Executive's
resignation (other than for Good Reason) or death, (ii) shall terminate upon
Executive's Disability, (iii) may be terminated by the Company at any time for
Cause (as defined below) or without Cause and (iv) may be terminated by
Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 30% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
---------
Payment"), in each case until the date which is fifteen months after the date of
- -------
such termination (the "Severance Period"); provided that the portion of the
----------------
Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced proportionately by the
ratio of the number of days of such fiscal year not included in the Severance
Period to the total number of days in such fiscal year. The Severance Payment
will be payable at such times as such payments would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to pay any part or all of the
Severance Payment if at any time during the Severance Period Executive is in
breach of Section 6 hereof or Section 11 of the Stock Agreement. The Severance
Payment shall be reduced by fifty percent (50%) of the amount of any
compensation Executive receives in respect of any other employment during the
Severance Period. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. As a condition to the Company's obligations (if any)
to make the Severance Payment pursuant to this Section 5(b), Executive will
execute and deliver a general release in form and substance satisfactory to the
Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 5(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
-3-
<PAGE>
(d) Except as specifically provided herein, all of Executive's
rights to Benefits and bonuses which accrue or become payable after the
termination of the Employment Period shall cease upon such termination.
(e) For purposes of this Agreement, "Disability" shall mean any
----------
physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries, or (v) any other material breach of this Agreement
or the Stock Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean the
-----------
occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as a senior executive officer of the Company, except in
the event Executive is unable to or fails to perform his normal full-time duties
and responsibility with the Company as a result of incapacity due to physical or
mental illness or incapacity; (ii) a reduction in the Base Salary as in effect
on the date hereof; (iii) the relocation of the Company's principal executive
offices to a location outside the San Francisco Bay Area (which includes the
counties of San Francisco, Alameda, Santa Clara, Contra Costa, San Mateo and
Marin) or the Company's requiring Executive to be based anywhere other than the
Company's principal executive offices (but not including required travel on the
Company's business); or (iv) the wrongful failure by the Company to pay to
Executive any portion of the Base Salary, Bonus or Benefits, or to pay to
Executive any portion of an installment of deferred compensation or Benefits
under any deferred compensation or benefits program of the Company, within 45
days of the date such Base Salary, Bonus, compensation or Benefit is due.
6. Noncompetition; Confidentiality; Nonsolicitation.
------------------------------------------------
(a) Noncompetition. Executive agrees that while he is employed by
--------------
the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean, directly or
------- ---------
indirectly, without the prior written consent of the Company, providing
consultive service with or without pay, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or Related
Entity (as defined in Section 6(d) below) to the extent its products are similar
or materially related to those of the Company or any Subsidiary or Related
-4-
<PAGE>
Entity (including products under development by the Company, or to Executive's
knowledge, by any Subsidiary or Related Entity) or (ii) otherwise engages in any
business in which the Company or any Subsidiary or Related Entity is engaged or
proposes to engage, in either case as of the date of the termination of
Executive's employment; provided that "Compete" and "Competing" shall not mean
------- ---------
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that he will not at
------------------------
any time, during and/or after the term of this Agreement, directly or
indirectly, divulge, furnish or make accessible to any party or otherwise use or
exploit any of the proprietary or confidential information or knowledge,
including without limitation, any financial information, marketing plans,
strategies, trade secrets (as defined by California Civil Code Section 3426),
data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 6(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
--------------------------
designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
----------------
available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof.
(d) Antisolicitation. Executive promises and agrees that while he
----------------
is employed by the Company, during the Severance Period, and for a period of two
(2) years thereafter (the "Antisolicitation Period"), he will not induce or
-----------------------
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
--------------
either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
--------------------
period of five years following the date of termination of employment hereunder,
he will not directly or indirectly (i) solicit any employee of the Company to
work for any business, individual, partnership, firm, corporation, or other
entity in competition with the business of the Company or any subsidiary of
-5-
<PAGE>
the Company or Related Entity at any time during such period or (ii) hire any
person who was an employee of the Company or any Subsidiary or Related Entity at
any time during the last year of the Employment Period.
(f) Disclosure to Company; Inventions as Sole Property of the
---------------------------------------------------------
Company.
- --------
(i) Executive agrees promptly to disclose to the Company any and
all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to date hereof), either alone or jointly with
others, which relate to or result from the actual or anticipated business,
work, research or investigations of the Company or any subsidiary or
affiliate of the Company, or which result, to any extent, from its use of
the Company's premises or property (the work being hereinafter collectively
referred to as the "Inventions").
-----------
(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue beyond the termination of his employment with
the Company, but the Company shall compensate Executive at a reasonable
rate after such termination for the time actually spent by Executive at the
Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit C is a
------------------------ ---------
complete list of all inventions, discoveries or improvements relating to the
Company's business (or the business of any Subsidiary or affiliate of the
Company) which have been made by Executive prior to the date of the Prior
Agreement and which are not owned by the Company (or any Subsidiary or affiliate
thereof). Executive represents and warrants that such list is complete and
accurate in all respects and acknowledges and agrees that the Company owns the
entire right and interest to each of the inventions, discoveries or improvements
relating to the Company's or any Subsidiary's or affiliate's business that have
been made by Executive and not listed in Exhibit C.
---------
-6-
<PAGE>
(h) Injunction. Executive agrees that it would be difficult to
----------
measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 6, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a) through (g) of this Section 6 or any of them, the Company shall
be entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Executive without
showing or proving any actual damage sustained by the Company.
7. Other Businesses. As long as Executive is employed by the Company
----------------
or any of its Subsidiaries, Executive agrees that he will not, except with the
express written consent of the Board, become engaged in, or render services for,
any business other than the business of the Company, any of its Subsidiaries or
any corporation or partnership in which the Company or any of its Subsidiaries
have an equity interest.
8. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Survival. Section 6 and the Company's obligation to make
--------
Severance Payments, if any, shall survive and continue in full force in
accordance with its terms notwithstanding any termination of the Employment
Period.
10. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
-7-
<PAGE>
Notices to Executive:
---------------------
Jon L. Opsal
3321 Middlefield Road
Palo Alto, California 94306
Notices to the Company:
-----------------------
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attention: President
With a copy to:
---------------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
-8-
<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way including, without limitation,
the Prior Agreement.
13. No Strict Construction. The language used in this Agreement shall
----------------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
17. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THERMA-WAVE, INC.
By:
-----------------------------------
Its:
----------------------------------
--------------------------------------
Jon L. Opsal
[Signature page to Jon L. Opsal Employment Agreement]
<PAGE>
EXHIBIT "C"
None
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of May 16, 1997, between Therma-Wave, Inc., a Delaware corporation (the
"Company"), and Anthony W. Lin ("Executive").
------- ---------
The Company and Executive are parties to an Executive Stock Agreement
dated May 16, 1997 (the "Stock Agreement") pursuant to which (i) the Company
---------------
will sell shares of capital stock to Executive and (ii) the Company will grant
Executive options to acquire shares of the Company's capital stock.
Company and Executive intend that this Agreement supersede in its
entirety the Employment Agreement dated as of October 30, 1991, between
Executive and the Company (the "Prior Agreement").
---------------
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in Section 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the
Executive Vice President and Chief Financial Officer of the Company and shall
have the normal duties, responsibilities and authority of the Executive Vice
President and Chief Financial Officer, subject to the overall direction and
authority of the Company's board of directors (the "Board") and the Company's
-----
President and/or Chief Executive Officer.
(b) Executive shall report to the Company's President and/or Chief
Executive Officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
<PAGE>
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
at least $243,023 per annum, subject to review by the Board and the President
and/or Chief Executive Officer (who shall consider the Radford Survey in such
review) on an annual basis (the "Base Salary"), which salary shall be payable in
-----------
regular installments in accordance with the Company's general payroll practices
and shall be subject to customary withholding. In addition, during the
Employment Period, Executive shall be entitled to participate in all of the
Company's employee benefit programs for which senior executive employees of the
Company and its Subsidiaries are generally eligible (collectively, the
"Benefits").
--------
(b) Executive shall be entitled to personal time off ("PTO") on
---
substantially the same terms and conditions as Executive is entitled to
pursuant to the Therma-Wave, Inc. Employee Handbook.
(c) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(d) In addition to the Base Salary, for each of the Company's fiscal
years beginning with the 1998 fiscal year, Executive will be eligible to earn a
bonus (the "Bonus") based on the Company achieving certain corporate performance
-----
goals and Executive achieving certain individual goals. The target amount of
the Bonus, the corporate performance goals and the individual goals each shall
be set annually by the Board and the Company's President and/or Chief Executive
Officer. The amount of the Bonus shall be determined in accordance with the
procedures set forth on Exhibit A attached hereto.
---------
4. Deferred Signing Bonus.
----------------------
(a) If, as of May 16, 2002 (the "Fifth Anniversary"), Executive
-----------------
continues to be employed by the Company, the Company shall pay to the Executive
a deferred signing bonus (the "Deferred Bonus") to the extent that the
--------------
cumulative earnings before interest, taxes, depreciation and amortization of the
Company ("EBITDA") from May 16, 1997 through the Fifth Anniversary (the "Actual
------ ------
EBITDA") exceeds $133.275 million (the "Floor Amount"). If Actual EBITDA is (i)
- ------ ------------
less than or equal to the Floor Amount, no Deferred Bonus will be paid, (ii)
equal to or greater than $177 million (the "Planned EBITDA"), then a Deferred
--------------
Bonus equal to $1,585,745.94 (the "Maximum Bonus") will be paid, and (iii)
-------------
between the Floor Amount and the Planned EBITDA, a Deferred Bonus equal to the
result of (x) the Maximum Bonus multiplied by (y) a fraction, the numerator of
which is the amount by which the Actual EBITDA exceeds the Floor amount and the
denominator of which is $43.725 million will be paid. Actual EBITDA shall be
determined as promptly as practicable after the Fifth Anniversary by reference
to the Company's annual audited financial statements (for all completed fiscal
years) and quarterly or other interim financial statements provided to the
Company's lenders (for interim periods). The Deferred Bonus shall be paid
within five days after the determination of Actual EBITDA (the date of such
payment, the "Bonus Payment
-------------
-2-
<PAGE>
Date"); provided that if (i) Executive has exercised any Management Options (as
- ----
defined in the Stock Agreement) prior to such date and issued to the Company a
promissory note or notes as payment of the exercise price therefor and (ii) any
of such promissory notes are outstanding on the Fifth Anniversary, then the
"Bonus Payment Date" shall be the date all of such notes are paid in full (it
------------------
being understood that Executive at any time after the Fifth Anniversary may
request payment of the Deferred Bonus payable to him and use the proceeds to
repay any such promissory notes), but in any event no later than the tenth
anniversary of the date hereof.
(b) Notwithstanding the foregoing, if, prior to the Fifth
Anniversary, a Sale of the Company occurs (as defined in the Stock Agreement),
then Actual EBITDA shall mean the sum of (i) cumulative actual EBITDA of the
Company for the period from May 16, 1997 through the end of the last completed
calendar month prior to such sale (determined as set forth in Section 4(a)
above) and (ii) projected EBITDA utilized to sell the Company for the remaining
portion of the period through the Fifth Anniversary (which will not be greater
than the EBITDA planned for such period as reflected in a performance plan for
the Company attached hereto as Exhibit B).
---------
5. Term.
----
(a) The Employment Period (i) shall terminate upon Executive's
resignation (other than for Good Reason) or death, (ii) shall terminate upon
Executive's Disability, (iii) may be terminated by the Company at any time for
Cause (as defined below) or without Cause and (iv) may be terminated by
Executive for Good Reason.
(b) If the Employment Period is terminated by the Company without
Cause, by Executive for Good Reason or as a result of Executive's Disability,
Executive shall be entitled to receive the Base Salary, the Bonus (which during
the Severance Period will be equal to 36% of the Base Salary in effect
immediately prior to the termination) and the Benefits (the "Severance
---------
Payment"), in each case until the date which is fifteen months after the date of
- -------
such termination (the "Severance Period"); provided that the portion of the
----------------
Bonus that Executive would have been entitled to receive for the fiscal year in
which the Severance Period terminates shall be reduced proportionately by the
ratio of the number of days of such fiscal year not included in the Severance
Period to the total number of days in such fiscal year. The Severance Payment
will be payable at such times as such payments would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to pay any part or all of the
Severance Payment if at any time during the Severance Period Executive is in
breach of Section 6 hereof or Section 11 of the Stock Agreement. The Severance
Payment shall be reduced by fifty percent (50%) of the amount of any
compensation Executive receives in respect of any other employment during the
Severance Period. Upon request from time to time, Executive shall furnish the
Company with a true and complete certificate specifying any such compensation
due to or received by him. As a condition to the Company's obligations (if any)
to make the Severance Payment pursuant to this Section 5(b), Executive will
execute and deliver a general release in form and substance satisfactory to the
Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to subsection 5(a)(i) above, Executive shall be
entitled to receive the Base Salary through the date of termination.
-3-
<PAGE>
(d) Except as specifically provided herein, all of Executive's
rights to Benefits and bonuses which accrue or become payable after the
termination of the Employment Period shall cease upon such termination.
(e) For purposes of this Agreement, "Disability" shall mean any
----------
physical or mental illness or incapacity of Executive if, as determined by the
Board, such illness or incapacity results in Executive's inability to perform
his full-time duties and responsibility for the Company (i) for a period of
three consecutive months, (ii) for a period of 6 months in any twelve month
period, or (iii) at such time when satisfactory medical evidence exists that
Executive has a physical or mental illness or incapacity that will likely
prevent him from returning to the performance of his work duties for 6 months or
longer.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries, or (v) any other material breach of this Agreement
or the Stock Agreement.
(g) For purposes of this Agreement, "Good Reason" shall mean the
-----------
occurrence (without Executive's consent) of any one of the following acts by the
Company, or failure by the Company to act: (i) the assignment to Executive of
duties that represent a substantial adverse alteration in the nature or status
of his responsibilities as a senior executive officer of the Company, except in
the event Executive is unable to or fails to perform his normal full-time duties
and responsibility with the Company as a result of incapacity due to physical or
mental illness or incapacity; (ii) a reduction in the Base Salary as in effect
on the date hereof; (iii) the relocation of the Company's principal executive
offices to a location outside the San Francisco Bay Area (which includes the
counties of San Francisco, Alameda, Santa Clara, Contra Costa, San Mateo and
Marin) or the Company's requiring Executive to be based anywhere other than the
Company's principal executive offices (but not including required travel on the
Company's business); or (iv) the wrongful failure by the Company to pay to
Executive any portion of the Base Salary, Bonus or Benefits, or to pay to
Executive any portion of an installment of deferred compensation or Benefits
under any deferred compensation or benefits program of the Company, within 45
days of the date such Base Salary, Bonus, compensation or Benefit is due.
6. Noncompetition; Confidentiality; Nonsolicitation.
------------------------------------------------
(a) Noncompetition. Executive agrees that while he is employed by
--------------
the Company he will not Compete with the Company or any of its Subsidiaries.
For purposes of this Agreement, "Compete" or "Competing" shall mean, directly or
------- ---------
indirectly, without the prior written consent of the Company, providing
consultive service with or without pay, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or Related
Entity (as defined in Section 6(d) below) to the extent its products are similar
or materially related to those of the Company or any Subsidiary or Related
-4-
<PAGE>
Entity (including products under development by the Company, or to Executive's
knowledge, by any Subsidiary or Related Entity) or (ii) otherwise engages in any
business in which the Company or any Subsidiary or Related Entity is engaged or
proposes to engage, in either case as of the date of the termination of
Executive's employment; provided that "Compete" and "Competing" shall not mean
------- ---------
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(b) Confidential Information. Executive agrees that he will not at
------------------------
any time, during and/or after the term of this Agreement, directly or
indirectly, divulge, furnish or make accessible to any party or otherwise use or
exploit any of the proprietary or confidential information or knowledge,
including without limitation, any financial information, marketing plans,
strategies, trade secrets (as defined by California Civil Code Section 3426),
data, know-how, processes, techniques, patents, patent applications,
improvements, inventions, formulas and other Proprietary Information, as such
term is used in the Proprietary Information and Employee Inventions Agreement
between the Company and Executive, of the Company or its subsidiaries,
affiliates, vendors, suppliers or customers, other than in the course of
performing his duties hereunder and with the consent of the Company in
accordance with the Company's policies and regulations, as established from time
to time, for the protection of the Company's Proprietary Information. The
provisions of this Section 6(b) shall not apply to any information, documents or
materials which are, as shown by appropriate written evidence, in the public
domain, other than by reason of a default by Executive of his obligations
hereunder.
(c) Right to Company Materials. Executive agrees that all styles,
--------------------------
designs, lists, materials, books, files, reports, correspondence, data, records,
and other documents pertaining to his employment or to any confidential
information referred to above ("Company Material") used or prepared by, or made
----------------
available to, Executive, shall be and shall remain the property of the Company
or its designees. Upon the termination of Executive's employment or the
expiration of this Agreement, all Company Materials shall be returned
immediately to the Company, and Executive shall not make or retain any copies or
excerpts thereof.
(d) Antisolicitation. Executive promises and agrees that while he
----------------
is employed by the Company, during the Severance Period, and for a period of two
(2) years thereafter (the "Antisolicitation Period"), he will not induce or
-----------------------
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any of its present or future
subsidiaries or any affiliate of the Company to which the technology of the
Company is hereafter transferred and which at such time engages in activities
similar or materially related to those of the Company (a "Related Entity"),
--------------
either directly or indirectly, to cease doing business with the Company or any
Subsidiary or Related Entity or in any way materially interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary or Related Entity.
(e) Soliciting Employees. Executive promises and agrees that for a
--------------------
period of five years following the date of termination of employment hereunder,
he will not directly or indirectly (i) solicit any employee of the Company to
work for any business, individual, partnership, firm, corporation, or other
entity in competition with the business of the Company or any subsidiary of
-5-
<PAGE>
the Company or Related Entity at any time during such period or (ii) hire any
person who was an employee of the Company or any Subsidiary or Related Entity at
any time during the last year of the Employment Period.
(f) Disclosure to Company; Inventions as Sole Property of the
---------------------------------------------------------
Company.
- -------
(i) Executive agrees promptly to disclose to the Company any and
all inventions, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not subject to patent,
trademark, copyright, trade secret or mask work protection and whether or
not reduced to practice, conceived or learned by Executive during his
employment with the Company or any subsidiary or affiliate of the Company
(including periods prior to date hereof), either alone or jointly with
others, which relate to or result from the actual or anticipated business,
work, research or investigations of the Company or any subsidiary or
affiliate of the Company, or which result, to any extent, from its use of
the Company's premises or property (the work being hereinafter collectively
referred to as the "Inventions").
----------
(ii) Executive acknowledges and agrees that all the Inventions
shall be the sole property of the Company or any other entity designated by
it and Executive hereby assigns to the Company his entire right and
interest in and to all the Inventions; provided, however, that such
assignment does not apply to any Invention which qualifies under the
provisions of Section 2870 of the California Labor Code. The Company or
any other entity designated by it shall be the sole owner of all domestic
and foreign rights pertaining to the Inventions. Executive further agrees
as to all the Inventions to assist the Company or entity designated by it
in every way (at the Company's expense) to obtain and from time to time
enforce patents on the Inventions in any and all countries. To that end,
by way of illustration but not limitation, Executive will testify in any
suit or other proceeding involving any of the Inventions, execute all
documents which the Company reasonably determines to be necessary or
convenient for use in applying for and obtaining patents thereon and
enforcing same, and execute all necessary assignments thereof to the
Company or entity designated by it. Executive's obligation to assist the
Company or entity designated by it in obtaining and enforcing patents for
the Inventions shall continue beyond the termination of his employment with
the Company, but the Company shall compensate Executive at a reasonable
rate after such termination for the time actually spent by Executive at the
Company's request on such assistance.
(g) List of Prior Inventions. Attached hereto as Exhibit C is a
------------------------ ---------
complete list of all inventions, discoveries or improvements relating to the
Company's business (or the business of any Subsidiary or affiliate of the
Company) which have been made by Executive prior to the date of the Prior
Agreement and which are not owned by the Company (or any Subsidiary or affiliate
thereof). Executive represents and warrants that such list is complete and
accurate in all respects and acknowledges and agrees that the Company owns the
entire right and interest to each of the inventions, discoveries or improvements
relating to the Company's or any Subsidiary's or affiliate's business that have
been made by Executive and not listed in Exhibit C.
---------
-6-
<PAGE>
(h) Injunction. Executive agrees that it would be difficult to
----------
measure damages to the Company from any breach by Executive of the promises set
forth in subsections (a) through (g) of this Section 6, that injury to the
Company from any such breach would be impossible to calculate, and that money
damages would therefore be an inadequate remedy for any such breach.
Accordingly, Executive agrees that if Executive shall breach any provision of
subsections (a) through (g) of this Section 6 or any of them, the Company shall
be entitled, in addition to all other remedies it may have, to injunctions or
other appropriate orders to restrain any such breach by Executive without
showing or proving any actual damage sustained by the Company.
7. Other Businesses. As long as Executive is employed by the
----------------
Company or any of its Subsidiaries, Executive agrees that he will not, except
with the express written consent of the Board, become engaged in, or render
services for, any business other than the business of the Company, any of its
Subsidiaries or any corporation or partnership in which the Company or any of
its Subsidiaries have an equity interest.
8. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive hereby acknowledges and represents that he has consulted
with independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.
9. Survival. Section 6 and the Company's obligation to make
--------
Severance Payments, if any, shall survive and continue in full force in
accordance with its terms notwithstanding any termination of the Employment
Period.
10. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, mailed by first class mail,
return receipt requested, or delivered by express courier service, to the
recipient at the address below indicated:
-7-
<PAGE>
Notices to Executive:
---------------------
Anthony W. Lin
3321 Middlefield Road
Palo Alto, California 94306
Notices to the Company:
-----------------------
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attention: President
With a copy to:
---------------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
-8-
<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way including, without limitation,
the Prior Agreement.
13. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
17. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THERMA-WAVE, INC.
By:
----------------------------------------
Its:
---------------------------------------
--------------------------------------------
Anthony W. Lin
[Signature page to A. Lin Employment Agreement]
-10-
<PAGE>
EXHIBIT "C"
None
-11-
<PAGE>
Exhibit 10.6
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
---------
into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and Allan Rosencwaig ("Executive").
------- ---------
The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 993,279 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and
--------------
110,364 shares of the Company's Class L Common Stock, par value $.01 per share
(the "Class L Common"), (ii) the Company will issue to Executive up to 671,875
--------------
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common") and (iii) pursuant to the Company's 1997 Stock Purchase and
--------------
Option Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the
--------- ----
Company will grant to Executive options (collectively, the "Management Options,"
------------------
and each, a "Management Option") to acquire an aggregate of 671,875 shares of
-----------------
Class B Common, which options will be divided into five tranches (collectively,
the "Tranches"); the first tranche ("Tranche 1") will consist of Management
-------- ---------
Options to acquire 134,375 shares of Class B Common at an exercise price of
$8.93 per share; the second tranche ("Tranche 2") will consist of Management
---------
Options to acquire 134,375 shares of Class A Common at an exercise price of
$10.68 per share; the third tranche ("Tranche 3") will consist of Management
---------
Options to acquire 134,375 shares of Class B Common at an exercise price of
$12.43 per share; the fourth tranche ("Tranche 4") will consist of Management
---------
Options to acquire 134,375 shares of Class B Common at an exercise price of
$14.18 per share; and the fifth tranche ("Tranche 5") will consist of Management
---------
Options to acquire 134,375 shares of Class B Common at an exercise price of
$15.89 per share. Capitalized terms used herein and not otherwise defined are
defined in Section 13 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 993,279 shares of Class A Common at a price of $0.235
per share and 110,364 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
--------------
$2,339,717.51. The Company will deliver to Executive certificates representing
the Rollover Stock, and, upon receipt of such certificates, Executive will
deliver to the Company $2,339,717.51 by delivery of a certified check or wire
transfer of funds.
(b) On or prior to April 15, 1998, at the Executive's request, the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by
<PAGE>
Executive as a result of payments to Executive by Toray Industries, Inc.
("Toray") on the date hereof pursuant to the Agreement, dated as of January 25,
1996, among Toray, Executive and other key employees listed therein in
connection with the Company's recapitalization. In consideration of such loan,
Executive shall issue to the Company a promissory note in the form of Exhibit B
---------
attached hereto (the "Rollover Stock Note"). Executive's obligations under the
-------------------
Rollover Stock Note will be secured by a pledge of all of the Rollover Stock,
and in connection therewith Executive will enter into a pledge agreement in the
form of Exhibit C attached hereto.
---------
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 671,875 shares of Class B Common (the "Time
----
Vesting Stock"), at a price of $0.235 per share for an aggregate purchase price
- -------------
of $157,890.63. The Company will deliver to Executive certificates representing
the Time Vesting Stock, and, upon receipt of such certificates, Executive will
deliver to the Company $6,718.75 by delivery of a check or wire transfer of
funds and a promissory note in the form of Exhibit D attached hereto in the
---------
aggregate principal amount of $151,171.88 (the "Time Vesting Stock Note").
-----------------------
Executive's obligations under the Time Vesting Stock Note will be secured by a
pledge of all of the Time Vesting Stock, and in connection therewith Executive
will enter into a pledge agreement in the form of Exhibit E attached hereto.
---------
(d) Section 83(b) Election. Within 30 days after the date hereof,
----------------------
the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------
(e) Vesting of Time Vesting Stock. Subject to the provisions of
-----------------------------
subsection 1(f), on each August 16, November 16, February 16, and May 16
(beginning on August 16, 1997 and ending on May 16, 2002) (each, a "Vesting
-------
Date"), 33,593.75 shares of the Time Vesting Stock will become vested if
- ----
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that if
an Early Termination occurs then the Time Vesting Stock will continue to vest
through the date that is thirty months following the date of the Early
Termination (such additional period being the "Extended Vesting Period") as if
-----------------------
Executive had been continuously employed by the Company or its Subsidiaries
during such period; and provided, further, that upon the occurrence of a Sale of
the Company, all of the Time Vesting Stock will immediately vest. The shares of
the Time Vesting Stock which have vested as set forth above will be hereafter
referred to as "Vested Time Vesting Stock" and the shares of the Time Vesting
-------------------------
Stock which have not vested will be hereafter referred to as "Unvested Time
-------------
Vesting Stock."
- -------------
(f) No Vesting After Time Vesting Termination Date or Competition
-------------------------------------------------------------
Date. Notwithstanding any provision of subsection 1(e) to the contrary, none of
- ----
the Time Vesting Stock will become Vested Time Vesting Stock on or after the
first to occur of (i) the Time Vesting Termination Date and (ii) the Competition
Date. All shares of the Time Vesting Stock which have become Vested Time Vesting
Stock prior to the Time Vesting Termination Date or the Competition
-2-
<PAGE>
Date, as the case may be, will remain Vested Time Vesting Stock after the Time
Vesting Termination Date or the Competition Date, respectively.
2. Management Options and Management Option Shares.
-----------------------------------------------
(a) Management Options Grant. The Company hereby grants to
------------------------
Executive, pursuant to the Plan, Management Options to purchase an aggregate of
671,875 shares of Class B Common ("Management Option Shares"). Tranche 1 will
------------------------
consist of Management Options to purchase 134,375 Management Option Shares at an
exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
------------------------
will consist of Management Options to purchase 134,375 Management Option Shares
at an exercise price of $10.68 per share (the "Tranche 2 Exercise Price");
------------------------
Tranche 3 will consist of Management Options to purchase 134,375 Management
Option Shares at an exercise price of $12.43 per share (the "Tranche 3 Exercise
------------------
Price"); Tranche 4 will consist of Management Options to purchase 134,375
- -----
Management Option Shares at an exercise price of $14.18 per share (the "Tranche
-------
4 Exercise Price"); and Tranche 5 will consist of Management Options to purchase
- ----------------
134,375 Management Option Shares at an exercise price of $15.89 per share (the
"Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the Tranche 2
------------------------
Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise Price, and
the Tranche 5 Exercise Price are collectively referred to herein as "Management
----------
Option Prices" and individually as a "Management Option Price". With respect to
- ------------- -----------------------
each Tranche, the Management Option Price and the number of Management Option
Shares will be equitably adjusted for any stock split, stock dividend,
reclassification or recapitalization of the Company which occurs subsequent to
the date of this Agreement. The Management Options will be immediately
exercisable and, subject to earlier expiration as provided in subsection 2(b)
below, will expire on the Expiration Date. Each Tranche may be exercised
separately; provided that each Tranche may only be exercised in whole and not in
part. The Management Options are not intended to be "incentive stock options"
within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
-----------------------------------------
Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance. Notwithstanding
anything herein to the contrary, if an Early Termination occurs then a portion
of each Tranche of Management Options equal to the product of (i) the number of
Management Options Shares in each such Tranche multiplied by (ii) a fraction
(which will in no event be greater than one), the numerator of which will equal
the sum of (A) the number of completed 3-Month Periods elapsed between May 16,
1997 and the date of the Early Termination plus (B) if and only if the
applicable Management Target as of the Termination Date has been exceeded, 10,
and the denominator of which will equal 20 (collectively, the "Extended
--------
Options"), will not expire until the Expiration Date. Notwithstanding anything
- -------
herein to the contrary, any Management Options which have not expired prior to
the Competition Date will expire 30 days after the Competition Date and may not
be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
----------------------
six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or
-3-
<PAGE>
a portion of the Management Options which have not expired pursuant to
subsection 2(b) above by delivering written notice of exercise to the Company,
together with (i) a written acknowledgment that Executive has read and has been
afforded an opportunity to ask questions of members of the Company's management
regarding all financial and other information provided to Executive regarding
the Company and (ii) (x) a certified check or wire transfer of funds in an
amount equal to the par value of the Management Option Shares being purchased
(the "Cash Amount") and (y) a promissory note in the form of Exhibit G attached
----------- ---------
hereto (an "Option Note") in the aggregate principal amount equal to the
-----------
aggregate Management Option Prices (calculated with respect to each Tranche
based on the number of Management Option Shares of such Tranche to be acquired
by Executive and the Management Option Price for such Tranche) for the
Tranche(s) being exercised less the Cash Amount. Executive's obligations under
the Option Note will be secured by a pledge of all of the Management Option
Shares, and in connection therewith Executive will enter into a pledge agreement
in the form of Exhibit H attached hereto. As a condition to any exercise of the
Management Options, Executive will permit the Company to deliver to him all
financial and other information regarding the Company and its Subsidiaries which
it believes necessary to enable Executive to make an informed investment
decision.
(d) Non-Transferability of Management Options. The Management
-----------------------------------------
Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
-----------------------------------
Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
(i) if an Early Termination occurs, a percentage of the amount of Management
Option Shares issued or issuable upon exercise of each Tranche equal to the
result of (A) the number of completed 3-Month Periods elapsed between May 16,
1997 and the date of the Early Termination, divided by (B) 20, will become
vested on the date of the Early Termination; (ii) if an Early Termination occurs
and as of the Termination Date the applicable Management Target has been
achieved, an additional 50% of all Management Option Shares issued or issuable
upon exercise of each Tranche (or, if less, any amounts remaining unvested after
the operation of subclause (i)) shall vest on a straight-line basis on each
Vesting Date occurring after the Termination Date until (and including) May 16,
2002 (such Shares, the "Management Target Option Shares") and (iii) provided,
-------------------------------
further, that all of the outstanding Management Option Shares will become vested
upon the occurrence of a Sale of the Company. The Management Option Shares
which have vested as set forth above will be hereafter referred to as "Vested
------
Management Option Shares" and the Management Option Shares which have not vested
- ------------------------
will be hereafter referred to as "Unvested Management Option Shares."
---------------------------------
(f) No Vesting After Termination Date or Competition Date.
-----------------------------------------------------
Notwithstanding any provision of subsection 2(e) to the contrary, none of the
Unvested Management Option Shares will become Vested Management Option Shares
after the first to occur of (i) the Termination Date (except for the Management
Target Option Shares, as provided above) and (ii) the Competition Date. All
Management Option Shares which have become Vested Management Option Shares prior
-4-
<PAGE>
to the Termination Date or the Competition Date, as the case may be, will remain
Vested Management Option Shares after the Termination Date or the Competition
Date, respectively.
(g) Section 83(b) Election. If any Management Options are exercised
----------------------
prior to May 16, 2002, then within 30 days after the date of exercise, the
Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit I attached hereto.
---------
3. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with
-------------------------------------------
the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
-5-
<PAGE>
(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
-----------------
(a) Repurchase Option. If the Termination Date or the Competition
-----------------
Date occurs, the Executive Stock, whether held by Executive or one or more
transferees, will be subject to repurchase by the Company and the Bain Group
(each of the aforementioned, solely at their option) pursuant to the terms and
conditions set forth in, and to the extent described in, this Section 4 (the
"Repurchase Option"):
-----------------
(i) In the event that Executive is terminated by the Company
with Cause or Executive resigns (other than for Good Reason), (A) the
outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof,
(B) the Unvested Time Vesting Stock will be subject to the Repurchase
Option at a price per share equal to the lesser of the Fair Market Value
thereof as of the Termination Date and the Original Cost thereof, (C) the
outstanding Vested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Fair Market Value
thereof as of the Termination Date, (D) the Vested Time Vesting Stock will
be subject to the Repurchase Option at a price per share equal to the Fair
Market Value thereof as of the Termination Date and (E) the Rollover Stock
will be subject to the Repurchase Option at a price per share equal to the
Fair Market Value thereof as of the Termination Date; provided that, if the
Company has consummated a Public Offering prior to the Termination Date,
none of the Rollover Stock, the Vested Management Option Shares or the
Vested Time Vesting Shares shall be subject to the Repurchase Option.
(ii) In the event Executive is terminated by the Company
without Cause or Executive resigns for Good Reason (and in either case an
Early Termination has not occurred), (A) the outstanding Unvested
Management Option Shares will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (B) the Unvested Time
Vesting Stock will be subject to the Repurchase Option at a price per share
equal to the Original Cost thereof, (C) the outstanding Vested Management
Option Shares will be subject to the Repurchase Option at a price per share
equal to the greater of the Fair Market
-6-
<PAGE>
Value thereof as of the Termination Date and the Original Cost thereof, (D)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the greater of the Fair Market Value thereof as of
the Termination Date and the Original Cost thereof and (E) the Rollover
Stock will not be subject to the Repurchase Option; provided that, if the
Company has consummated a Public Offering prior to the Termination Date,
none of the Rollover Stock, the Vested Management Option Shares or the
Vested Time Vesting Shares shall be subject to the Repurchase Option.
(iii) In the event of an Early Termination, (A) the outstanding
Unvested Management Option Shares (other than the Management Target Option
Shares) will be subject to the Repurchase Option at a price per share equal
to the Original Cost thereof, (B) the portion of the Time Vesting Stock
that has not become vested and that will not become vested prior to the
expiration of the Extending Vesting Period will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof
and (C) the Vested Management Option Shares will not be subject to the
Repurchase Option, (D) the Vested Time Vesting Stock (including the Time
Vesting Stock that will become vested during the Extended Vesting Period)
will not be subject to the Repurchase Option and (E) the Rollover Stock
will not be subject to the Repurchase Option.
(iv) Notwithstanding anything in clauses (a)(i)-(iii) to the
contrary, in the event the Competition Date occurs, (A) the outstanding
Unvested Management Option Shares will be subject to the Repurchase Option
at a price per share equal to the Original Cost thereof, (B) the Unvested
Time Vesting Stock will be subject to the Repurchase Option at a price per
share equal to the lesser of the Fair Market Value thereof as of the
Termination Date and the Original Cost thereof, (C) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the
Termination Date, (D) the Vested Time Vesting Stock will be subject to the
Repurchase Option at a price per share equal to the Fair Market Value
thereof as of the Termination Date and (E) the Rollover Stock will be
subject to the Repurchase Option at a price per share equal to the Fair
Market Value thereof as of the Termination Date; provided that, if the
Company has consummated a Public Offering prior to the Competition Date,
none of the Vested Management Option Shares, the Vested Time Vesting Shares
or the Rollover Stock shall be subject to the Repurchase Option.
(b) Repurchase Procedures. The Repurchase Option is exercisable by
---------------------
the Company delivering written notice (the "Repurchase Notice") to the holder or
-----------------
holders of each Class of Executive Stock subject to the Repurchase Option (the
"Applicable Stock") within 90 days after the Applicable Repurchase Date. The
----------------
Repurchase Notice will set forth the number of shares of each Class of
Applicable Stock to be acquired from such holder(s), the aggregate consideration
to be paid for such holder's shares of each such Class of Applicable Stock and
the time and place for the closing of the transaction. If any shares of any
Class of Applicable Stock are held by any transferees of Executive, the Company
will purchase the shares of such Class elected to be purchased from such
holder(s) of Applicable Stock, pro rata according to the number of shares of
such Class of Applicable Stock held by such holder(s) at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the nearest
share).
-7-
<PAGE>
(c) Bain Group's Rights.
-------------------
(i) If for any reason the Company does not elect to purchase
all of the shares of Applicable Stock pursuant to the Repurchase Option prior to
the 90th day following the Applicable Repurchase Date, the Bain Group will be
entitled to exercise the Repurchase Option, in the manner set forth in this
Section 4, for those shares of each Class of Applicable Stock the Company has
not elected to purchase (the "Available Shares"); provided that the Bain Group
----------------
will not be entitled to exercise the Repurchase Option with respect to any
Unvested Management Option Shares or Unvested Time Vesting Stock unless the
Company is legally or contractually prohibited from repurchasing such stock. As
soon as practicable, but in any event within thirty (30) days after the Company
determines that there will be any Available Shares, the Company will deliver
written notice (the "Option Notice") to the Bain Group setting forth the number
-------------
of each Class of Available Shares and the price for each Available Share.
(ii) Each member of the Bain Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the Bain Group) of each Class of the Available
Shares. Each member of the Bain Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the Bain Group electing to purchase Available
Shares of any Class of Available Shares which the members of the Bain Group have
elected not to purchase and each of the electing members of the Bain Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate
--------------------
such members of the Bain Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the Bain Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
Bain Group. Each member of the Bain Group may elect to purchase any of the
remaining Available Shares available to such member of the Bain Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period or the Second Election Period
(if any) the Company will, if necessary, notify the holder(s) of Applicable
Stock as to the number of shares of each Class of such Applicable Stock being
purchased from the holder(s) by the members of the Bain Group (the "Supplemental
------------
Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
- -----------------
Notice to the holder(s) of such Applicable Stock, the Company will also deliver
to each electing member of the Bain Group written notice setting forth the
number of shares of each Class of Applicable Stock the Company and each member
of the Bain Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
-8-
<PAGE>
(d) Closing. The closing of the transactions contemplated by this
-------
Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the Bain Group will pay for any shares of Applicable Stock to be
purchased by such members of the Bain Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
-----
amounts owed to the Company under the Rollover Stock Note, the Time Vesting
Stock Note and/or the Option Note, as the case may be, used to purchase the
shares of Applicable Stock being repurchased, by offsetting such amounts and
second, the Company shall pay the remaining portion of the purchase price by
- ------
delivery of (i) a check payable to the holder of such shares of Applicable Stock
or (ii) a note or notes payable in three equal annual installments beginning on
the first anniversary of the closing of such purchase and bearing interest at a
rate per annum equal to 7%, or (iii) a combination of (i) and (ii) in the
aggregate amount of such remaining portion. Any notes issued by the Company
pursuant to this subsection 4(d) will be subject to any restrictive covenants to
which the Company is subject at the time of such purchase. Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of shares
of Applicable Stock by the Company will be subject to applicable restrictions
contained in the Delaware General Corporation Law and in the Company's and its
Subsidiaries' debt and equity financing agreements. If any such restrictions
prohibit the repurchase of shares of Executive Stock hereunder which the Company
is otherwise entitled to make, the Company may make such repurchases as soon as
it is permitted to do so under such restrictions; provided, however, that in
such circumstances any such repurchases for Fair Market Value shall be for the
greater of (i) the Fair Market Value on the date such restrictions lapse and
(ii) the Fair Market Value on the Termination Date. The Company and/or the
members of the Bain Group, as the case may be, will receive customary
representations and warranties from each seller regarding the sale of the shares
of Applicable Stock, including, but not limited to, the representation that such
seller has good and marketable title to such shares of Applicable Stock to be
transferred free and clear of all liens, claims and other encumbrances.
(e) Termination of Repurchase Option. The provisions of this
--------------------------------
Section 4 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the later of (A) the fifth anniversary of the date of this Agreement
and (B) a Public Offering.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge,
---------------------------
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator
-9-
<PAGE>
of which is the number of shares of Common Stock sold by the Investors in such
Public Offering and the denominator of which is the total number of shares of
Common Stock held by the Investors immediately prior to the initial Public
Offering; provided that if any Other Executives are permitted but do not elect
to Transfer any vested shares of Other Executive Stock pursuant to the
applicable Other Executive Stock Agreement (the aggregate amount of such shares
not Transferred being "Excess Shares"), then the number of vested shares of
-------------
Executive Stock permitted to be Transferred pursuant to clause (y) above will be
increased by the result of the number of Excess Shares multiplied by a fraction,
the numerator of which is the number of vested shares of Executive Stock held by
Executive and the denominator of which is the aggregate number of vested shares
of Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
--------------------
pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
---------------
(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
Section 5 will terminate upon the first to occur of (i) a Sale of the Company
and (ii) the later of (A) the fifth anniversary of the date of this Agreement
and (B) a Public Offering.
6. Participation Rights.
--------------------
(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
------------------
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common
-10-
<PAGE>
Stock, the Other Stockholders participating in such Transfer will be required to
sell in the contemplated Transfer a pro rata portion of shares of all such
classes of Common Stock, which portion will be determined in the manner set
forth immediately above.
For example (by way of illustration only), if the Transfer Notice
-----------------------------------------
contemplated a sale of 100 shares of Class L Common by the
transferring Investor, and if the transferring Investor at such time
owns 30% of the Class L Common and if one Other Stockholder elects to
participate and owns 20% of the Class L Common, the transferring
Investor would be entitled to sell 60 shares (30% / 50% x 100 shares)
and the Other Stockholder would be entitled to sell 40 shares (20% /
50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF MAY 16, 1997, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
-11-
<PAGE>
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
8. Definition of Executive Stock. For all purposes of this
-----------------------------
Agreement, Executive Stock will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company, the Investors,
purchasers pursuant to an offering registered under the 1933 Act or purchasers
pursuant to a Rule 144 transaction (other than a Rule 144(k) transaction
occurring prior to the time the Company is a Public Company) and subsequent
transferees), and each such other holder of Executive Stock will succeed to all
rights and obligations attributable to Executive as a holder of Executive Stock
hereunder. Executive Stock will also include shares of the Company's capital
stock issued with respect to shares of Executive Stock by way of a stock split,
stock dividend or other recapitalization.
9. Sale of the Company.
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the Bain Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
-12-
<PAGE>
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Executive Stock appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Executive Stock declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof
-13-
<PAGE>
will be determined based on the fair value of the consideration received or
receivable by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other distribution in respect of, the Common
Stock in accordance with the Company's Certificate of Incorporation or (ii)
issuances of Common Stock upon conversion of any shares of the Company=s Series
A Preferred Stock, or (iii) the issuance of Common Stock (or securities
convertible into or exchangeable for, or options to purchase, Common Stock) in
connection with the provision by the Investors or their Affiliates of debt
financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 in connection with Executive's termination by the Company with Cause or upon
Executive's resignation (other than for Good Reason), in further consideration
of the repurchase of Executive Stock in connection therewith, for a period of
thirty months after the Termination Date (the "Noncompete Period"), he will not
-----------------
Compete.
(b) Sections 7(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
12. Lookback.
--------
(a) If (i) the Termination Date occurs as a result of Executive's
termination by the Company without Cause or Executive's resignation for Good
Reason and (ii) within one year after the Termination Date either (x) a Transfer
of Common Stock by an Investor occurs (other than a Transfer among the
Investors, their partners or affiliates or to an employee of the Company or its
Subsidiaries) or (y) a Sale of the Company occurs, then Executive will be
entitled to receive from the Company the benefit of such Transfer or Sale of the
Company that Executive would have been entitled to receive had the Termination
Date not occurred. Thus, (1) if either a Transfer or a Sale of the Company
occurs within one year after the Termination Date and the Company or the
Investors have repurchased any Executive Stock pursuant to the Repurchase Option
(such repurchased shares of Executive Stock being "Repurchased Stock"), then the
-----------------
Company will pay to Executive the excess, if any, of (A) the amount of net
proceeds Executive would have been entitled to receive for the shares of
Repurchased Stock that Executive would have been permitted to sell in connection
with the Transfer or Sale of the Company had the Termination Date not occurred
and had Executive still
-14-
<PAGE>
owned such shares over (B) the amount actually received by Executive for such
shares from the Company and/or the Investors pursuant to the Repurchase Option
and (2) without duplication of the payments made to Executive pursuant to clause
(1) above and only with respect to Management Options that expired on the
Termination Date, if a Sale of the Company occurs within one year of the
Termination Date, then the Company will pay to Executive the excess, if any, of
(X) the amount of net proceeds Executive would have received with respect to
Management Option Shares that Executive would have held if (I) the Termination
Date had not occurred, (II) Executive's Management Options that had not become
exercisable prior to and expired on the Termination Date had become exercisable
in connection with such Sale of the Company, and (III) Executive had exercised
the in-the-money Management Options in connection with such Sale of the Company
over (Y) the aggregate Management Option Price Executive would have been
required to pay to the Company in connection with to the exercise of such
Management Options, in each case by certified or cashier's check or wire
transfer of funds upon consummation of such transaction. The Company will
provide the Executive notice of the Transfer of Common Stock or the Sale of the
Company within fifteen days after the Transfer of Common Stock or Sale of the
Company, as the case may be.
(b) Subject to the following sentence, in the event Executive
becomes entitled to receive any amounts from the Company pursuant to Section
12(a) above and the Company has not paid all of such amounts (the amount not
paid being the "Unpaid Amount") to Executive within 90 days after the date of
-------------
the Transfer of Common Stock by an Investor or the Sale of the Company (as the
case may be), Executive may require (by delivery of written notice of such
election to the Investors (the "Lookback Notice")) each Investor to pay to
---------------
Executive the product of (i) the Unpaid Amount and (ii) a fraction, the
numerator of which shall equal the total number of shares of Common Stock held
by such Investor immediately preceding the Transfer of Common Stock or Sale of
the Company (as the case may be) and the denominator of which shall equal the
total number of shares of Common Stock outstanding on a fully diluted basis
(including all Common Stock issuable upon exercise or conversion of all options,
warrants or convertible securities outstanding at such time) immediately
preceding the Transfer of Common Stock or Sale of the Company (as the case may
be). Notwithstanding the foregoing, no Investor shall be required to pay to
Executive any amounts under this Section 12(b) unless Executive has in writing
unconditionally released the Company from all amounts and obligations owing by
the Company to Executive pursuant to this Section 12.
(c) The provisions of this Section 12 will terminate upon the
Competition Date.
DEFINITIONS
13. Definitions. The following terms are defined as follows:
-----------
"3-Month Period" means a period of three months (i) beginning on May
--------------
16 and ending on the next following August 16, (ii) beginning on August 16, and
ending on the next following November 16, (iii) beginning on November 16 and
ending on the next following February 16, or (iv) beginning on February 16 and
ending on the next following May 16.
-15-
<PAGE>
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"Applicable Repurchase Date" means, in the case of the Executive
--------------------------
ceasing to be employed by the Company for any reason, the Termination Date, and
in the case of the Competition Date occurring, the date the Company has obtained
actual knowledge that the Competition Date has occurred.
"Bain Group" means collectively Bain Capital Fund V, L.P., Bain
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
Randolph Street Partners.
"Board" means the Company's Board of Directors.
-----
"Cause" has the meaning given to such term in the Employment
-----
Agreement.
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company, providing consultive service, owning, managing, operating, joining,
controlling, participating in, or being connected as a stockholder, partner or
otherwise with any business, individual, partner, firm corporation or other
entity that (i) is in competition with the Company or any Subsidiary or
affiliate of the Company to the extent its products are similar or materially
related to those of the Company or any Subsidiary or affiliate of the Company
(including products under development by the Company or any Subsidiary of
affiliate of the Company) or (ii) otherwise engages in any business in which the
Company or any Subsidiary or affiliate of the Company is engaged or proposes to
engage, in either case as of the Termination Date; provided that "Compete" and
-------
"Competing" will not mean being a passive owner of not more than 2% of the
---------
outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no active participation in the business of such
corporation.
"Competition Date" will occur if at any time within thirty months
----------------
after the Termination Date, Executive begins Competing with the Company or
breaches any of the provisions of Section 7 of the Employment Agreement or
Section 11 of this Agreement; provided that the Company will notify Executive of
any such breach and, if such breach is capable of being cured, provide Executive
with 10 days to cure such breach.
-16-
<PAGE>
"Disability" has the meaning given to such term in the Employment
----------
Agreement.
"Early Termination" means termination of Executive's employment with
-----------------
the Company and its Subsidiaries (i) by the Company without Cause or by
Executive for Good Reason and, in either case if the Termination Date occurs
after the end of the Company's 1998 fiscal year, the applicable Performance
Hurdle has been achieved, (ii) by the Company without Cause or by Executive for
Good Reason and, in either case, the Investors have achieved Substantial
Liquidity or (iii) as a result of Executive's death or Disability.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the fair
value of such security determined jointly in good faith by the Board and
Executive; provided that if, within 60 days, the Board and Executive cannot so
agree, then such value will be determined by an independent appraiser reasonably
acceptable to the Board and Executive, which appraiser will submit to the Board
and Executive a written report setting forth such determination. If the Board
and Executive are unable to so agree on an appraiser within 15 days after the
end of such 60-day period, each of the Board and Executive will promptly select
an independent appraiser and the two appraisers so selected by the Board and
Executive will promptly select a third independent appraiser to determine the
Fair Market Value based upon information provided by the Company and Executive.
The appraiser appointed hereunder will allocate its costs and expenses incurred
in determining Fair Market Value based upon the relative differences between
each the Board's and Executive's
-17-
<PAGE>
respective determinations of Fair Market Value and such appraiser's
determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Good Reason" has the meaning given to such term in the Employment
-----------
Agreement.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will Bain Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the Bain Group, the Sutter Group and
---------
Antares International Partners, Inc.; and "Investor" means any of the Investors
--------
individually.
"Management Target" will be achieved as of any date of determination
-----------------
if the Company's cumulative actual EBITDA for the period from April 1, 1997
through the end of the Company's then most recently completed fiscal year
(determined by reference to the Company's annual audited financial statements)
exceeds the applicable cumulative EBITDA target set forth below:
<TABLE>
<CAPTION>
Fiscal Year Ending: EBITDA Target:
------------------ --------------
<S> <C>
March 31, 1998 $16.5 million
March 31, 1999 $42.2 million
March 31, 2000 $81.0 million
March 31, 2001 $127.3 million
March 31, 2002 $177.7 million
</TABLE>
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
-18-
<PAGE>
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Performance Hurdle" will be achieved if (i) at any time after the end
------------------
of the Company's fiscal year ending March 31, 1998 but prior to the end of the
second quarter of the Company's fiscal year ending March 31, 1999, the Company's
actual cumulative EBITDA for the immediately preceding twelve completed fiscal
months was at least $6 million, (ii) at any time after the end of the second
quarter of the Company's fiscal year ending March 31, 1999 but prior to the end
of the Company's fiscal year ending March 31, 1999, the Company's actual
cumulative EBITDA for the immediately preceding twelve completed fiscal months
was greater than $9 million, (iii) at any time after the end of the Company's
fiscal year ending March 31, 1999 but prior to the end of the Company's fiscal
year ending March 31, 2000, the Company's actual cumulative EBITDA for the
immediately preceding twenty-four completed fiscal months was greater than $24
million, or (iv) at any time after the end of the Company's fiscal year ending
March 31, 2000, the Company's actual cumulative EBITDA for the immediately
preceding twenty-four completed fiscal months was greater than $28 million. For
purposes of determining whether the Performance Hurdle has been achieved, the
Company's actual cumulative EBITDA will be determined by reference to the
Company's annual audited financial statements (for all completed fiscal years
within the measurement period) and monthly or other interim financial statements
provided to the Company's lenders (for interim periods).
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1993 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the Bain Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or
-19-
<PAGE>
Transfer of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Substantial Liquidity" means the sale by the Investors of at least
---------------------
50% in the aggregate of the shares of Class A Common and Class L Common held by
them on the date hereof (after giving effect to any stock splits, stock
dividends, recapitalizations and similar transactions) in a Public Offering or
thereafter.
"Sutter Group" means collectively, Sutter Hill Ventures, a California
------------
limited partnership, Sutter Hill Associates, L.P., Wells Fargo Bank, Trustee SHV
M/P/T FBO David L. Anderson, Wells Fargo Bank, Trustee SHV M/P/T FBO Leonard
Baker, Jr., Wells Fargo Bank, Trustee SHV M/P/T FBO William H. Younger, Jr.,
Wells Fargo Bank, Trustee SHV M/P/T FBO Tench Coxe, Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
"Time Vesting Termination Date" means the Termination Date; provided
-----------------------------
that if an Early Termination occurs, the "Time Vesting Termination Date" means
-----------------------------
the last day of the Extended Vesting Period.
MISCELLANEOUS
14. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
To the Company:
Therma-Wave, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
-20-
<PAGE>
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To Executive:
Allan Rosencwaig
3304 Deer Hollow Drive
Danville, CA 94595
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
15. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
16. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
Without limiting the foregoing, all existing stock option agreements between the
Company and/or the Company's existing stockholders and Executive are hereby
cancelled and terminated.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
18. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
-21-
<PAGE>
19. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
20. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
21. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement of
the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
22. Effect of Transfers in Violation of Agreement. The Company will
---------------------------------------------
not be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to
-22-
<PAGE>
any transferee to whom such shares of Executive Stock have been transferred in
violation of this Agreement.
23. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the Bain Group who hold 80% of the Common Stock held by the Bain
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
24. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
25. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The
-----------------------------------------------------
issuance of the Time Vesting Stock and the grant of Management Stock Options
hereunder is pursuant to and subject to all of the terms and conditions of the
Plan.
26. Adjustment of Performance Hurdles and Management Targets. If the
--------------------------------------------------------
Company acquires all or substantially all of the assets or capital stock of
another business or if the Company sells a substantial portion of its assets,
the Company, the Bain Group and the Executive will negotiate in good faith to
make any appropriate adjustments to the Performance Hurdles and Management
Targets based on the EBITDA of the acquired business or if the EBITDA associated
with the sold assets (as the case may be). In addition, for purposes of
determining whether the Performance Hurdles and the Management Targets have been
achieved, EBITDA shall be determined without giving effect to any (i)
extraordinary items of loss or gain, (ii) fees payable by the Company to Bain
Capital, Inc. or its Affiliates under the Advisory Agreement, dated May 16, 1997
or otherwise, (iii) non-cash charges incurred in connection with the
transactions contemplated by the Recapitalization Agreement or (iv) any expenses
incurred by the Company in connection with the modification of the lease of the
Company's Fremont facility in connection with the transaction contemplated by
the Recapitalization Agreement including, without limitation, any expenses
incurred by the Company as a result of any increased level of letter of credit
support required by such modification or any allowance payments, for rent or
otherwise, payable to Sobrato or his designees.
* * * * *
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
-----------------------------------
By:
Its:
-----------------------------------
ALLAN ROSENCWAIG
[Signature Page to Allan Rosencwaig Executive Stock Agreement]
<PAGE>
Exhibit 10.7
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
---------
into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and David L. Willenborg ("Executive").
------- ---------
The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 128,299 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and 14,255
--------------
shares of the Company's Class L Common Stock, par value $.01 per share (the
"Class L Common"), (ii) the Company will issue to Executive 100,781 shares of
--------------
the Company's Class B Common Stock, par value $.01 per share (the "Class B
-------
Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option
- ------
Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
--------- ----
will grant to Executive options (collectively, the "Management Options," and
------------------
each, a "Management Option") to acquire an aggregate of 100,781 shares of Class
-----------------
A Common, which options will be divided into five tranches (collectively, the
"Tranches"); the first tranche ("Tranche 1") will consist of Management Options
-------- ---------
to acquire 20,156.2 shares of Class A Common at an exercise price of $8.93 per
share; the second tranche ("Tranche 2") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $ 10.68 per
share; the third tranche ("Tranche 3") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $12.43 per
share; the fourth tranche ("Tranche 4") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $14.18 per
share; and the fifth tranche ("Tranche 5") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $ 15.89 per
share. Capitalized terms used herein and not otherwise defined are defined in
Section 12 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 128,299 shares of Class A Common at a price of $0.235
per share and 14,255 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
--------------
$302,206.94. The Company will deliver to Executive certificates representing
the Rollover Stock, and, upon receipt of such certificates, Executive will
deliver to the Company $302,206.94 by delivery of a certified check or wire
transfer of funds.
(b) On or prior to April 15, 1998, at the Executive's request the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by Executive as a result of payments on the date
hereof to Executive by Toray Industries, Inc. pursuant
<PAGE>
to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc.,
Executive and other key employees listed therein in connection with the
Company's recapitalization in exchange for the issuance by Executive to the
Company of a promissory note in the form of Exhibit B attached hereto (the
---------
"Rollover Stock Note"). Executive's obligations under the Rollover Stock Note
-------------------
will be secured by a pledge of all of the Rollover Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit C
---------
attached hereto.
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 100,781 shares of Class B Common (the
"Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase
------------------
price of $23,683.54. The Company will deliver to Executive certificates
representing the Time Vesting Stock, and, upon receipt of such certificates,
Executive will deliver to the Company $1,007.81 by delivery of a check or wire
transfer of funds and a promissory note in the form of Exhibit D attached
---------
hereto in the aggregate principal amount of $22,675.73 (the "Time Vesting Stock
------------------
Note"). Executive's obligations under the Time Vesting Stock Note will be
- ----
secured by a pledge of all of the Time Vesting Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit E
---------
attached hereto.
(d) Section 83(b) Election. Within 30 days after the date hereof,
----------------------
the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------
(e) Vesting of Time Vesting Stock. Subject to the provisions of
-----------------------------
subsection 1(f), on each date set forth below the Time Vesting Stock will have
become vested with respect to the cumulative percentage of Time Vesting Stock
set forth opposite such date if Executive is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
<TABLE>
<CAPTION>
Cumulative
Percentage of Time
Date Vesting Stock Vested
---- --------------------
<S> <C>
May 16, 1998 20%
May 16, 1999 40%
May 16, 2000 60%
May 16, 2001 80%
May 16, 2002 100%
</TABLE>
-2-
<PAGE>
; provided that upon the occurrence of a Sale of the Company, all of the Time
Vesting Stock will immediately vest. The shares of the Time Vesting Stock which
have vested as set forth above will be hereafter referred to as "Vested Time
-----------
Vesting Stock" and the shares of the Time Vesting Stock which have not vested
- -------------
will be hereafter referred to as "Unvested Time Vesting Stock."
---------------------------
(f) No Vesting After Termination Date. Notwithstanding any
--------------------------------
provision of subsection 1(e) to the contrary, none of the Time Vesting Stock
will become Vested Time Vesting Stock on or after the Termination Date. All
shares of the Time Vesting Stock which have become Vested Time Vesting Stock
prior to the Termination Date will remain Vested Time Vesting Stock after the
Termination Date.
2. Management Options and Management Option Shares.
-----------------------------------------------
(a) Management Options Grant. The Company hereby grants to
------------------------
Executive, pursuant to the Plan, Management Options to purchase an aggregate of
100,781 shares of Class A Common ("Management Option Shares"). Tranche 1 will
------------------------
consist of Management Options to purchase 20,156.2 Management Option Shares at
an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
------------------------
will consist of Management Options to purchase 20,156.2 Management Option Shares
at an exercise price of $10.68 per share (the "Tranche 2 Exercise Price");
------------------------
Tranche 3 will consist of Management Options to purchase 20,156.2 Management
Option Shares at an exercise price of $12.43 per share (the "Tranche 3 Exercise
------------------
Price"); Tranche 4 will consist of Management Options to purchase 20,156.2
- -----
Management Option Shares at an exercise price of $14.18 per share (the "Tranche
-------
4 Exercise Price"); and Tranche 5 will consist of Management Options to purchase
- ----------------
20,156.2 Management Option Shares at an exercise price of $15.89 per share (the
"Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the Tranche 2
------------------------
Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise Price, and
the Tranche 5 Exercise Price are collectively referred to herein as "Management
----------
Option Prices" and individually as a "Management Option Price". With respect to
- ------------- -----------------------
each Tranche, the Management Option Price and the number of Management Option
Shares will be equitably adjusted for any stock split, stock dividend,
reclassification or recapitalization of the Company which occurs subsequent to
the date of this Agreement. The Management Options will be immediately
exercisable and, subject to earlier expiration as provided in subsection 2(b)
below, will expire on the Expiration Date. Each Tranche may be exercised
separately; provided that each Tranche may only be exercised in whole and not in
part. The Management Options are not intended to be "incentive stock options"
within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
-----------------------------------------
Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
----------------------
six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or a portion of the
Management Options which have not expired pursuant to subsection 2(b) above by
-3-
<PAGE>
delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Executive has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Executive regarding the Company
and (ii) (x) a certified check or wire transfer of funds in an amount equal to
the par value of the Management Option Shares being purchased (the "Cash
----
Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an
- ------ ---------
"Option Note") in the aggregate principal amount equal to the aggregate
-----------
Management Option Prices (calculated with respect to each Tranche based on the
number of Management Option Shares of such Tranche to be acquired by Executive
and the Management Option Price for such Tranche) for the Tranche(s) being
exercised less the Cash Amount. Executive's obligations under the Option Note
will be secured by a pledge of all of the Management Option Shares, and in
connection therewith Executive will enter into a pledge agreement in the form of
Exhibit H attached hereto. As a condition to any exercise of the Management
- ---------
Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Non-Transferability of Management Options. The Management
-----------------------------------------
Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
-----------------------------------
Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
all of the outstanding Management Option Shares will become vested upon the
occurrence of a Sale of the Company. The Management Option Shares which have
vested as set forth above will be hereafter referred to as "Vested Management
-----------------
Option Shares" and the Management Option Shares which have not vested will be
- -------------
hereafter referred to as "Unvested Management Option Shares."
---------------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 2(e) to the contrary, none of the Unvested Management
Option Shares will become Vested Management Option Shares after the Termination
Date. All Management Option Shares which have become Vested Management Option
Shares prior to the Termination Date will remain Vested Management Option Shares
after the Termination Date.
(g) Section 83(b) Election. Within 30 days after the exercise of
----------------------
any Management Options, the Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in the form of
Exhibit I attached hereto.
- ---------
-4-
<PAGE>
3. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with
-------------------------------------------
the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
-5-
<PAGE>
(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
-----------------
(a) Repurchase Option. If the Termination Date occurs, the Executive
-----------------
Stock, whether held by Executive or one or more transferees, will be subject to
repurchase by the Company and the Bain Group (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in, and to the
extent described in, this Section 4 (the "Repurchase Option").
-----------------
(b) Repurchase Price. In the event the Termination Date occurs, (i)
----------------
the outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof, (ii)
the Unvested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (iii) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a price per
share equal to the Fair Market Value thereof as of the Termination Date, (iv)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date and (v) the Rollover Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date; provided that, if the Company has consummated a Public Offering prior to
the Termination Date, none of the Rollover Stock, the Vested Management Option
Shares or the Vested Time Vesting Shares will be subject to the Repurchase
Option.
(c) Repurchase Procedures. The Repurchase Option is exercisable by
---------------------
the Company delivering written notice (the "Repurchase Notice") to the holder or
-----------------
holders of each Class of Executive Stock within 180 days after the Termination
Date. The Repurchase Notice will set forth the number of shares of each Class
of Executive Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such holder's shares of each such Class of
Executive Stock and the time and place for the closing of the transaction. If
any shares of any Class of Executive Stock are held by any transferees of
Executive, the Company will purchase the shares of such Class elected to be
purchased from such holder(s) of Executive Stock, pro rata according to the
number of shares of such Class of Executive Stock held by such holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) Bain Group's Rights.
-------------------
(i) If for any reason the Company does not elect to purchase
all of the shares of Executive Stock pursuant to the Repurchase Option prior to
the 180th day following the Termination Date, the Bain Group will be entitled to
exercise the Repurchase Option, in the manner set forth in this Section 4, for
those shares of each Class of Executive Stock the Company has not elected to
purchase (the "Available Shares"); provided that the Bain Group will not be
----------------
entitled to exercise the Repurchase Option with respect to any Unvested
Management Option Shares or
-6-
<PAGE>
Unvested Time Vesting Stock unless the Company is legally or contractually
prohibited from repurchasing such stock. As soon as practicable, but in any
event within thirty (30) days after the Company determines that there will be
any Available Shares, the Company will deliver written notice (the "Option
------
Notice") to the Bain Group setting forth the number of each Class of Available
- ------
Shares and the price for each Available Share.
(ii) Each member of the Bain Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the Bain Group) of each Class of the Available
Shares. Each member of the Bain Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the Bain Group electing to purchase Available
Shares of any Class of Available Shares which the members of the Bain Group have
elected not to purchase and each of the electing members of the Bain Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate
--------------------
such members of the Bain Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the Bain Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
Bain Group. Each member of the Bain Group may elect to purchase any of the
remaining Available Shares available to such member of the Bain Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period or the Second Election Period
(if any) the Company will, if necessary, notify the holder(s) of Executive Stock
as to the number of shares of each Class of such Executive Stock being purchased
from the holder(s) by the members of the Bain Group (the "Supplemental
------------
Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
- -----------------
Notice to the holder(s) of such Executive Stock, the Company will also deliver
to each electing member of the Bain Group written notice setting forth the
number of shares of each Class of Executive Stock the Company and each member of
the Bain Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
(e) Closing. The closing of the transactions contemplated by this
-------
Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the Bain Group will pay for any shares of Applicable Stock to be
purchased by such members of the Bain Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
-----
amounts owed to the Company under the Rollover Stock Note, the
-7-
<PAGE>
Time Vesting Stock Note and/or the Option Note, as the case may be, used to
purchase the shares of Applicable Stock being repurchased, by offsetting such
amounts and second, the Company shall pay the remaining portion of the purchase
------
price by delivery of (i) a check payable to the holder of such shares of
Applicable Stock or (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest at a rate per annum equal to 7%, or (iii) a combination of
(i) and (ii) in the aggregate amount of such remaining portion. Any notes issued
by the Company pursuant to this subsection 4(e) will be subject to any
restrictive covenants to which the Company is subject at the time of such
purchase. Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of shares of Executive Stock by the Company will be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of shares of Executive Stock hereunder
which the Company is otherwise entitled to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that in such circumstances any such repurchases for Fair
Market Value shall be for the greater of (i) the Fair Market Value on the date
such restrictions lapse and (ii) the Fair Market Value on the Termination Date.
The Company and/or the members of the Bain Group, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the shares of Executive Stock, including, but not limited to, the
representation that such seller has good and marketable title to such shares of
Executive Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(f) Termination of Repurchase Option. The provisions of this
--------------------------------
Section 4 will terminate upon a Sale of the Company.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge,
---------------------------
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator of which is the number of
shares of Common Stock sold by the Investors in such Public Offering and the
denominator of which is the total number of shares of Common Stock held by the
Investors immediately prior to the initial Public Offering; provided that if any
Other Executives are permitted but do not elect to Transfer any vested shares of
Other Executive Stock pursuant to the applicable Other Executive Stock Agreement
(the aggregate amount of such shares not Transferred being "Excess Shares"),
-------------
then the number of vested shares of Executive Stock permitted to be Transferred
pursuant to clause (y) above will be increased by the result of the number of
Excess Shares multiplied by a fraction, the numerator of which is the number of
vested shares of Executive Stock held by Executive and the denominator of which
is the aggregate number of vested shares of
-8-
<PAGE>
Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
--------------------
pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
---------------
(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
Section 5 will terminate upon the earlier of (i) a Sale of the Company and (ii)
the eighth anniversary of the date hereof.
6. Participation Rights.
--------------------
(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
------------------
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common Stock, the
Other Stockholders participating in such Transfer will be required to sell in
the contemplated Transfer a pro rata portion of shares of all such classes of
Common Stock, which portion will be determined in the manner set forth
immediately above.
-9-
<PAGE>
For example (by way of illustration only), if the Transfer
Notice contemplated a sale of 100 shares of Class L Common
by the transferring Investor, and if the transferring Investor
at such time owns 30% of the Class L Common and if one Other
Stockholder elects to participate and owns 20% of the Class L
Common, the transferring Investor would be entitled to sell 60
shares (30% / 50% x 100 shares) and the Other Stockholder would
be entitled to sell 40 shares (20% / 50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE
STOCK AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN
EMPLOYEE OF THE COMPANY DATED AS OF MAY 16, 1997, A COPY OF
WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
-10-
<PAGE>
8. Definition of Executive Stock. For all purposes of this
-----------------------------
Agreement, Executive Stock will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company, the Investors,
purchasers pursuant to an offering registered under the 1933 Act or purchasers
pursuant to a Rule 144 transaction (other than a Rule 144(k) transaction
occurring prior to the time the Company is a Public Company) and subsequent
transferees), and each such other holder of Executive Stock will succeed to all
rights and obligations attributable to Executive as a holder of Executive Stock
hereunder. Executive Stock will also include shares of the Company's capital
stock issued with respect to shares of Executive Stock by way of a stock split,
stock dividend or other recapitalization.
9. Sale of the Company.
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the Bain Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501)
-11-
<PAGE>
reasonably acceptable to the Company. If any holder of Executive Stock appoints
a purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof will be
determined based on the fair value of the consideration received or receivable
by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other
-12-
<PAGE>
distribution in respect of, the Common Stock in accordance with the Company's
Certificate of Incorporation or (ii) issuances of Common Stock upon conversion
of any shares of the Company's Series A Preferred Stock, or (iii) the issuance
of Common Stock (or securities convertible into or exchangeable for, or options
to purchase, Common Stock) in connection with the provision by the Investors or
their Affiliates of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 hereof, in further consideration of the repurchase of Executive Stock in
connection therewith, for a period of two years after the Termination Date (the
"Noncompete Period"), he will not Compete.
-----------------
(b) Sections 6(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
DEFINITIONS
12. Definitions. The following terms are defined as follows:
-----------
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"Bain Group" means collectively Bain Capital Fund V, L.P., Bain
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
Randolph Street Partners.
"Board" means the Company's Board of Directors.
-----
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
-13-
<PAGE>
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company directly or indirectly, providing consultive service with or without
pay, owning, managing, operating, joining, controlling, participating in, or
being connected as a stockholder, partner or otherwise with any business,
individual, partner, firm corporation or other entity that (i) is in competition
with the Company or any Subsidiary or affiliate of the Company to the extent its
products are similar or materially related to those of the Company or any
Subsidiary or affiliate of the Company (including products under development by
the Company or any Subsidiary of affiliate of the Company) or (ii) otherwise
engages in any business in which the Company or any Subsidiary or affiliate of
the Company is engaged or proposes to engage, in either case as of the
Termination Date; provided that "Compete" and "Competing" will not mean being a
------- ---------
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the
Common Stock on all securities exchanges on which Common Stock may at the time
be listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the fair value of such security determined jointly in good faith by the
Board and Executive; provided that if, within 60 days, the Board and Executive
cannot so agree, then such value will be determined by an independent appraiser
reasonably acceptable to the Board and Executive, which appraiser will submit to
the
-14-
<PAGE>
Board and Executive a written report setting forth such determination. If the
Board and Executive are unable to so agree on an appraiser within 15 days after
the end of such 60-day period, each of the Board and Executive will promptly
select an independent appraiser and the two appraisers so selected by the Board
and Executive will promptly select a third independent appraiser to determine
the Fair Market Value based upon information provided by the Company and
Executive. The appraiser appointed hereunder will allocate its costs and
expenses incurred in determining Fair Market Value based upon the relative
differences between each the Board's and Executive's respective determinations
of Fair Market Value and such appraiser's determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will Bain Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the Bain Group Members, the Sutter
---------
Group and Antares International Partners, Inc.; and "Investor" means any of the
Investors individually.
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-15-
<PAGE>
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1933 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the Bain Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or Transfer
of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Sutter Group" means collectively Sutter Hill Ventures and certain
------------
other investors affiliated therewith.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
-16-
<PAGE>
To the Company:
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attn: President
With a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To Executive:
David L. Willenborg
8373 Creekside Drive
Dublin, California 94568
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
Without limiting the foregoing, all existing stock option
-17-
<PAGE>
agreements between the Company and/or the Company's existing stockholders and
Executive are hereby cancelled and terminated.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
17. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
18. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
-18-
<PAGE>
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
21. Effect of Transfers in Violation of Agreement. The Company will
---------------------------------------------
not be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
22. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the Bain Group who hold 80% of the Common Stock held by the Bain
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
23. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
24. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The grant
-----------------------------------------------------
of Management Stock Options hereunder is pursuant to and subject to all of the
terms and conditions of the Plan.
* * * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
-----------------------------------
By:
Its:
-----------------------------------
David L. Willenborg
David L. Willenborg Executive Stock Agreement
<PAGE>
Exhibit 10.8
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
---------
into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and W. Lee Smith ("Executive").
------- ---------
The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 40,738 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and 4,526
--------------
shares of the Company's Class L Common Stock, par value $.01 per share (the
"Class L Common"), (ii) the Company will issue to Executive 100,781 shares of
--------------
the Company's Class B Common Stock, par value $.01 per share (the "Class B
-------
Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option
- ------
Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
--------- ----
will grant to Executive options (collectively, the "Management Options," and
------------------
each, a "Management Option") to acquire an aggregate of 100,781 shares of Class
-----------------
A Common, which options will be divided into five tranches (collectively, the
"Tranches"); the first tranche ("Tranche 1") will consist of Management Options
-------- ---------
to acquire 20,156.2 shares of Class A Common at an exercise price of $8.93 per
share; the second tranche ("Tranche 2") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $ 10.68 per
share; the third tranche ("Tranche 3") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $12.43 per
share; the fourth tranche ("Tranche 4") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $14.18 per
share; and the fifth tranche ("Tranche 5") will consist of Management Options to
---------
acquire 20,156.2 shares of Class A Common at an exercise price of $ 15.89 per
share. Capitalized terms used herein and not otherwise defined are defined in
Section 12 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 40,738 shares of Class A Common at a price of $0.235 per
share and 4,526 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
--------------
$95,952.14. The Company will deliver to Executive certificates representing the
Rollover Stock, and, upon receipt of such certificates, Executive will deliver
to the Company $95,952.14 by delivery of a certified check or wire transfer of
funds.
(b) On or prior to April 15, 1998, at the Executive's request the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by Executive as a result of payments on the date
hereof to Executive by Toray Industries, Inc. pursuant
<PAGE>
to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc.,
Executive and other key employees listed therein in connection with the
Company's recapitalization in exchange for the issuance by Executive to the
Company of a promissory note in the form of Exhibit B attached hereto (the
---------
"Rollover Stock Note"). Executive's obligations under the Rollover Stock Note
-------------------
will be secured by a pledge of all of the Rollover Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit C
---------
attached hereto.
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 100,781 shares of Class B Common (the
"Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase
------------------
price of $23,683.54. The Company will deliver to Executive certificates
representing the Time Vesting Stock, and, upon receipt of such certificates,
Executive will deliver to the Company $1,007.81 by delivery of a check or wire
transfer of funds and a promissory note in the form of Exhibit D attached
---------
hereto in the aggregate principal amount of $22,675.73 (the "Time Vesting Stock
------------------
Note"). Executive's obligations under the Time Vesting Stock Note will be
- ----
secured by a pledge of all of the Time Vesting Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit E
---------
attached hereto.
(d) Section 83(b) Election. Within 30 days after the date hereof,
----------------------
the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------
(e) Vesting of Time Vesting Stock. Subject to the provisions of
-----------------------------
subsection 1(f), on each date set forth below the Time Vesting Stock will have
become vested with respect to the cumulative percentage of Time Vesting Stock
set forth opposite such date if Executive is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
<TABLE>
<CAPTION>
Cumulative
Percentage of Time
Date Vesting Stock Vested
---- --------------------
<S> <C>
May 16, 1998 20%
May 16, 1999 40%
May 16, 2000 60%
May 16, 2001 80%
May 16, 2002 100%
</TABLE>
-2-
<PAGE>
; provided that upon the occurrence of a Sale of the Company, all of the Time
Vesting Stock will immediately vest. The shares of the Time Vesting Stock which
have vested as set forth above will be hereafter referred to as "Vested Time
-----------
Vesting Stock" and the shares of the Time Vesting Stock which have not vested
- -------------
will be hereafter referred to as "Unvested Time Vesting Stock."
---------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 1(e) to the contrary, none of the Time Vesting Stock
will become Vested Time Vesting Stock on or after the Termination Date. All
shares of the Time Vesting Stock which have become Vested Time Vesting Stock
prior to the Termination Date will remain Vested Time Vesting Stock after the
Termination Date.
2. Management Options and Management Option Shares.
-----------------------------------------------
(a) Management Options Grant. The Company hereby grants to
------------------------
Executive, pursuant to the Plan, Management Options to purchase an aggregate of
100,781 shares of Class A Common ("Management Option Shares"). Tranche 1 will
------------------------
consist of Management Options to purchase 20,156.2 Management Option Shares at
an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranch 2
------------------------
will consist of Management Options to purchase 20,156.2 Management Option Shares
at an exercise price of $10.68 per share (the "Tranche 2 Exercise Price");
------------------------
Tranche 3 will consist of Management Options to purchase 20,156.2 Management
Option Shares at an exercise price of $12.43 per share (the "Tranche 3 Exercise
------------------
Price"); Tranche 4 will consist of Management Options to purchase 20,156.2
- -----
Management Option Shares at an exercise price of $14.18 per share (the "Tranche
-------
4 Exercise Price"); and Tranche 5 will consist of Management Options to purchase
- ----------------
20,156.2 Management Option Shares at an exercise price of $15.89 per share (the
"Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the Tranche 2
------------------------
Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise Price, and
the Tranche 5 Exercise Price are collectively referred to herein as "Management
----------
Option Prices" and individually as a "Management Option Price". With respect to
- ------------- -----------------------
each Tranche, the Management Option Price and the number of Management Option
Shares will be equitably adjusted for any stock split, stock dividend,
reclassification or recapitalization of the Company which occurs subsequent to
the date of this Agreement. The Management Options will be immediately
exercisable and, subject to earlier expiration as provided in subsection 2(b)
below, will expire on the Expiration Date. Each Tranche may be exercised
separately; provided that each Tranche may only be exercised in whole and not in
part. The Management Options are not intended to be "incentive stock options"
within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
-----------------------------------------
Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
----------------------
six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or a portion of the
Management Options which have not expired pursuant to subsection 2(b) above by
-3-
<PAGE>
delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Executive has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Executive regarding the Company
and (ii) (x) a certified check or wire transfer of funds in an amount equal to
the par value of the Management Option Shares being purchased (the "Cash
----
Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an
- ------ ---------
"Option Note") in the aggregate principal amount equal to the aggregate
-----------
Management Option Prices (calculated with respect to each Tranche based on the
number of Management Option Shares of such Tranche to be acquired by Executive
and the Management Option Price for such Tranche) for the Tranche(s) being
exercised less the Cash Amount. Executive's obligations under the Option Note
will be secured by a pledge of all of the Management Option Shares, and in
connection therewith Executive will enter into a pledge agreement in the form of
Exhibit H attached hereto. As a condition to any exercise of the Management
- ---------
Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Non-Transferability of Management Options. The Management
-----------------------------------------
Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
-----------------------------------
Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
all of the outstanding Management Option Shares will become vested upon the
occurrence of a Sale of the Company. The Management Option Shares which have
vested as set forth above will be hereafter referred to as "Vested Management
-----------------
Option Shares" and the Management Option Shares which have not vested will be
- -------------
hereafter referred to as "Unvested Management Option Shares."
---------------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 2(e) to the contrary, none of the Unvested Management
Option Shares will become Vested Management Option Shares after the Termination
Date. All Management Option Shares which have become Vested Management Option
Shares prior to the Termination Date will remain Vested Management Option Shares
after the Termination Date.
(g) Section 83(b) Election. Within 30 days after the exercise of
----------------------
any Management Options, the Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in the form of
Exhibit I attached hereto.
- ---------
-4-
<PAGE>
3. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with
-------------------------------------------
the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
-5-
<PAGE>
(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
-----------------
(a) Repurchase Option. If the Termination Date occurs, the Executive
-----------------
Stock, whether held by Executive or one or more transferees, will be subject to
repurchase by the Company and the Bain Group (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in, and to the
extent described in, this Section 4 (the "Repurchase Option").
-----------------
(b) Repurchase Price. In the event the Termination Date occurs, (i)
----------------
the outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof, (ii)
the Unvested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (iii) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a price per
share equal to the Fair Market Value thereof as of the Termination Date, (iv)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date and (v) the Rollover Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date; provided that, if the Company has consummated a Public Offering prior to
the Termination Date, none of the Rollover Stock, the Vested Management Option
Shares or the Vested Time Vesting Shares will be subject to the Repurchase
Option.
(c) Repurchase Procedures. The Repurchase Option is exercisable by
---------------------
the Company delivering written notice (the "Repurchase Notice") to the holder or
-----------------
holders of each Class of Executive Stock within 180 days after the Termination
Date. The Repurchase Notice will set forth the number of shares of each Class
of Executive Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such holder's shares of each such Class of
Executive Stock and the time and place for the closing of the transaction. If
any shares of any Class of Executive Stock are held by any transferees of
Executive, the Company will purchase the shares of such Class elected to be
purchased from such holder(s) of Executive Stock, pro rata according to the
number of shares of such Class of Executive Stock held by such holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) Bain Group's Rights.
-------------------
(i) If for any reason the Company does not elect to purchase all
of the shares of Executive Stock pursuant to the Repurchase Option prior to the
180th day following the Termination Date, the Bain Group will be entitled to
exercise the Repurchase Option, in the manner set forth in this Section 4, for
those shares of each Class of Executive Stock the Company has not elected to
purchase (the "Available Shares"); provided that the Bain Group will not be
----------------
entitled to exercise the Repurchase Option with respect to any Unvested
Management Option Shares or
-6-
<PAGE>
Unvested Time Vesting Stock unless the Company is legally or contractually
prohibited from repurchasing such stock. As soon as practicable, but in any
event within thirty (30) days after the Company determines that there will be
any Available Shares, the Company will deliver written notice (the "Option
------
Notice") to the Bain Group setting forth the number of each Class of Available
- ------
Shares and the price for each Available Share.
(ii) Each member of the Bain Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the Bain Group) of each Class of the Available
Shares. Each member of the Bain Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the Bain Group electing to purchase Available
Shares of any Class of Available Shares which the members of the Bain Group have
elected not to purchase and each of the electing members of the Bain Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate-
--------------------
such members of the Bain Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the Bain Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
Bain Group. Each member of the Bain Group may elect to purchase any of the
remaining Available Shares available to such member of the Bain Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period or the Second Election Period
(if any) the Company will, if necessary, notify the holder(s) of Executive Stock
as to the number of shares of each Class of such Executive Stock being purchased
from the holder(s) by the members of the Bain Group (the "Supplemental
------------
Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
- -----------------
Notice to the holder(s) of such Executive Stock, the Company will also deliver
to each electing member of the Bain Group written notice setting forth the
number of shares of each Class of Executive Stock the Company and each member of
the Bain Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
(e) Closing. The closing of the transactions contemplated by this
-------
Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the Bain Group will pay for any shares of Applicable Stock to be
purchased by such members of the Bain Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
-----
amounts owed to the Company under the Rollover Stock Note, the
-7-
<PAGE>
Time Vesting Stock Note and/or the Option Note, as the case may be, used to
purchase the shares of Applicable Stock being repurchased, by offsetting such
amounts and second, the Company shall pay the remaining portion of the purchase
------
price by delivery of (i) a check payable to the holder of such shares of
Applicable Stock or (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest at a rate per annum equal to 7%, or (iii) a combination of
(i) and (ii) in the aggregate amount of such remaining portion. Any notes issued
by the Company pursuant to this subsection 4(e) will be subject to any
restrictive covenants to which the Company is subject at the time of such
purchase. Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of shares of Executive Stock by the Company will be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of shares of Executive Stock hereunder
which the Company is otherwise entitled to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that in such circumstances any such repurchases for Fair
Market Value shall be for the greater of (i) the Fair Market Value on the date
such restrictions lapse and (ii) the Fair Market Value on the Termination Date.
The Company and/or the members of the Bain Group, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the shares of Executive Stock, including, but not limited to, the
representation that such seller has good and marketable title to such shares of
Executive Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(f) Termination of Repurchase Option. The provisions of this
--------------------------------
Section 4 will terminate upon a Sale of the Company.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge,
---------------------------
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator of which is the number of
shares of Common Stock sold by the Investors in such Public Offering and the
denominator of which is the total number of shares of Common Stock held by the
Investors immediately prior to the initial Public Offering; provided that if any
Other Executives are permitted but do not elect to Transfer any vested shares of
Other Executive Stock pursuant to the applicable Other Executive Stock Agreement
(the aggregate amount of such shares not Transferred being "Excess Shares"),
-------------
then the number of vested shares of Executive Stock permitted to be Transferred
pursuant to clause (y) above will be increased by the result of the number of
Excess Shares multiplied by a fraction, the numerator of which is the number of
vested shares of Executive Stock held by Executive and the denominator of which
is the aggregate number of vested shares of
-8-
<PAGE>
Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
--------------------
pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
---------------
(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
Section 5 will terminate upon the earlier of (i) a Sale of the Company and (ii)
the eighth anniversary of the date hereof.
6. Participation Rights.
--------------------
(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
------------------
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common Stock, the
Other Stockholders participating in such Transfer will be required to sell in
the contemplated Transfer a pro rata portion of shares of all such classes of
Common Stock, which portion will be determined in the manner set forth
immediately above.
-9-
<PAGE>
For example (by way of illustration only), if the Transfer Notice
------------------------------------------
contemplated a sale of 100 shares of Class L Common by the
transferring Investor, and if the transferring Investor at such time
owns 30% of the Class L Common and if one Other Stockholder elects to
participate and owns 20% of the Class L Common, the transferring
Investor would be entitled to sell 60 shares (30% / 50% x 100 shares)
and the Other Stockholder would be entitled to sell 40 shares (20% /
50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF MAY 16, 1997, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
-10-
<PAGE>
8. Definition of Executive Stock. For all purposes of this Agreement,
-----------------------------
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, the Investors, purchasers pursuant
to an offering registered under the 1933 Act or purchasers pursuant to a Rule
144 transaction (other than a Rule 144(k) transaction occurring prior to the
time the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
9. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the Bain Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501)
-11-
<PAGE>
reasonably acceptable to the Company. If any holder of Executive Stock appoints
a purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof will be
determined based on the fair value of the consideration received or receivable
by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other
-12-
<PAGE>
distribution in respect of, the Common Stock in accordance with the Company's
Certificate of Incorporation or (ii) issuances of Common Stock upon conversion
of any shares of the Company's Series A Preferred Stock, or (iii) the issuance
of Common Stock (or securities convertible into or exchangeable for, or options
to purchase, Common Stock) in connection with the provision by the Investors or
their Affiliates of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 hereof, in further consideration of the repurchase of Executive Stock in
connection therewith, for a period of two years after the Termination Date (the
"Noncompete Period"), he will not Compete.
-----------------
(b) Sections 6(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
DEFINITIONS
12. Definitions. The following terms are defined as follows:
-----------
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"Bain Group" means collectively Bain Capital Fund V, L.P., Bain
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
Randolph Street Partners.
"Board" means the Company's Board of Directors.
-----
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
-13-
<PAGE>
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company directly or indirectly, providing consultive service with or without
pay, owning, managing, operating, joining, controlling, participating in, or
being connected as a stockholder, partner or otherwise with any business,
individual, partner, firm corporation or other entity that (i) is in competition
with the Company or any Subsidiary or affiliate of the Company to the extent its
products are similar or materially related to those of the Company or any
Subsidiary or affiliate of the Company (including products under development by
the Company or any Subsidiary of affiliate of the Company) or (ii) otherwise
engages in any business in which the Company or any Subsidiary or affiliate of
the Company is engaged or proposes to engage, in either case as of the
Termination Date; provided that "Compete" and "Competing" will not mean being a
------- ---------
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the fair
value of such security determined jointly in good faith by the Board and
Executive; provided that if, within 60 days, the Board and Executive cannot so
agree, then such value will be determined by an independent appraiser reasonably
acceptable to the Board and Executive, which appraiser will submit to the
-14-
<PAGE>
Board and Executive a written report setting forth such determination. If the
Board and Executive are unable to so agree on an appraiser within 15 days after
the end of such 60-day period, each of the Board and Executive will promptly
select an independent appraiser and the two appraisers so selected by the Board
and Executive will promptly select a third independent appraiser to determine
the Fair Market Value based upon information provided by the Company and
Executive. The appraiser appointed hereunder will allocate its costs and
expenses incurred in determining Fair Market Value based upon the relative
differences between each the Board's and Executive's respective determinations
of Fair Market Value and such appraiser's determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will Bain Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the Bain Group Members, the Sutter
---------
Group and Antares International Partners, Inc.; and "Investor" means any of the
--------
Investors individually.
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-15-
<PAGE>
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1933 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the Bain Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or Transfer
of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Sutter Group" means collectively Sutter Hill Ventures and certain
------------
other investors affiliated therewith.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
-16-
<PAGE>
To the Company:
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attn: President
With a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To Executive:
W. Lee Smith
4660 Kingswood Drive
Danville, California 94506
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. Without
limiting the foregoing, all existing stock option
-17-
<PAGE>
agreements between the Company and/or the Company's existing stockholders and
Executive are hereby cancelled and terminated.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
17. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
18. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
-18-
<PAGE>
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
21. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
22. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the Bain Group who hold 80% of the Common Stock held by the Bain
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
23. Third Party Beneficiaries. The parties hereto acknowledge and agree
-------------------------
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
24. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The grant of
-----------------------------------------------------
Management Stock Options hereunder is pursuant to and subject to all of the
terms and conditions of the Plan.
* * * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
THERMA-WAVE, INC.
-------------------------------
By:
Its:
-------------------------------
W. Lee Smith
W. Lee Smith Executive Stock Agreement
<PAGE>
Exhibit 10.9
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
---------
into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and Jon L. Opsal ("Executive").
------- ---------
The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 23,427 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and 2,603
--------------
shares of the Company's Class L Common Stock, par value $.01 per share (the
"Class L Common"), (ii) the Company will issue to Executive 127,656 shares of
--------------
the Company's Class B Common Stock, par value $.01 per share (the "Class B
-------
Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option
- ------
Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
--------- ----
will grant to Executive options (collectively, the "Management Options," and
------------------
each, a "Management Option") to acquire an aggregate of 127,656 shares of Class
-----------------
A Common, which options will be divided into five tranches (collectively, the
"Tranches"); the first tranche ("Tranche 1") will consist of Management Options
-------- ---------
to acquire 25,531.2 shares of Class A Common at an exercise price of $8.93 per
share; the second tranche ("Tranche 2") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $ 10.68 per
share; the third tranche ("Tranche 3") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $12.43 per
share; the fourth tranche ("Tranche 4") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $14.18 per
share; and the fifth tranche ("Tranche 5") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $ 15.89 per
share. Capitalized terms used herein and not otherwise defined are defined in
Section 12 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 23,427 shares of Class A Common at a price of $0.235 per
share and 2,603 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
--------------
$55,183.60. The Company will deliver to Executive certificates representing the
Rollover Stock, and, upon receipt of such certificates, Executive will deliver
to the Company $55,183.60 by delivery of a certified check or wire transfer of
funds.
(b) On or prior to April 15, 1998, at the Executive's request the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by Executive as a result of payments on the date
hereof to Executive by Toray Industries, Inc. pursuant
<PAGE>
to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc.,
Executive and other key employees listed therein in connection with the
Company's recapitalization in exchange for the issuance by Executive to the
Company of a promissory note in the form of Exhibit B attached hereto (the
---------
"Rollover Stock Note"). Executive's obligations under the Rollover Stock Note
-------------------
will be secured by a pledge of all of the Rollover Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit C
---------
attached hereto.
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 127,656 shares of Class B Common (the
"Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase
------------------
price of $29,999.16. The Company will deliver to Executive certificates
representing the Time Vesting Stock, and, upon receipt of such certificates,
Executive will deliver to the Company $1,276.56 by delivery of a check or wire
transfer of funds and a promissory note in the form of Exhibit D attached
---------
hereto in the aggregate principal amount of $28,722.60 (the "Time Vesting Stock
------------------
Note"). Executive's obligations under the Time Vesting Stock Note will be
- ----
secured by a pledge of all of the Time Vesting Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit E
---------
attached hereto.
(d) Section 83(b) Election. Within 30 days after the date hereof,
----------------------
the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------
(e) Vesting of Time Vesting Stock. Subject to the provisions of
-----------------------------
subsection 1(f), on each date set forth below the Time Vesting Stock will have
become vested with respect to the cumulative percentage of Time Vesting Stock
set forth opposite such date if Executive is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
<TABLE>
<CAPTION>
Cumulative
Percentage of Time
Date Vesting Stock Vested
---- --------------------
<S> <C>
May 16, 1998 20%
May 16, 1999 40%
May 16, 2000 60%
May 16, 2001 80%
May 16, 2002 100%
</TABLE>
-2-
<PAGE>
; provided that upon the occurrence of a Sale of the Company, all of the Time
Vesting Stock will immediately vest. The shares of the Time Vesting Stock which
have vested as set forth above will be hereafter referred to as "Vested Time
-----------
Vesting Stock" and the shares of the Time Vesting Stock which have not vested
- -------------
will be hereafter referred to as "Unvested Time Vesting Stock."
---------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 1(e) to the contrary, none of the Time Vesting Stock
will become Vested Time Vesting Stock on or after the Termination Date. All
shares of the Time Vesting Stock which have become Vested Time Vesting Stock
prior to the Termination Date will remain Vested Time Vesting Stock after the
Termination Date.
2. Management Options and Management Option Shares.
-----------------------------------------------
(a) Management Options Grant. The Company hereby grants to
------------------------
Executive, pursuant to the Plan, Management Options to purchase an aggregate of
127,656 shares of Class A Common ("Management Option Shares"). Tranche 1 will
------------------------
consist of Management Options to purchase 25,531.2 Management Option Shares at
an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
------------------------
will consist of Management Options to purchase 25,531.2 Management Option
Shares at an exercise price of $10.68 per share (the "Tranche 2 Exercise
------------------
Price"); Tranche 3 will consist of Management Options to purchase 25,531.2
- -----
Management Option Shares at an exercise price of $12.43 per share (the "Tranche
-------
3 Exercise Price"); Tranche 4 will consist of Management Options to purchase
- ----------------
25,531.2 Management Option Shares at an exercise price of $14.18 per share (the
"Tranche 4 Exercise Price"); and Tranche 5 will consist of Management Options to
------------------------
purchase 25,531.2 Management Option Shares at an exercise price of $15.89 per
share (the "Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the
------------------------
Tranche 2 Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise
Price, and the Tranche 5 Exercise Price are collectively referred to herein as
"Management Option Prices" and individually as a "Management Option Price".
------------------------ -----------------------
With respect to each Tranche, the Management Option Price and the number of
Management Option Shares will be equitably adjusted for any stock split, stock
dividend, reclassification or recapitalization of the Company which occurs
subsequent to the date of this Agreement. The Management Options will be
immediately exercisable and, subject to earlier expiration as provided in
subsection 2(b) below, will expire on the Expiration Date. Each Tranche may be
exercised separately; provided that each Tranche may only be exercised in whole
and not in part. The Management Options are not intended to be "incentive stock
options" within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
-----------------------------------------
Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
----------------------
six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or a portion of the
Management Options which have not expired pursuant to subsection 2(b) above by
-3-
<PAGE>
delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Executive has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Executive regarding the Company
and (ii) (x) a certified check or wire transfer of funds in an amount equal to
the par value of the Management Option Shares being purchased (the "Cash
----
Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an
- ------ ---------
"Option Note") in the aggregate principal amount equal to the aggregate
-----------
Management Option Prices (calculated with respect to each Tranche based on the
number of Management Option Shares of such Tranche to be acquired by Executive
and the Management Option Price for such Tranche) for the Tranche(s) being
exercised less the Cash Amount. Executive's obligations under the Option Note
will be secured by a pledge of all of the Management Option Shares, and in
connection therewith Executive will enter into a pledge agreement in the form of
Exhibit H attached hereto. As a condition to any exercise of the Management
- ---------
Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Non-Transferability of Management Options. The Management
-----------------------------------------
Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
-----------------------------------
Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
all of the outstanding Management Option Shares will become vested upon the
occurrence of a Sale of the Company. The Management Option Shares which have
vested as set forth above will be hereafter referred to as "Vested Management
-----------------
Option Shares" and the Management Option Shares which have not vested will be
- -------------
hereafter referred to as "Unvested Management Option Shares."
---------------------------------
(f) No Vesting After Termination Date. Notwithstanding any provision
---------------------------------
of subsection 2(e) to the contrary, none of the Unvested Management Option
Shares will become Vested Management Option Shares after the Termination Date.
All Management Option Shares which have become Vested Management Option Shares
prior to the Termination Date will remain Vested Management Option Shares after
the Termination Date.
(g) Section 83(b) Election. Within 30 days after the exercise of
----------------------
any Management Options, the Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in the form of
Exhibit I attached hereto.
- ---------
-4-
<PAGE>
3. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with
-------------------------------------------
the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
-5-
<PAGE>
(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
-----------------
(a) Repurchase Option. If the Termination Date occurs, the Executive
-----------------
Stock, whether held by Executive or one or more transferees, will be subject to
repurchase by the Company and the Bain Group (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in, and to the
extent described in, this Section 4 (the "Repurchase Option").
-----------------
(b) Repurchase Price. In the event the Termination Date occurs, (i)
----------------
the outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof, (ii)
the Unvested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (iii) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a price per
share equal to the Fair Market Value thereof as of the Termination Date, (iv)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date and (v) the Rollover Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date; provided that, if the Company has consummated a Public Offering prior to
the Termination Date, none of the Rollover Stock, the Vested Management Option
Shares or the Vested Time Vesting Shares will be subject to the Repurchase
Option.
(c) Repurchase Procedures. The Repurchase Option is exercisable by
---------------------
the Company delivering written notice (the "Repurchase Notice") to the holder or
-----------------
holders of each Class of Executive Stock within 180 days after the Termination
Date. The Repurchase Notice will set forth the number of shares of each Class
of Executive Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such holder's shares of each such Class of
Executive Stock and the time and place for the closing of the transaction. If
any shares of any Class of Executive Stock are held by any transferees of
Executive, the Company will purchase the shares of such Class elected to be
purchased from such holder(s) of Executive Stock, pro rata according to the
number of shares of such Class of Executive Stock held by such holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) Bain Group's Rights.
-------------------
(i) If for any reason the Company does not elect to purchase all
of the shares of Executive Stock pursuant to the Repurchase Option prior to the
180th day following the Termination Date, the Bain Group will be entitled to
exercise the Repurchase Option, in the manner set forth in this Section 4, for
those shares of each Class of Executive Stock the Company has not elected to
purchase (the "Available Shares"); provided that the Bain Group will not be
----------------
entitled to exercise the Repurchase Option with respect to any Unvested
Management Option Shares or
-6-
<PAGE>
Unvested Time Vesting Stock unless the Company is legally or contractually
prohibited from repurchasing such stock. As soon as practicable, but in any
event within thirty (30) days after the Company determines that there will be
any Available Shares, the Company will deliver written notice (the "Option
------
Notice") to the Bain Group setting forth the number of each Class of Available
- ------
Shares and the price for each Available Share.
(ii) Each member of the Bain Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the Bain Group) of each Class of the Available
Shares. Each member of the Bain Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the Bain Group electing to purchase Available
Shares of any Class of Available Shares which the members of the Bain Group have
elected not to purchase and each of the electing members of the Bain Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate
--------------------
such members of the Bain Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the Bain Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
Bain Group. Each member of the Bain Group may elect to purchase any of the
remaining Available Shares available to such member of the Bain Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5) days
after the expiration of the Election Period or the Second Election Period (if
any) the Company will, if necessary, notify the holder(s) of Executive Stock as
to the number of shares of each Class of such Executive Stock being purchased
from the holder(s) by the members of the Bain Group (the "Supplemental
------------
Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
- -----------------
Notice to the holder(s) of such Executive Stock, the Company will also deliver
to each electing member of the Bain Group written notice setting forth the
number of shares of each Class of Executive Stock the Company and each member of
the Bain Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
(e) Closing. The closing of the transactions contemplated by this
-------
Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the Bain Group will pay for any shares of Applicable Stock to be
purchased by such members of the Bain Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
-----
amounts owed to the Company under the Rollover Stock Note, the
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Time Vesting Stock Note and/or the Option Note, as the case may be, used to
purchase the shares of Applicable Stock being repurchased, by offsetting such
amounts and second, the Company shall pay the remaining portion of the purchase
------
price by delivery of (i) a check payable to the holder of such shares of
Applicable Stock or (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest at a rate per annum equal to 7%, or (iii) a combination of
(i) and (ii) in the aggregate amount of such remaining portion. Any notes issued
by the Company pursuant to this subsection 4(e) will be subject to any
restrictive covenants to which the Company is subject at the time of such
purchase. Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of shares of Executive Stock by the Company will be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of shares of Executive Stock hereunder
which the Company is otherwise entitled to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that in such circumstances any such repurchases for Fair
Market Value shall be for the greater of (i) the Fair Market Value on the date
such restrictions lapse and (ii) the Fair Market Value on the Termination Date.
The Company and/or the members of the Bain Group, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the shares of Executive Stock, including, but not limited to, the
representation that such seller has good and marketable title to such shares of
Executive Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(f) Termination of Repurchase Option. The provisions of this
--------------------------------
Section 4 will terminate upon a Sale of the Company.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge,
---------------------------
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator of which is the number of
shares of Common Stock sold by the Investors in such Public Offering and the
denominator of which is the total number of shares of Common Stock held by the
Investors immediately prior to the initial Public Offering; provided that if any
Other Executives are permitted but do not elect to Transfer any vested shares of
Other Executive Stock pursuant to the applicable Other Executive Stock Agreement
(the aggregate amount of such shares not Transferred being "Excess Shares"),
-------------
then the number of vested shares of Executive Stock permitted to be Transferred
pursuant to clause (y) above will be increased by the result of the number of
Excess Shares multiplied by a fraction, the numerator of which is the number of
vested shares of Executive Stock held by Executive and the denominator of which
is the aggregate number of vested shares of
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Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
--------------------
pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
---------------
(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
Section 5 will terminate upon the earlier of (i) a Sale of the Company and (ii)
the eighth anniversary of the date hereof.
6. Participation Rights.
--------------------
(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
------------------
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common Stock, the
Other Stockholders participating in such Transfer will be required to sell in
the contemplated Transfer a pro rata portion of shares of all such classes of
Common Stock, which portion will be determined in the manner set forth
immediately above.
-9-
<PAGE>
For example (by way of illustration only), if the Transfer
-----------------------------------------
Notice contemplated a sale of 100 shares of Class L Common
by the transferring Investor, and if the transferring
Investor at such time owns 30% of the Class L Common and
if one Other Stockholder elects to participate and owns
20% of the Class L Common, the transferring Investor would
be entitled to sell 60 shares (30% / 50% x 100 shares) and
the Other Stockholder would be entitled to sell 40 shares
(20% / 50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF MAY 16, 1997, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
-10-
<PAGE>
8. Definition of Executive Stock. For all purposes of this Agreement,
-----------------------------
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, the Investors, purchasers pursuant
to an offering registered under the 1933 Act or purchasers pursuant to a Rule
144 transaction (other than a Rule 144(k) transaction occurring prior to the
time the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
9. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the Bain Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501)
-11-
<PAGE>
reasonably acceptable to the Company. If any holder of Executive Stock appoints
a purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof will be
determined based on the fair value of the consideration received or receivable
by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other
-12-
<PAGE>
distribution in respect of, the Common Stock in accordance with the Company's
Certificate of Incorporation or (ii) issuances of Common Stock upon conversion
of any shares of the Company=s Series A Preferred Stock, or (iii) the issuance
of Common Stock (or securities convertible into or exchangeable for, or options
to purchase, Common Stock) in connection with the provision by the Investors or
their Affiliates of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 hereof, in further consideration of the repurchase of Executive Stock in
connection therewith, for a period of two years after the Termination Date (the
"Noncompete Period"), he will not Compete.
-----------------
(b) Sections 6(b)-(g) of the Employment Agreement are hereby
incorporated by reference in their entirety.
DEFINITIONS
12. Definitions. The following terms are defined as follows:
------------
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"Bain Group" means collectively Bain Capital Fund V, L.P., Bain
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
Randolph Street Partners.
"Board" means the Company's Board of Directors.
-----
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
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<PAGE>
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company directly or indirectly, providing consultive service with or without
pay, owning, managing, operating, joining, controlling, participating in, or
being connected as a stockholder, partner or otherwise with any business,
individual, partner, firm corporation or other entity that (i) is in competition
with the Company or any Subsidiary or affiliate of the Company to the extent its
products are similar or materially related to those of the Company or any
Subsidiary or affiliate of the Company (including products under development by
the Company or any Subsidiary of affiliate of the Company) or (ii) otherwise
engages in any business in which the Company or any Subsidiary or affiliate of
the Company is engaged or proposes to engage, in either case as of the
Termination Date; provided that "Compete" and "Competing" will not mean being a
------- ---------
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the fair
value of such security determined jointly in good faith by the Board and
Executive; provided that if, within 60 days, the Board and Executive cannot so
agree, then such value will be determined by an independent appraiser reasonably
acceptable to the Board and Executive, which appraiser will submit to the
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<PAGE>
Board and Executive a written report setting forth such determination. If the
Board and Executive are unable to so agree on an appraiser within 15 days after
the end of such 60-day period, each of the Board and Executive will promptly
select an independent appraiser and the two appraisers so selected by the Board
and Executive will promptly select a third independent appraiser to determine
the Fair Market Value based upon information provided by the Company and
Executive. The appraiser appointed hereunder will allocate its costs and
expenses incurred in determining Fair Market Value based upon the relative
differences between each the Board's and Executive's respective determinations
of Fair Market Value and such appraiser's determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will Bain Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the Bain Group Members, the Sutter
---------
Group and Antares International Partners, Inc.; and "Investor" means any of the
--------
Investors individually.
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
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<PAGE>
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1933 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the Bain Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or Transfer
of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Sutter Group" means collectively Sutter Hill Ventures and certain
------------
other investors affiliated therewith.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
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<PAGE>
To the Company:
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attn: President
With a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To Executive:
Jon L. Opsal
2295 Northwood Drive
Livermore, California 94550
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein .
15. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. Without
limiting the foregoing, all existing stock option
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<PAGE>
agreements between the Company and/or the Company's existing stockholders and
Executive are hereby cancelled and terminated.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
17. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
18. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
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<PAGE>
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
21. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
22. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the Bain Group who hold 80% of the Common Stock held by the Bain
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
23. Third Party Beneficiaries. The parties hereto acknowledge and agree
-------------------------
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
24. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The grant of
-----------------------------------------------------
Management Stock Options hereunder is pursuant to and subject to all of the
terms and conditions of the Plan.
* * * * *
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
___________________________________
By:
Its:
____________________________________
Jon L. Opsal
Jon L. Opsal Executive Stock Agreement
<PAGE>
Exhibit 10.10
THERMA-WAVE, INC.
EXECUTIVE STOCK AGREEMENT
-------------------------
THIS EXECUTIVE STOCK AGREEMENT (this "Agreement") is made and entered
---------
into as of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation
(the "Company"), and Anthony W. Lin ("Executive").
------- ---------
The Company and Executive desire to enter into this Agreement pursuant
to which (i) the Company will issue to Executive 40,588 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common") and 4,510
--------------
shares of the Company's Class L Common Stock, par value $.01 per share (the
"Class L Common"), (ii) the Company will issue to Executive 127,656 shares of
--------------
the Company's Class B Common Stock, par value $.01 per share (the "Class B
-------
Common") and (iii) pursuant to the Company's 1997 Stock Purchase and Option
- ------
Plan, a copy of which is attached hereto as Exhibit A (the "Plan"), the Company
--------- ----
will grant to Executive options (collectively, the "Management Options," and
------------------
each, a "Management Option") to acquire an aggregate of 127,656 shares of Class
-----------------
A Common, which options will be divided into five tranches (collectively, the
"Tranches"); the first tranche ("Tranche 1") will consist of Management Options
-------- ---------
to acquire 25,531.2 shares of Class A Common at an exercise price of $8.93 per
share; the second tranche ("Tranche 2") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $ 10.68 per
share; the third tranche ("Tranche 3") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $12.43 per
share; the fourth tranche ("Tranche 4") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $14.18 per
share; and the fifth tranche ("Tranche 5") will consist of Management Options to
---------
acquire 25,531.2 shares of Class A Common at an exercise price of $ 15.89 per
share. Capitalized terms used herein and not otherwise defined are defined in
Section 12 hereof.
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will purchase, and
the Company will sell, 40,588 shares of Class A Common at a price of $0.235 per
share and 4,510 shares of Class L Common at a price of $19.085 per share
(collectively, the "Rollover Stock"), for an aggregate purchase price of
--------------
$95,611.53. The Company will deliver to Executive certificates representing the
Rollover Stock, and, upon receipt of such certificates, Executive will deliver
to the Company $95,611.53 by delivery of a certified check or wire transfer of
funds.
(b) On or prior to April 15, 1998, at the Executive's request the
Company shall loan to Executive an amount equal to all federal, state and local
taxes required to be paid by Executive as a result of payments on the date
hereof to Executive by Toray Industries, Inc. pursuant
<PAGE>
to the Agreement, dated as of January 25, 1996, among Toray Industries, Inc.,
Executive and other key employees listed therein in connection with the
Company's recapitalization in exchange for the issuance by Executive to the
Company of a promissory note in the form of Exhibit B attached hereto (the
---------
"Rollover Stock Note"). Executive's obligations under the Rollover Stock Note
-------------------
will be secured by a pledge of all of the Rollover Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit C
---------
attached hereto.
(c) Immediately after the closing of the transactions contemplated
by the Recapitalization Agreement, dated as of December 18, 1996, among the
Company, Sellers and Purchaser (each as defined therein), Executive will
purchase, and the Company will sell, 127,656 shares of Class B Common (the
"Time Vesting Stock"), at a price of $0.235 per share for an aggregate purchase
------------------
price of $29,999.16. The Company will deliver to Executive certificates
representing the Time Vesting Stock, and, upon receipt of such certificates,
Executive will deliver to the Company $1,276.56 by delivery of a check or wire
transfer of funds and a promissory note in the form of Exhibit D attached
---------
hereto in the aggregate principal amount of $28,722.60 (the "Time Vesting Stock
------------------
Note"). Executive's obligations under the Time Vesting Stock Note will be
- ----
secured by a pledge of all of the Time Vesting Stock, and in connection
therewith Executive will enter into a pledge agreement in the form of Exhibit E
---------
attached hereto.
(d) Section 83(b) Election. Within 30 days after the date hereof,
----------------------
the Executive will make an effective election with the Internal Revenue Service
under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, in the form of Exhibit F attached hereto.
---------
(e) Vesting of Time Vesting Stock. Subject to the provisions of
-----------------------------
subsection 1(f), on each date set forth below the Time Vesting Stock will have
become vested with respect to the cumulative percentage of Time Vesting Stock
set forth opposite such date if Executive is, and has been, continuously
employed by the Company or its Subsidiaries from the date of this Agreement
through such date:
<TABLE>
<CAPTION>
Cumulative
Percentage of Time
Date Vesting Stock Vested
---- --------------------
<S> <C>
May 16, 1998 20%
May 16, 1999 40%
May 16, 2000 60%
May 16, 2001 80%
May 16, 2002 100%
</TABLE>
-2-
<PAGE>
provided that upon the occurrence of a Sale of the Company, all of the Time
Vesting Stock will immediately vest. The shares of the Time Vesting Stock which
have vested as set forth above will be hereafter referred to as "Vested Time
-----------
Vesting Stock" and the shares of the Time Vesting Stock which have not vested
- -------------
will be hereafter referred to as "Unvested Time Vesting Stock."
---------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 1(e) to the contrary, none of the Time Vesting Stock
will become Vested Time Vesting Stock on or after the Termination Date. All
shares of the Time Vesting Stock which have become Vested Time Vesting Stock
prior to the Termination Date will remain Vested Time Vesting Stock after the
Termination Date.
2. Management Options and Management Option Shares.
-----------------------------------------------
(a) Management Options Grant. The Company hereby grants to
------------------------
Executive, pursuant to the Plan, Management Options to purchase an aggregate of
127,656 shares of Class A Common ("Management Option Shares"). Tranche 1 will
------------------------
consist of Management Options to purchase 25,531.2 Management Option Shares at
an exercise price of $8.93 per share (the "Tranche 1 Exercise Price"); Tranche 2
------------------------
will consist of Management Options to purchase 25,531.2 Management Option
Shares at an exercise price of $10.68 per share (the "Tranche 2 Exercise
------------------
Price"); Tranche 3 will consist of Management Options to purchase 25,531.2
- -----
Management Option Shares at an exercise price of $12.43 per share (the "Tranche
-------
3 Exercise Price"); Tranche 4 will consist of Management Options to purchase
- ----------------
25,531.2 Management Option Shares at an exercise price of $14.18 per share (the
"Tranche 4 Exercise Price"); and Tranche 5 will consist of Management Options to
------------------------
purchase 25,531.2 Management Option Shares at an exercise price of $15.89 per
share (the "Tranche 5 Exercise Price"). The Tranche 1 Exercise Price, the
------------------------
Tranche 2 Exercise Price, the Tranche 3 Exercise Price, the Tranche 4 Exercise
Price, and the Tranche 5 Exercise Price are collectively referred to herein as
"Management Option Prices" and individually as a "Management Option Price".
------------------------- -----------------------
With respect to each Tranche, the Management Option Price and the number of
Management Option Shares will be equitably adjusted for any stock split, stock
dividend, reclassification or recapitalization of the Company which occurs
subsequent to the date of this Agreement. The Management Options will be
immediately exercisable and, subject to earlier expiration as provided in
subsection 2(b) below, will expire on the Expiration Date. Each Tranche may be
exercised separately; provided that each Tranche may only be exercised in whole
and not in part. The Management Options are not intended to be "incentive stock
options" within the meaning of Section 422A of the Code.
(b) Expiration Upon Termination of Employment. Any Management
-----------------------------------------
Options which have not been exercised prior to the Termination Date will expire
on the earlier of (i) 90 days after the Termination Date and (ii) the Expiration
Date and may not be exercised thereafter under any circumstance.
(c) Procedure for Exercise. At any time after the earlier of (i)
----------------------
six months after the date hereof and (ii) the effective date of a registration
statement with respect to the Company's debt securities under the 1933 Act and
prior to the Expiration Date, Executive may exercise all or a portion of the
Management Options which have not expired pursuant to subsection 2(b) above by
-3-
<PAGE>
delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Executive has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Executive regarding the Company
and (ii) (x) a certified check or wire transfer of funds in an amount equal to
the par value of the Management Option Shares being purchased (the "Cash
----
Amount") and (y) a promissory note in the form of Exhibit G attached hereto (an
- ------ ---------
"Option Note") in the aggregate principal amount equal to the aggregate
-----------
Management Option Prices (calculated with respect to each Tranche based on the
number of Management Option Shares of such Tranche to be acquired by Executive
and the Management Option Price for such Tranche) for the Tranche(s) being
exercised less the Cash Amount. Executive's obligations under the Option Note
will be secured by a pledge of all of the Management Option Shares, and in
connection therewith Executive will enter into a pledge agreement in the form of
Exhibit H attached hereto. As a condition to any exercise of the Management
Options, Executive will permit the Company to deliver to him all financial and
other information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(d) Non-Transferability of Management Options. The Management
-----------------------------------------
Options are personal to Executive and are not transferable by Executive except
pursuant to the laws of descent or distribution. Only Executive or his legal
guardian or representative may exercise the Management Options.
(e) Vesting of Management Option Shares. The Management Option
-----------------------------------
Shares will become vested (regardless of whether the corresponding Management
Options have been exercised) on the fifth anniversary of the date hereof if
Executive is, and has been, continuously employed by the Company or its
Subsidiaries from the date of this Agreement through such date; provided that
all of the outstanding Management Option Shares will become vested upon the
occurrence of a Sale of the Company. The Management Option Shares which have
vested as set forth above will be hereafter referred to as "Vested Management
-----------------
Option Shares" and the Management Option Shares which have not vested will be
- -------------
hereafter referred to as "Unvested Management Option Shares."
---------------------------------
(f) No Vesting After Termination Date. Notwithstanding any
---------------------------------
provision of subsection 2(e) to the contrary, none of the Unvested Management
Option Shares will become Vested Management Option Shares after the Termination
Date. All Management Option Shares which have become Vested Management Option
Shares prior to the Termination Date will remain Vested Management Option Shares
after the Termination Date.
(g) Section 83(b) Election. Within 30 days after the exercise of
----------------------
any Management Options, the Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder, in the form of
Exhibit I attached hereto.
- ---------
-4-
<PAGE>
3. Representations and Warranties; Acknowledgments.
-----------------------------------------------
(a) Representations and Warranties by Executive. In connection with
-------------------------------------------
the purchase and sale of Executive Stock hereunder, Executive represents and
warrants to the Company that:
(i) The shares of Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and
not with a view to, or intention of, distribution thereof in violation of
the 1933 Act or any applicable state securities laws, and the shares of
Executive Stock will not be disposed of in contravention of the 1933 Act or
any applicable state securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in Executive Stock for an indefinite period of time because
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
Executive Stock and has had full access to such other information
concerning the Company and its Subsidiaries as he has requested. Executive
has reviewed, or has had an opportunity to review, a copy of the
Recapitalization Agreement and the persons listed on the signature pages
thereto, and Executive is familiar with the transactions contemplated
thereby. Executive also has reviewed, or has had an opportunity to review,
the Company's Certificate of Incorporation and the Company's Bylaws and any
credit agreements, notes and related documents to which the Company is a
party.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(b) Acknowledgment by Executive. As an inducement to the Company to
---------------------------
sell the Executive Stock to Executive, and as a condition thereto,
Executive acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior
to, upon or in connection with the repurchase of Executive Stock as
provided hereunder; and
-5-
<PAGE>
(ii) subject to any employment agreement between Executive and
the Company or applicable law, neither the issuance of Executive Stock to
Executive nor any provision contained herein will entitle Executive to
remain in the employment of the Company or its Subsidiaries or affect the
right of the Company to terminate Executive's employment at any time for
any reason.
4. Repurchase Option.
-----------------
(a) Repurchase Option. If the Termination Date occurs, the Executive
-----------------
Stock, whether held by Executive or one or more transferees, will be subject to
repurchase by the Company and the Bain Group (each of the aforementioned, solely
at their option) pursuant to the terms and conditions set forth in, and to the
extent described in, this Section 4 (the "Repurchase Option").
-----------------
(b) Repurchase Price. In the event the Termination Date occurs, (i)
----------------
the outstanding Unvested Management Option Shares will be subject to the
Repurchase Option at a price per share equal to the Original Cost thereof, (ii)
the Unvested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Original Cost thereof, (iii) the outstanding Vested
Management Option Shares will be subject to the Repurchase Option at a price per
share equal to the Fair Market Value thereof as of the Termination Date, (iv)
the Vested Time Vesting Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date and (v) the Rollover Stock will be subject to the Repurchase Option at a
price per share equal to the Fair Market Value thereof as of the Termination
Date; provided that, if the Company has consummated a Public Offering prior to
the Termination Date, none of the Rollover Stock, the Vested Management Option
Shares or the Vested Time Vesting Shares will be subject to the Repurchase
Option.
(c) Repurchase Procedures. The Repurchase Option is exercisable by
---------------------
the Company delivering written notice (the "Repurchase Notice") to the holder or
-----------------
holders of each Class of Executive Stock within 180 days after the Termination
Date. The Repurchase Notice will set forth the number of shares of each Class
of Executive Stock to be acquired from such holder(s), the aggregate
consideration to be paid for such holder's shares of each such Class of
Executive Stock and the time and place for the closing of the transaction. If
any shares of any Class of Executive Stock are held by any transferees of
Executive, the Company will purchase the shares of such Class elected to be
purchased from such holder(s) of Executive Stock, pro rata according to the
number of shares of such Class of Executive Stock held by such holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) Bain Group's Rights.
-------------------
(i) If for any reason the Company does not elect to purchase
all of the shares of Executive Stock pursuant to the Repurchase Option prior to
the 180th day following the Termination Date, the Bain Group will be entitled to
exercise the Repurchase Option, in the manner set forth in this Section 4, for
those shares of each Class of Executive Stock the Company has not elected to
purchase (the "Available Shares"); provided that the Bain Group will not be
----------------
entitled to exercise the Repurchase Option with respect to any Unvested
Management Option Shares or
-6-
<PAGE>
Unvested Time Vesting Stock unless the Company is legally or contractually
prohibited from repurchasing such stock. As soon as practicable, but in any
event within thirty (30) days after the Company determines that there will be
any Available Shares, the Company will deliver written notice (the "Option
------
Notice") to the Bain Group setting forth the number of each Class of Available
- ------
Shares and the price for each Available Share.
(ii) Each member of the Bain Group initially will be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such member of the Bain Group) of each Class of the Available
Shares. Each member of the Bain Group may elect to purchase any number of any
Class of the Available Shares (subject to the preceding sentence) by delivering
written notice to the Company within 30 days after receipt of the Option Notice
from the Company (such 30-day period being referred to herein as the "Election
--------
Period").
- ------
(iii) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period, the Company will, if
necessary, notify the members of the Bain Group electing to purchase Available
Shares of any Class of Available Shares which the members of the Bain Group have
elected not to purchase and each of the electing members of the Bain Group will
be entitled to purchase the remaining Available Shares on the same terms as
described above (the "Second Option Notice"); provided that if in the aggregate
--------------------
such members of the Bain Group elect to purchase more than the remaining
Available Shares of any Class, such remaining Available Shares purchased by each
such member of the Bain Group of such Class will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such member of the
Bain Group. Each member of the Bain Group may elect to purchase any of the
remaining Available Shares available to such member of the Bain Group by
delivering written notice to the Company within 10 days after the delivery of
the Second Option Notice (with such 10-day period referred to herein as the
"Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5)
days after the expiration of the Election Period or the Second Election Period
(if any) the Company will, if necessary, notify the holder(s) of Executive Stock
as to the number of shares of each Class of such Executive Stock being purchased
from the holder(s) by the members of the Bain Group (the "Supplemental
------------
Repurchase Notice"). At the time the Company delivers a Supplemental Repurchase
- -----------------
Notice to the holder(s) of such Executive Stock, the Company will also deliver
to each electing member of the Bain Group written notice setting forth the
number of shares of each Class of Executive Stock the Company and each member of
the Bain Group will acquire, the aggregate purchase price to be paid and the
time and place of the closing of the transaction.
(e) Closing. The closing of the transactions contemplated by this
-------
Section 4 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
members of the Bain Group will pay for any shares of Applicable Stock to be
purchased by such members of the Bain Group pursuant to the Repurchase Option by
delivery of a check payable to the holder of such shares of Applicable Stock.
The Company will pay for any shares of Applicable Stock to be purchased by the
Company pursuant to the Repurchase Option (if any) first, to the extent of any
-----
amounts owed to the Company under the Rollover Stock Note, the
-7-
<PAGE>
Time Vesting Stock Note and/or the Option Note, as the case may be, used to
purchase the shares of Applicable Stock being repurchased, by offsetting such
amounts and second, the Company shall pay the remaining portion of the purchase
------
price by delivery of (i) a check payable to the holder of such shares of
Applicable Stock or (ii) a note or notes payable in three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest at a rate per annum equal to 7%, or (iii) a combination of
(i) and (ii) in the aggregate amount of such remaining portion. Any notes issued
by the Company pursuant to this subsection 4(e) will be subject to any
restrictive covenants to which the Company is subject at the time of such
purchase. Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of shares of Executive Stock by the Company will be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of shares of Executive Stock hereunder
which the Company is otherwise entitled to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that in such circumstances any such repurchases for Fair
Market Value shall be for the greater of (i) the Fair Market Value on the date
such restrictions lapse and (ii) the Fair Market Value on the Termination Date.
The Company and/or the members of the Bain Group, as the case may be, will
receive customary representations and warranties from each seller regarding the
sale of the shares of Executive Stock, including, but not limited to, the
representation that such seller has good and marketable title to such shares of
Executive Stock to be transferred free and clear of all liens, claims and other
encumbrances.
(f) Termination of Repurchase Option. The provisions of this
--------------------------------
Section 4 will terminate upon a Sale of the Company.
5. Restrictions on Transfer of Executive Stock.
-------------------------------------------
(a) Transfer of Executive Stock. Executive will not sell, pledge,
---------------------------
transfer or otherwise dispose of (a "Transfer") any interest in any shares of
--------
Executive Stock, except pursuant to the provisions of Sections 4, 5(b), 6, 7 and
8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
Section 5 will not apply with respect to Transfers of shares of Executive Stock
(i) pursuant to applicable laws of descent and distribution, (ii) among
Executive's Family Group, or (iii) at such times as the Investors sell shares of
Common Stock in a Public Offering, but in the case of this clause (iii) only to
the extent of the lesser of (x) the number of vested shares of Executive Stock
held by Executive and (y) the number of shares of Executive Stock held by
Executive multiplied by a fraction, the numerator of which is the number of
shares of Common Stock sold by the Investors in such Public Offering and the
denominator of which is the total number of shares of Common Stock held by the
Investors immediately prior to the initial Public Offering; provided that if any
Other Executives are permitted but do not elect to Transfer any vested shares of
Other Executive Stock pursuant to the applicable Other Executive Stock Agreement
(the aggregate amount of such shares not Transferred being "Excess Shares"),
-------------
then the number of vested shares of Executive Stock permitted to be Transferred
pursuant to clause (y) above will be increased by the result of the number of
Excess Shares multiplied by a fraction, the numerator of which is the number of
vested shares of Executive Stock held by Executive and the denominator of which
is the aggregate number of vested shares of
-8-
<PAGE>
Executive Stock and Other Executive Stock held by Executive and all Other
Executives electing to transfer additional vested shares of Other Executive
Stock pursuant to similar provisions of the applicable Other Executive Stock
Agreement; and provided, further, that the restrictions contained in this
Section 5 will continue to be applicable to the shares of Executive Stock after
any Transfer of the type referred to in clause (i) or (ii) and the transferees
of such shares of Executive Stock will agree in writing to be bound by the
provisions of this Agreement. Any transferee of Executive Stock pursuant to a
transfer in accordance with the provisions of this Section 5(b) is herein
referred to as a "Permitted Transferee." Upon the transfer of Executive Stock
--------------------
pursuant to this Section 5(b), Executive will deliver a written notice (a
"Transfer Notice") to the Company. In the case of a Transfer pursuant to clause
---------------
(i) or (ii) hereof, the Transfer Notice will disclose in reasonable detail the
identity of the Permitted Transferee(s).
(c) Termination of Transfer Restrictions. The provisions of this
------------------------------------
Section 5 will terminate upon the earlier of (i) a Sale of the Company and (ii)
the eighth anniversary of the date hereof.
6. Participation Rights.
--------------------
(a) At least 30 days prior to any Transfer of Common Stock by an
Investor (other than a Transfer among the Investors, their partners or
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will deliver a Transfer Notice to the Company, Executive
and all other holders of such class of Common Stock that have been granted
participation rights similar to the participation rights granted herein
(Executive and such other holders of Common Stock with participation rights
collectively referred to as the "Other Stockholders"), specifying in reasonable
------------------
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. Notwithstanding the restrictions contained in this
Section 6, the Other Stockholders may elect to participate in the contemplated
Transfer by delivering written notice to the transferring Investor within 10
days after delivery of the Transfer Notice. If any Other Stockholders elect to
participate in such Transfer, each of the transferring Investor and such Other
Stockholders will be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, a number of shares of such class of Common Stock
equal to the product of (i) the quotient determined by dividing the number of
shares of such class of Common Stock owned by such person by the aggregate
number of shares of such class of Common Stock owned by the transferring
Investor and the Other Stockholders participating in such sale and (ii) the
number of shares of such class of Common Stock to be sold in the contemplated
Transfer. Notwithstanding the foregoing, in the event that the transferring
Investor intends to Transfer shares of more than one class of Common Stock, the
Other Stockholders participating in such Transfer will be required to sell in
the contemplated Transfer a pro rata portion of shares of all such classes of
Common Stock, which portion will be determined in the manner set forth
immediately above.
-9-
<PAGE>
For example (by way of illustration only), if the Transfer Notice
-----------------------------------------
contemplated a sale of 100 shares of Class L Common by the
transferring Investor, and if the transferring Investor at such time
owns 30% of the Class L Common and if one Other Stockholder elects to
participate and owns 20% of the Class L Common, the transferring
Investor would be entitled to sell 60 shares (30%/50% x 100 shares)
and the Other Stockholder would be entitled to sell 40 shares
(20%/50% x 100 shares).
(b) The transferring Investor will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders who have elected to participate in any contemplated Transfer, and
the transferring Investor will not Transfer any of its shares of Common Stock to
the prospective transferee unless (A) the prospective transferee agrees to allow
the participation of the Other Stockholders or (B) simultaneously with such
Transfer, the transferring Investor purchases the number of shares of such class
of Common Stock from the Other Stockholders who have elected to participate
which Other Stockholders would have been entitled to sell pursuant to this
Section 6.
(c) The provisions of this Section 6 will terminate upon the first
to occur of (i) a Sale of the Company and (ii) a Public Offering.
7. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing shares of Executive Stock will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF MAY 16, 1997, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
-10-
<PAGE>
8. Definition of Executive Stock. For all purposes of this Agreement,
-----------------------------
Executive Stock will continue to be Executive Stock in the hands of any holder
other than Executive (except for the Company, the Investors, purchasers pursuant
to an offering registered under the 1933 Act or purchasers pursuant to a Rule
144 transaction (other than a Rule 144(k) transaction occurring prior to the
time the Company is a Public Company) and subsequent transferees), and each such
other holder of Executive Stock will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock hereunder. Executive
Stock will also include shares of the Company's capital stock issued with
respect to shares of Executive Stock by way of a stock split, stock dividend or
other recapitalization.
9. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of Common Stock held
by the Bain Group approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all (or, for accounting,
tax or other reasons, substantially all) of the Company's outstanding capital
stock (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party or group of Independent
Third Parties (each such sale, an "Approved Sale"), each holder of Executive
-------------
Stock will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock will waive any dissenters' rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
stock, each holder of Executive Stock will agree to sell all of his shares of
Executive Stock and rights to acquire shares of Executive Stock on the terms and
conditions approved by the Board and the holders of a majority of the Common
Stock then outstanding. Each holder of Executive Stock will take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to
an Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of such Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501)
-11-
<PAGE>
reasonably acceptable to the Company. If any holder of Executive Stock appoints
a purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock
declines to appoint the purchaser representative designated by the Company, such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock (if any) will
bear their pro-rata share (based upon the number of shares sold) of the costs of
any sale of Executive Stock pursuant to an Approved Sale to the extent such
costs are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
Executive and the other holders of Executive Stock on their own behalf will not
be considered costs of the transaction hereunder.
(e) The provisions of this Section 9 will terminate upon the
consummation of a Public Offering.
10. Preemptive Rights.
-----------------
(a) Except as set forth in subsection (b) below, the Company will
not issue, sell or otherwise transfer for consideration to any Investor (an
"Issuance") at any time prior to a Public Offering, any capital stock or debt
--------
security unless, at least 30 days and not more than 60 days prior to such
Issuance, the Company notifies Executive in writing of the Issuance (including
the price, the purchasers thereof and the other terms thereof) and grants to
Executive, the right (the "Right") to subscribe for and purchase a portion of
-----
such additional shares or other securities so issued at the same price and on
the same terms as issued in the Issuance equal to the quotient determined by
dividing (1) the number of fully diluted shares of Executive Stock held by
Executive (other than options to acquire stock from other stockholders of the
Company) by (2) the total number of shares of Common Stock outstanding on a
fully diluted basis. Notwithstanding the foregoing, if all Persons entitled to
purchase or receive such stock or securities are required to also purchase other
securities of the Company, if Executive exercises the Right pursuant to this
Section 10 then Executive will also be required to purchase the same strip of
securities (on the same terms and conditions) that such other Persons are
required to purchase. The Right may be exercised by Executive at any time by
written notice to the Company received by the Company within 15 days after
receipt by Executive of the notice from the Company referred to above. The
closing of the purchase and sale pursuant to the exercise of the Right will
occur at least 10 days after the Company receives notice of the exercise of the
Right and concurrently with the closing of the Issuance. In the event that the
consideration received by the Company in connection with an Issuance is property
other than cash, Executive may, at his election, pay the purchase price for such
additional shares or other securities in such property or solely in cash. In
the event that Executive elects to pay cash, the amount thereof will be
determined based on the fair value of the consideration received or receivable
by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right will not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other
-12-
<PAGE>
distribution in respect of, the Common Stock in accordance with the Company's
Certificate of Incorporation or (ii) issuances of Common Stock upon conversion
of any shares of the Company=s Series A Preferred Stock, or (iii) the issuance
of Common Stock (or securities convertible into or exchangeable for, or options
to purchase, Common Stock) in connection with the provision by the Investors or
their Affiliates of debt financing to the Company or its Subsidiaries.
(c) The provisions of this Section 10 will terminate upon the
consummation of a Public Offering.
11. Non-Compete; Non-Solicitation.
-----------------------------
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar and will become familiar with the Company's
trade secrets and with other confidential information concerning the Company and
its Subsidiaries and that his services have been and will be of special, unique
and extraordinary value to the Company and its Subsidiaries. Therefore,
Executive agrees that upon exercise of the Repurchase Option pursuant to Section
4 hereof, in further consideration of the repurchase of Executive Stock in
connection therewith, for a period of two years after the Termination Date (the
"Noncompete Period"), he will not Compete.
-----------------
(b) Sections 6(b)-(g) of the Employment Agreement is hereby
incorporated by reference in its entirety.
DEFINITIONS
12. Definitions. The following terms are defined as follows:
------------
"1933 Act" means the Securities Act of 1933, as amended from time to
--------
time.
"Affiliate" means, with respect to any Person, any other Person who is
---------
controlling, controlled by, or under common control with such Person and, in the
case of a Person which is a partnership, any partner of such Person.
"Bain Group" means collectively Bain Capital Fund V, L.P., Bain
----------
Capital Fund V-B, L.P., BCIP Associates, BCIP Trust Associates, L.P. and
Randolph Street Partners.
"Board" means the Company's Board of Directors.
-----
"Class" means each of the Vested Time Vesting Stock, the Unvested Time
-----
Vesting Stock, the Vested Management Option Shares, the Unvested Management
Option Shares, and the Rollover Stock.
"Closing" means the closing of the Recapitalization.
-------
-13-
<PAGE>
"Common Stock" means, collectively, Class A Common, Class B Common and
------------
Class L Common.
"Competes" or "Competing" means, without the prior written consent of
-------- ---------
the Company directly or indirectly, providing consultive service with or without
pay, owning, managing, operating, joining, controlling, participating in, or
being connected as a stockholder, partner or otherwise with any business,
individual, partner, firm corporation or other entity that (i) is in competition
with the Company or any Subsidiary or affiliate of the Company to the extent its
products are similar or materially related to those of the Company or any
Subsidiary or affiliate of the Company (including products under development by
the Company or any Subsidiary of affiliate of the Company) or (ii) otherwise
engages in any business in which the Company or any Subsidiary or affiliate of
the Company is engaged or proposes to engage, in either case as of the
Termination Date; provided that "Compete" and "Competing" will not mean being a
------- ---------
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
"Employment Agreement" means the Employment Agreement, dated as of the
--------------------
date hereof, between Executive and the Company, as amended and modified from
time to time.
"Executive Stock" means all shares of Common Stock purchased pursuant
---------------
hereto and all shares of Common Stock otherwise owned or acquired by Executive,
including the Management Option Shares and the Rollover Stock but excluding the
Option Shares (as defined in the Option Agreement).
"Expiration Date" means, with respect to any Management Option, the
---------------
date which is 30 days after the tenth anniversary of the date of this Agreement.
"Fair Market Value" of each share of Common Stock means,
-----------------
(i) the average of the closing prices of the sales of the Common
Stock on all securities exchanges on which Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day Common Stock is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of 3:00
P.M., Chicago time, or, if on any day Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day; or
(ii) if at any time Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the fair
value of such security determined jointly in good faith by the Board and
Executive; provided that if, within 60 days, the Board and Executive cannot so
agree, then such value will be determined by an independent appraiser reasonably
acceptable to the Board and Executive, which appraiser will submit to the
-14-
<PAGE>
Board and Executive a written report setting forth such determination. If
the Board and Executive are unable to so agree on an appraiser within 15 days
after the end of such 60-day period, each of the Board and Executive will
promptly select an independent appraiser and the two appraisers so selected by
the Board and Executive will promptly select a third independent appraiser to
determine the Fair Market Value based upon information provided by the Company
and Executive. The appraiser appointed hereunder will allocate its costs and
expenses incurred in determining Fair Market Value based upon the relative
differences between each the Board's and Executive's respective determinations
of Fair Market Value and such appraiser's determination of Fair Market Value.
"Family Group" means Executive's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of Executive and/or
Executive's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 5% of the Common Stock
on a fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Common Stock;
provided that in no event will Bain Capital, Inc. or any of its Affiliates be an
Independent Third Party.
"Investors" means collectively the Bain Group Members, the Sutter
---------
Group and Antares International Partners, Inc.; and "Investor" means any of the
--------
Investors individually.
"Option Agreement" means the Option Agreement, dated as of the date
----------------
hereof, between Executive and certain investors named therein.
"Original Cost" means, in the case of each share of Time Vesting
-------------
Stock, $0.235, and in the case of each Management Option Share, the applicable
Management Option Price (in each case as proportionally adjusted for all stock
splits, stock dividends and other recapitalizations affecting such shares
subsequent to the date hereof).
"Other Executives" means the individuals who have executed or will
----------------
execute Other Executive Stock Agreements with the Company.
"Other Executive Stock" means the "Executive Stock" as defined in all
---------------------
Other Executive Stock Agreements.
"Other Executive Stock Agreements" means the Executive Stock
--------------------------------
Agreements (other than this Agreement) by and between the Company and certain
other executives of the Company, as amended and modified from time to time.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-15-
<PAGE>
"Plan" has the meaning set forth in the preamble.
----
"Public Company" means a company any of whose securities are
--------------
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Offering" means an initial public offering and sale of the
---------------
Common Stock pursuant to an effective registration statement under the 1933 Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
-----------
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (other
than Rule 144(k) prior to the time the Company is a Public Company) adopted
under the 1933 Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
--------------------------
dated as of the date hereof, among the Company, the Bain Group and the Sellers
named therein.
"Sale of the Company" means any transaction involving the Company and
-------------------
an Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or Transfer
of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Sutter Group" means collectively Sutter Hill Ventures and certain
------------
other investors affiliated therewith.
"Termination Date" means the date that Executive ceases to be employed
----------------
by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
13. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
-16-
<PAGE>
To the Company:
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Attn: President
With a copy to:
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To Executive:
Anthony W. Lin
3321 Middlefield Road
Palo Alto, California 94306
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
14. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. Without
limiting the foregoing, all existing stock option
-17-
<PAGE>
agreements between the Company and/or the Company's existing stockholders and
Executive are hereby cancelled and terminated.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
17. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by Executive, the Company,
the Investors, and their respective successors and assigns, provided that
Executive may not assign any of his rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any shares of
Executive Stock (other than in a Public Sale or any Approved Sale) to any person
or entity, Executive will cause the prospective transferee to execute and
deliver to the Company and the Other Stockholders an agreement containing the
rights and restrictions set forth herein with respect to such shares of
Executive Stock.
18. Governing Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of California.
19. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
20. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes will be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Los Angeles, California. Such arbitration proceeding will
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
will be final and binding on the parties hereto and may be specifically enforced
by legal proceedings. The parties agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in his or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
-18-
<PAGE>
(b) Procedure. Such arbitration may be initiated by written notice
---------
from either party to the other which will be a compulsory and binding proceeding
on each party. The arbitration will be conducted before a panel of arbitrators
selected in accordance with the rules of the American Arbitration Association.
The costs of said arbitrators and the arbitration will be borne equally by the
parties to the arbitration; provided that the Company will reimburse Executive
for all reasonable travel costs incurred by Executive in connection with such
arbitration. Each party will bear separately the cost of their respective
attorneys, witnesses and experts in connection with such arbitration. Time is
of the essence of this arbitration procedure, and the arbitrators will be
instructed and required to render their decision within ten (10) days following
completion of the arbitration.
21. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares of Executive Stock, to
accord the right to vote as such owner or to pay dividends to any transferee to
whom such shares of Executive Stock have been transferred in violation of this
Agreement.
22. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company and the
members of the Bain Group who hold 80% of the Common Stock held by the Bain
Group as of the Closing, and Executive; provided, however, that in the event
that such amendment or waiver would materially and adversely affect an Investor
or a group of Investors in a manner different than any other Investor, then such
amendment or waiver will require the consent of such Investor or a majority of
the Common Shares held by such group of Investors adversely affected.
23. Third Party Beneficiaries. The parties hereto acknowledge and agree
-------------------------
that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
24. Therma-Wave, Inc. 1997 Stock Purchase and Option Plan. The grant of
-----------------------------------------------------
Management Stock Options hereunder is pursuant to and subject to all of the
terms and conditions of the Plan.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THERMA-WAVE, INC.
-----------------------------------
By:
Its:
-----------------------------------
Anthony W. Lin
Anthony W. Lin Executive Stock Agreement
<PAGE>
Exhibit 10.11
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of May __,
1997, by and among Therma-Wave, Inc., a Delaware corporation (the "Company"),
each of the Persons listed on Schedule I attached hereto or certain designees
thereof that execute a counterpart to this Agreement (the "Bain Group"), each of
the Persons listed on Schedule II attached hereto (the "Sutter Group"), and each
of the Persons listed on Schedule III attached hereto (the "Existing
Stockholders"), and Antares International Partners, Inc. ("Antares") (the Bain
Group, the Sutter Group, the Existing Stockholders and Antares are collectively
referred to herein as the "Stockholders," and each as a "Stockholder"). Unless
otherwise indicated herein, capitalized terms used herein are defined in Section
7 hereof.
WHEREAS, the Company, as of the date hereof, is authorized by its
Certificate of Incorporation to issue capital stock consisting of 2,000,000
shares of its Class L Common Stock, par value $.01 per share ("Class L Common"),
20,000,000 shares of its Class A Common Stock, par value $.01 per share ("Class
A Common"), 4,000 shares of its Class B Common Stock, par value $.01 per share
("Class B Common"), and 1,000,000 shares of its Series A Convertible Preferred
Stock, par value $.01 per share ("Series A Preferred"). The Class L Common, the
Class A Common and the Class B Common are sometimes collectively referred to
herein as "Common Stock".
WHEREAS, the Stockholders and the Company desire to enter into this
Agreement to establish the composition of the Company's Board of Directors (the
"Board"), to restrict the sale, assignment, transfer, encumbrance or other
disposition of the Common Stock and to provide for certain rights and
obligations in respect thereto as hereinafter provided.
NOW, THEREFORE, the Company and the Stockholders hereby agree as
follows:
1. Voting Agreement.
(a) From and after the date of this Agreement each holder of
Stockholder Shares shall vote all of his or its Stockholder Shares and shall
take all other necessary or desirable actions within his or its control (whether
in his or its capacity as a stockholder or officer of the Company or otherwise,
and including, without limitation, attendance at meetings in person or by proxy
for purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary and desirable actions within
its control (including, without limitation, calling special board and
stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established at 5 directors;
(ii) the following individuals shall be elected to the Board:
<PAGE>
a. 2 representatives designated by Bain Capital Fund V, L.P.
("BCF V");
b. 1 representatives designated by Bain Capital Fund V-B, L.P.
("BCF V-B");
c. 1 representatives designated by BCIP Associates ("BCIP"); and
d. 1 representatives designated by BCIP Trust Associates, L.P.
("BCIP Trust"); and
(iii) the removal from the Board (with or without cause) of any
representative designated hereunder by BCF V, BCF V-B, BCIP, or BCIP Trust
shall be at BCF V's, BCFV-B's, BCIP's, BCIP Trust's written request,
respectively, but only upon such written request and under no other
circumstances; and
(iv) in the event that any representative designated hereunder by BCF
V, BCF V-B, BCIP, BCIP Trust for any reason ceases to serve as a member of
the Board during his term of office, the resulting vacancy on the Board
shall be filled by a representative designated by BCF V, BCF V-B, BCIP, or
BCIP Trust, respectively, as provided hereunder.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
or any committee thereof.
(c) The provisions of this Section 1 shall terminate upon the
consummation of a Public Offering.
2. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of Stockholder Shares
shall sell, transfer, assign, pledge or otherwise dispose of (a "Transfer") any
interest in any Stockholder Shares, except pursuant to and in accordance with
Sections 2(b), 2(c), 2(d) and 3 below. Each Stockholder agrees not to
consummate any Transfer until 20 days after the later of the delivery to the
Company and, to the extent required below, the other holders of Stockholder
Shares, of such Stockholder's Sale Notice or Transfer Notice (if any) (each as
defined below), unless the parties to the Transfer have been finally determined
pursuant to this Section 2 prior to the expiration of such 20-day period (the
date of the first to occur of such events is referred to herein as the
"Authorization Date"). Notwithstanding anything to the contrary in this
Agreement, (i) no holder of Stockholder Shares shall transfer any Stockholder
Shares to any Person who is a direct or indirect competitor of the Company or
any of its subsidiaries, (ii) until July 1, 1998, no Existing Stockholder shall
Transfer any interest in any Stockholder Shares, except pursuant to and in
accordance with Sections 2(c), 2(d) and 3 and (iii) no member of the Sutter
Group may Transfer any interest in any Stockholder Shares, except pursuant to
and in accordance with Sections 2(c), 2(d) and 3.
-2-
<PAGE>
(b) First Refusal Rights.
(i) Prior to making any Transfer other than pursuant to Section 3,
each Existing Stockholder seeking to Transfer any interest in any
Stockholder Shares (a "Selling Stockholder"), shall deliver written notice
(the "Sale Notice") to the Company and to the Bain Group. Such Sale Notice
shall disclose in reasonable detail the identity of the prospective
transferee(s), the number of shares to be transferred and the terms and
conditions of the proposed transfer.
(ii) The Company may elect to purchase all or a portion of the shares
specified in the Sale Notice (the "Sale Stock") upon the same terms and
conditions as those set forth in the Sale Notice by delivering a written
notice of such election to the Selling Stockholder and the Bain Group
within 15 days after the Sale Notice has been delivered to the Company. If
the Company has not elected to purchase all of the Sale Stock, the Bain
Group may elect to purchase all or a portion of the Sale Stock upon the
same terms and conditions as those set forth in the Sale Notice by
delivering written notice of such election to the Selling Stockholder
within 20 days after the Sale Notice has been given to the Bain Group. If
neither the Company nor the Bain Group elects to purchase all of the shares
of Sale Stock, the Selling Stockholder may transfer the shares of Sale
Stock, at a price and on terms no more favorable to the transferee(s)
thereof than specified in the Sale Notice, during the 60-day period
immediately following the Authorization Date. Any shares of Sale Stock not
transferred within such 60-day period shall be subject to the provisions of
this Section 2(b) upon subsequent transfer. If the Company or the Bain
Group have elected to purchase all of the shares of Sale Stock hereunder,
the Transfer of such shares shall be consummated as soon as practical after
the delivery of notice of such election to the Selling Stockholder, but in
any event within 30 days after the delivery of such notice of election.
(c) Participation Rights.
(i) At least 20 days prior to any Transfer of Stockholder Shares by
any member of the Bain Group (the "Transferring Stockholder"), the
Transferring Stockholder will deliver a written notice (the "Transfer
Notice") to the Company, the Sutter Group and the Existing Stockholders
specifying in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the Transfer. Any member of
the Sutter Group and any Existing Stockholder may elect to participate in
the contemplated Transfer by delivering written notice to the Transferring
Stockholder within 20 days after delivery of the Transfer Notice. If any
Stockholders (other than the Transferring Stockholders) have elected to
participate in such Transfer ("Participating Stockholder(s)"), the
Transferring Stockholder and each Participating Stockholder will be
entitled to sell in the contemplated Transfer, at the same price and on the
same terms, a number of shares of Common Stock equal to the product of (A)
the quotient determined by dividing the number of shares of Stockholder
Shares owned by such Transferring Stockholder or Participating Stockholder
by the aggregate number of outstanding shares of Stockholder Shares owned
by the Transfer ring Stockholder and all Participating Stockholders (on a
fully diluted basis and assuming for such purpose that all shares of Common
Stock issuable upon conversion of the Preferred
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Stock are outstanding) and (B) the number of shares of Stockholder Shares
to be sold in the contemplated Transfer.
Notwithstanding the foregoing, in the event that the Transferring
Stockholder intends to Transfer shares of more than one class of Common
Stock, each Participating Stockholder shall be required to sell in the
contemplated Transfer a pro rata portion of shares of all such classes of
Stockholder Shares, which portion shall be determined in the manner set
forth immediately above. Any holder of Preferred Stock participating in
such Transfer shall be entitled to sell in such Transfer up to such
holder's pro-rata portion of each class of Stockholder Shares and shall
have the opportunity to either (x) sell Common Stock of such class obtained
upon exercise of such holder's Preferred Stock or (y) sell Shares of
Preferred Stock convertible into shares of such class of Common Stock.
(ii) The Transferring Stockholder will use reasonable efforts to
obtain the agreement of the prospective transferee(s) to the participation
of any Participating Stockholders in any contemplated Transfer and to the
inclusion of the Preferred Stock in any contemplated transfer, and the
Transferring Stockholder will not transfer any of its Stockholder Shares to
the prospective transferee(s) unless (A) the prospective transferee(s)
agrees to allow the participation of the other Stockholders and the
inclusion of the Preferred Stock or (B) the Transferring Stockholder agrees
to purchase the number of such class of Stockholder Shares or portion of
the Preferred Stock (based upon the number of Stockholder Shares obtainable
upon conversion thereof) from any Participating Stockholders which the
Participating Stockholders would have been entitled to sell pursuant to
this Section 2(c).
(d) Permitted Transfers. Notwithstanding anything to the contrary in
any other provision of this Agreement, the restrictions contained in this
Section 2 shall not apply to (i) any Transfer of Stockholder Shares by any
Stockholder to or among any of its Affiliates, (ii) a Public Sale, (iii)
Transfers among Existing Stockholders, or (iv) an Approved Sale (as hereinafter
defined); provided that the restrictions contained in this Agreement will
continue to be applicable to the Stockholder Shares after any Transfer pursuant
to clause (i) above and the transferees of such Stockholder Shares shall agree
in writing to be bound by the provisions of this Agreement. Upon the Transfer of
Stockholder Shares pursuant to this Section 2(d), the transferees will deliver a
written notice to the Company, which notice will, in the case of a Transfer
pursuant to clause (i) above, disclose in reasonable detail the identity of such
transferee.
(e) Termination of Restrictions. The restrictions set forth in this
Section 2 shall continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, (ii) the consummation of an Approved Sale, or (iii) the
consummation of a Public Offering.
3. Sale of the Company.
(a) If the holders of a majority of the Bain Shares (the "Majority
Bain Stockholders") approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all or substantially all
of the Company's outstanding capital stock
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(whether by merger, recapitalization, consolidation, reorganization, combination
or otherwise) to an Independent Third Party (collectively an "Approved Sale"),
each holder of Stockholder Shares will consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as (i) a merger
or consolidation, each holder of Stockholder Shares will waive any dissenters
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Stockholder Shares will
agree to sell all of his Stockholder Shares and rights to acquire Stockholder
Shares on the terms and conditions approved by the Majority Bain Stockholders.
Each holder of Stockholder Shares will take all necessary or desirable actions
in connection with the consummation of the Approved Sale as requested by the
Company.
(b) The obligations of the holders of Stockholder Shares with respect
to an Approved Sale are subject to the satisfaction of the following conditions:
(i) upon the consummation of the Approved Sale, each holder of Stockholder
Shares will receive the same form of consideration and the same portion of the
aggregate consideration that such holders of Stockholder Shares would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) each holder of shares of a class of Stockholder Shares will
be given the same consideration with respect to each share of such class, and,
if any holders of Stockholder Shares are given an option as to the form and
amount of consideration to be received, each holder of Stockholder Shares will
be given the same option; and (iii) each holder of then currently exercisable
rights to acquire shares of Stockholder Shares will be given an opportunity to
exercise such rights prior to the consummation of the Approved Sale and
participate in such sale as holders of Stockholder Shares. Notwithstanding
anything herein to the contrary, (i) the Existing Stockholders shall not be
required to provide indemnification in connection with such Approved Sale, (ii)
in no event shall an Existing Stockholder be required to enter into an agreement
not to compete in connection with such Approved Sale, and (iii) in determining
the amount of consideration to be paid to the Existing Stockholders in such
Approved Sale, all consideration paid directly or indirectly to the Bain Group
in connection with such Approved Sale (other than customary investment banking
and legal fees) shall be taken into account.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities and Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stockholder Shares that
are not accredited investors will, at the request of the Company, appoint a
purchaser representative (as such terms are defined in Rule 501) reasonably
acceptable to the Company. If any holder of Stockholder Shares appoints a
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Stockholder Shares
declines to appoint the purchaser representative designated by the Company such
holder will appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Holders of Stockholder Shares will bear their pro-rata share
(based upon the number of shares sold) of the costs of any sale of Stockholder
Shares pursuant to an Approved Sale to the extent such costs are incurred for
the benefit of all holders of Common Stock and are not
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otherwise paid by the Company or the acquiring party. Costs incurred by holders
of Stockholder Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this Section 3 will terminate upon completion of
a Public Offering.
4. Preemptive Rights.
(a) Except as set forth in subsection (b) below, the Company will not
issue, sell or otherwise transfer for consideration to any member of the Bain
Group or Affiliate thereof (an "Issuance") at any time prior to a Public
Offering, any Common Stock (or securities convertible into or exercisable or
exchangeable for Common Stock or securities containing any profit participation
features or options to purchase Common Stock or any stock appreciation right or
phantom stock plan) unless, at least 30 days and not more than 60 days prior to
such Issuance, the Company notifies each holder of Stockholder Shares in writing
of the Issuance (including the price, the purchasers thereof and the other terms
thereof) and grants to each holder of Stockholder Shares, the right (the
"Right") to subscribe for and purchase a portion of such additional shares or
other securities so issued at the same price and on the same terms as issued in
the Issuance equal to the quotient determined by dividing (1) the number of
fully diluted shares of Common Stock held by such holder by (2) the total number
of shares of Common Stock outstanding on a fully diluted basis. Notwithstanding
the foregoing, if all Persons entitled to purchase or receive such stock or
securities are required to also purchase other securities of the Company, the
holders of Stockholder Shares exercising their Right pursuant to this Section
shall also be required to purchase the same strip of securities (on the same
terms and conditions) that such other Persons are required to purchase; provided
that, at the request of any holder of Stockholders Shares, the Company shall
offer to such holder stock or securities which have no voting rights (other than
required by applicable law) and which are convertible into voting securities but
which are otherwise identical to the stock or securities being offered. The
Right may be exercised by such holder at any time by written notice to the
Company received by the Company within 15 days after receipt by such holder of
the notice from the Company referred to above. The closing of the purchase and
sale pursuant to the exercise of the Right shall occur not less than 10 days
after the Company receives notice of the exercise of the Right and concurrently
with the closing of the Issuance. In the event that the consideration received
by the Company in connection with an Issuance is property other than cash, each
holder of Stockholder Shares may, at its election, pay the purchase price for
such additional shares or other securities in such property or solely in cash.
In the event that any such holder elects to pay cash, the amount thereof shall
be determined based on the fair value of the consideration received or
receivable by the Company in connection with the Issuance.
(b) Notwithstanding the foregoing, the Right shall not apply to (i)
issuances of Common Stock (or securities convertible into or exchangeable for,
or options to purchase, Common Stock), pro rata to all holders of Common Stock,
as a dividend on, subdivision of or other distribution in respect of, the Common
Stock in accordance with the Company's Certificate of Incorporation, (ii) the
issuance of Common Stock upon conversion of the Preferred Stock, or (iii) the
issuance of Common Stock (or securities convertible into or exchangeable for, or
options to
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<PAGE>
purchase, Common Stock) on customary, arm's length terms in connection with the
provision by the Bain Group (or Affiliates thereof) of debt financing to the
Company or its Subsidiaries.
(c) The provisions of this Section 4 will terminate upon the
consummation of a Public Offering.
5. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
Transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TRANSFERS AND VOTING RESTRICTIONS PURSUANT TO
STOCKHOLDERS AGREEMENT DATED AS OF MAY 16, 1997, AMONG THE
ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE
COMPANY'S STOCKHOLDERS. A COPY OF SUCH STOCKHOLDERS AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER
HEREOF UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with the definition thereof in Section 7.
6. Transfer. Prior to Transferring any Stockholder Shares (other
than in a Public Sale or in an Approved Sale) to any person or entity, the
transferring Stockholder shall cause the prospective transferee to execute and
deliver to the Company and the other Stockholders a counterpart of this
Agreement.
7. Definitions.
"Affiliate" of a Stockholder means any other person, entity or
investment fund controlling, controlled by or under common control with the
Stockholder and, in the case of a Stockholder which is a partnership, any
partner of the Stockholder.
"Bain Shares" means (i) any Common Stock issued to the Bain Group
pursuant to the Recapitalization Agreement, (ii) any shares of Common Stock
otherwise acquired by the Bain Group and (iii) any equity securities issued or
issuable directly or indirectly with respect to the Common Stock referred to in
clauses (i) or (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Certificate of Incorporation" means the Company's certificate of
incorporation in effect at the time as of which any determination is being made.
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"Existing Stockholder Shares" means (i) any shares of Common Stock
issued to the Existing Stockholders pursuant to the Recapitalization Agreement
or held by the Existing Stockholders as of the date hereof, (ii) any shares of
Common Stock otherwise acquired by the Existing Stockholders, (iii) any shares
of Common Stock issued or issuable upon conversion of the Preferred Stock, and
(iv) any equity securities issued or issuable directly or indirectly with
respect to the Common Stock referred to in clauses (i), (ii) and (iii) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Family Group" means a Stockholder's spouse and descendants (whether
or not adopted) and any trust solely for the benefit of the Stockholder and/or
the Stockholder's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock on a fully-diluted basis (a "5% Owner"), and who is not
controlling, controlled by or under common control with any such 5% Owner or, in
the case of a partnership, is a general partner thereof.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Company" shall mean a company (i) which is subject to the
reporting requirements of Section 15(d) of the Securities Exchange Act or (ii)
any of whose securities are registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act.
"Public Offering" means an initial public offering and sale of Common
Stock pursuant to an effective registration statement under the Securities Act.
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
(other than Rule 144(k) prior to the time the Company is a Public Company)
adopted under the Securities Act.
"Recapitalization Agreement" means the Recapitalization Agreement,
dated as of December 18, 1996, among the Company, the Bain Group and the
Existing Stockholders.
"Registration Agreement" means that certain Registration Agreement
dated the date hereof, between the Company and certain of its stockholders.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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"Stockholder Shares" means the Bain Shares, the Sutter Shares and the
Existing Stockholder Shares. As to any particular shares constituting
Stockholder Shares, such shares will cease to be Stockholder Shares when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"Sutter Shares" means (i) any Common Stock issued to the Sutter Group
pursuant to the Recapitalization Agreement, (ii) any shares of Common Stock
otherwise acquired by the Sutter Group and (iii) any equity securities issued or
issuable directly or indirectly with respect to the Common Stock referred to in
clauses (i) or (ii) by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
8. Information Rights.
(a) Quarterly Information. Except for any quarter at the end of which
the Company is a Public Company, the Company shall deliver to each Existing
Stockholder as soon as practicable after the end of each of the first three
quarterly fiscal periods in each fiscal year of the Company, and in any event
within 45 days thereafter, a copy of (i) an unaudited consolidated balance sheet
of the Company and its subsidiaries as at the end of such quarter, and (ii) an
unaudited consolidated statement of income of the Company and its subsidiaries
for such quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter. Such statements will be
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), consistently applied, subject to normal year end audit
adjustments and to the absence of footnotes.
(b) Annual Information. Except following any year at the end of which
the Company is a Public Company, the Company shall deliver to each Existing
Stockholder as soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, a copy of (i) an audited
consolidated balance sheet of the Company and its subsidiaries as at the end of
such year, and (ii) audited consolidated statements of income, retained earnings
and consolidated cash flows of the Company and its subsidiaries for such year;
setting forth in each case in comparative form the figures for the previous
years. Such statements shall be (i) prepared in accordance with GAAP,
consistently applied, (ii) in reasonable detail and (iii) certified by a firm of
independent certified public accountants of recognized national standing
selected by the Company.
9. Capitalization. The Company hereby represents and warrants that,
as of the closing under the Recapitalization Agreement and immediately
thereafter, the authorized capital stock of the Company shall consist of (a)
1,000,000 shares of Series A Preferred (of which 748,739 shares shall be issued
and outstanding), (b) 2,000,000 shares of Class L Common, of which 1,008,170
shares shall be issued and outstanding, (c) 20,000,000 shares of Class A Common,
of which 9,073,532 shares shall be issued and outstanding and 750,000 shares
shall be reserved for issuance upon conversion of the Series A Preferred, and
(d) 4,000,000 shares of Class B Common, up to 2,687,500 of which shares shall
either be outstanding or reserved for issuance upon exercise
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<PAGE>
of stock options granted to the Company's employees (the "Key Employee
Options"). As of the Closing, neither the Company nor any subsidiary of the
Company shall have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans, except for the Series A Preferred, the Key
Employee Options and the Warrants.
10. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
11. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of at
least a majority of the then outstanding Bain Shares and the holders of at least
a majority of the then outstanding Existing Stockholder Shares. The failure of
any party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
12. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
13. Entire Agreement. Except as otherwise expressly set forth
herein, this document, the Recapitalization Agreement and the Registration
Agreement embody the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
15. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
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<PAGE>
16. Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and any Stockholder shall have the right to
injunctive relief, in addition to all of its rights and remedies at law or in
equity, to enforce the provisions of this Agreement. Nothing contained in this
Agreement shall be construed to confer upon any Person who is not a signatory
hereto any rights or benefits, as a third party beneficiary or otherwise.
17. Arbitration.
(a) Arbitration. In the event of disputes between the parties with
respect to the terms and conditions of this Agreement, such disputes shall be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Boston, Massachusetts. Such arbitration proceeding shall
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration shall be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement
of the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
shall be final and binding on the parties hereto and may be specifically
enforced by legal proceedings. The parties agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may, in his or its sole discretion, ask for
specific performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(b) Procedure. Such arbitration may be initiated by written notice
from either party to the other which shall be a compulsory and binding
proceeding on each party. The arbitration shall be conducted before a panel of
arbitrators selected in accordance with the rules of the American Arbitration
Association. The costs of said arbitrators and the arbitration shall be borne
equally by the parties to the arbitration. Each party shall bear separately the
cost of their respective attorneys, witnesses and experts in connection with
such arbitration. Time is of the essence of this arbitration procedure, and the
arbitrators shall be instructed and required to render their decision within ten
(10) days following completion of the arbitration.
(c) Venue and Jurisdiction. Any and all legal proceedings to enforce
this Agreement (including any action to compel arbitration hereunder or to
enforce any award or judgment rendered thereby) shall be governed in accordance
with this Section.
18. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or sent by certified mail,
return receipt requested, or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been
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given hereunder when delivered personally, three days after deposit in the U.S.
mail and one day after deposit with a reputable overnight courier service. The
Company's address is:
Chief Executive Officer
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Telecopier No. (510) 490-0843
with a copy (not to constitute notice to the Company) to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
Telecopier: (617) 572-3274
and to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60606
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
Telecopier: (312) 861-2200
19. Governing Law. The corporate law of Delaware will govern all
issues concerning the relative rights of the Company and its stockholders. All
other issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the law of
any jurisdiction other than the State of New York.
20. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
THERMA-WAVE, INC.
By: _______________________________________
Its: _______________________________________
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: _______________________________________
Its: _______________________________________
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: _______________________________________
Its: _______________________________________
BCIP ASSOCIATES
By: _______________________________
A General Partner
(Signature Page to Stockholders Agreement)
<PAGE>
BCIP TRUST ASSOCIATES, L.P.
By: _______________________________
A General Partner
RANDOLPH STREET PARTNERS
By: _______________________________
Its: _______________________________
SUTTER HILL VENTURES, a California limited
partnership
By: _______________________________
Its: _______________________________
SUTTER HILL ASSOCIATES, L.P.
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO DAVID L. ANDERSON
By: _______________________________
Its: _______________________________
(Signature Page to Stockholders Agreement)
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO LEONARD BAKER, JR.
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO WILLIAM H. YOUNGER, JR.
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO TENCH COXE
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO SHERRYL W. HOSSACK
By: _______________________________
Its: _______________________________
TORAY INDUSTRIES, INC.
By: _______________________________
Its: _______________________________
(Signature Page to Stockholders Agreement)
<PAGE>
TORAY INDUSTRIES (AMERICA), INC.
By: _______________________________
Its: _______________________________
SHIMADZU CORPORATION
By: _______________________________
Its: _______________________________
(Signature Page to Stockholders Agreement)
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO PAUL M. WYTHES
By: _______________________________
Its: _______________________________
ANTARES INTERNATIONAL PARTNERS, INC.
By: _______________________________
Its: _______________________________
(Signature Page to Stockholders Agreement)
<PAGE>
SCHEDULE I
Bain Group
----------
Bain Capital Fund V, L.P.
Bain Capital Fund V-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
Randolph Street Partners
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
<PAGE>
SCHEDULE II
Sutter Group
------------
Sutter Hill Ventures, a California limited partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attention: G. Leonard Baker
Sutter Hill Associates, L.P.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attention: G. Leonard Baker
Wells Fargo Bank, Trustee
SHV M/P/T FBO Paul M. Wythes
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO Leonard Baker, Jr.
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
<PAGE>
SCHEDULE III
Existing Stockholders
---------------------
Toray Industries, Inc.
2-2-1 Nihonbashi-Muromachi
Chuo-ku, Tokyo 103 Japan
Attention: Satoru Masuzaki
Shimadzu Corporation
1, Nishinokyo-Kuwabaracho
Nakagyo-ku, Kyoto 604, Japan
Attention: Soju Onose
Toray Industries (America), Inc.
600 Third Avenue, 5th Floor
New York, NY 10016
Attention: Mr. Uchida
<PAGE>
Exhibit 10.15
ADVISORY AGREEMENT
------------------
THIS ADVISORY AGREEMENT (this "Agreement") is made and entered into as of
May 16, 1997, by and between Therma Wave, Inc., a Delaware corporation (the
"Company"), and Bain Capital, Inc., a Delaware corporation ("Bain").
WHEREAS, the Company desires to retain Bain and Bain desires to perform for
the Company and its subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term of ten
years commencing on the date hereof (the "Term"), and shall be automatically
extended thereafter on a year to year basis unless the Company or Bain provides
written notice of its desire to terminate this Agreement to the other party 90
days prior to the expiration of the Term or any extension thereof.
2. Services. Bain shall perform or cause to be performed such services
for the Company and its subsidiaries as directed by the Company's board of
directors, which may include, without limitation, the following:
(a) general executive and management services;
(b) identification, support, negotiation and analysis of acquisitions and
dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing alternatives, including,
without limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of financial
projections, and monitoring of compliance with financing agreements;
(e) marketing functions, including monitoring of marketing plans and
strategies;
(f) human resource functions, including searching and hiring of executives;
and
(g) other services for the Company and its subsidiaries upon which the
Company's board of directors and Bain agree.
3. Advisory Fee. Payment for services rendered by Bain incurred in
connection with the performance of services pursuant to this Agreement shall be
$1,000,000 per calendar year to Bain plus reasonable out-of-pocket expenses of
Bain, payable by the Company on a quarterly
<PAGE>
basis in advance commencing July 1, 1997. If any time when a payment is due
under this Agreement the Company (i) does not have sufficient cash to make such
payment or (ii) is prohibited from making such payment pursuant to the terms of
the Company's loan agreement, part or all of such payment shall be deferred.
Any amount so deferred shall be added to the amount due under this Agreement in
the quarter following the quarter in which the amount was deferred.
4. Closing Fees. During the term of this Agreement, Bain shall be entitled
to receive from the Company a transaction fee in connection with the
consummation of each acquisition by the Company of an additional business in an
amount equal to 1% of the aggregate transaction value of such acquisition,
including assumed debt or debt for which an acquired entity is liable (each such
payment, a "Transaction Fee"). In addition, upon the consummation of the
transactions contemplated by the Recapitalization Agreement dated as of December
18, 1996, by and among the Company and the persons set forth on the signature
pages attached thereto, the Company shall pay to Bain a transaction fee of
$1,800,000 in immediately available funds to an account designated by Bain.
5. Personnel. Bain shall provide and devote to the performance of this
Agreement such partners, employees and agents of Bain as Bain shall deem
appropriate to the furnishing of the services required.
6. Liability. Neither Bain nor any of its affiliates, partners, employees
or agents shall be liable to the Company or its subsidiaries or affiliates for
any loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense shall be proven to result directly from gross
negligence, willful misconduct or bad faith on the part of Bain, its affiliates,
partners, employees or agents acting within the scope of their employment or
authority.
7. Indemnity. The Company and its subsidiaries shall defend, indemnify
and hold harmless each of Bain, its affiliates, partners, employees and agents
from and against any and all loss, liability, damage or expenses arising from
any claim (a "Claim") by any person with respect to, or in any way related to,
the performance of services contemplated by this Agreement (including attorneys'
fees) (collectively, "Claims") resulting from any act or omission of Bain, its
affiliates, partners, employees or agents, other than for Claims which shall be
proven to be the direct result of gross negligence, bad faith or willful
misconduct by Bain, its affiliates, partners, employees or agents. The Company
and its subsidiaries shall defend at its own cost and expense any and all suits
or actions (just or unjust) which may be brought against the Company, its
subsidiaries and Bain, its officers, directors, affiliates, partners, employees
or agents or in which Bain, its affiliates, partners, employees or agents may be
impleaded with others upon any Claim or Claims, or upon any matter, directly or
indirectly, related to or arising out of this Agreement or the performance
hereof by Bain, its affiliates, partners, employees or agents, except that if
such damage shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by Bain, its affiliates, partners, employees or
agents, then Bain shall reimburse the Company and its subsidiaries for the costs
of defense and other costs incurred by the Company and its subsidiaries.
-2-
<PAGE>
8. Notices. All notices hereunder shall be in writing and must be
personally delivered, received by certified mail, return receipt requested, or
sent by guaranteed overnight delivery service, addressed to the parties as
follows:
To the Company:
Therma Wave, Inc.
1250 Reliance Way
Fremont, CA 94539
Attn: Chief Executive Officer
To Bain:
Bain Capital, Inc.
2 Copley Place
Boston, MA 02116
Attn: Adam Kirsch
David Dominik
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
9. Assignment. Neither party may assign any obligations hereunder to any
other party without the prior written consent of the other party (which consent
shall not be unreasonably withheld); provided, that Bain may assign its rights
and obligations under this Agreement to any of its affiliates (provided that
such affiliate is a person or entity (excluding any Bain portfolio companies)
controlled by Bain, or in the case of an affiliate which is a partnership, Bain
is the ultimate general partner of such partnership) without the consent of the
Company. The assignor shall remain liable for the performance of any assignee.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
-3-
<PAGE>
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THERMA WAVE, INC.
By: ________________________________
Its: _______________________________
BAIN CAPITAL, INC.
By: ________________________________
Its: _______________________________
-5-
<PAGE>
Exhibit 10.16
THERMA-WAVE, INC.
VOTING AGREEMENT
----------------
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as
---------
of May 16, 1997 by and between Therma-Wave, Inc., a Delaware corporation (the
"Company"), the Investors listed on Schedule I attached hereto (the "Investors")
------- ---------
and the Key Employees listed on Schedule II attached hereto (the "Key
---
Employees").
- ---------
WHEREAS, the parties hereto desire to enter into this Agreement to
establish the composition of the Company's Board of Directors (the "Board").
-----
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Board of Directors.
------------------
(a) From and after the date of this Agreement, each Investor and
each Key Employee shall vote all of his shares of the Company's common stock
(the "Common Stock") and any other voting securities of the Company over which
------------
such holder has voting control and shall take all other necessary or desirable
actions within its control (whether as a stockholder, director, member of a
board committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions (including, without
limitation, calling special board and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be
established at five (5) directors;
(ii) the following individuals shall be elected to the Board:
(A) one representative designated by Bain Capital Fund
V.L.P. ("BCF V");
-----
(B) one representative designated by Bain Capital Fund
V-B, L.P. ("BCF V-B");
-------
(C) one representatives designated by BCIP Associates
("BCIP"); and
----
(D) Allan Rosencwaig and (so long as Allan Rosencwaig is
employed by the Company) another Key Employee
designated by Allan Rosencwaig;
<PAGE>
(iii) the removal from the Board (with or without cause) of any
representative designated hereunder by BCF V, BCF V-B, BCIP, or Allan
Rosencwaig shall be at the written request of BCF V, BCF V-B, BCIP, or
Allan Rosencwaig, respectively, but only upon such written request and
under no other circumstances, provided that if any director designated
pursuant to subparagraph (ii)(D) above ceases to be an employee of the
Company for any reason, he shall be removed as a director promptly after
his employment ceases; and
(iv) in the event that any representative designated hereunder
by BCF V, BCF V-B, BCIP, or Allan Rosencwaig for any reason ceases to serve
as a member of the Board during his term of office, the resulting vacancy
on the Board shall be filled by a representative designated by BCF V, BCF
V-B, BCIP or Allan Rosencwaig, respectively, as provided hereunder.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
or any committee thereof.
2. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
recipients at the addresses indicated below:
To the Company:
Therma-Wave, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Adam W. Kirsch
David Dominik
Ian Loring
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
-2-
<PAGE>
To Investors:
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Stephen G. Pagliuca
Adam W. Kirsch
Ian Loring
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Stephen L. Ritchie
To the Key Employees:
c/o Allan Rosencwaig
3304 Deer Hollow Drive
Danville, CA 94506
With a copy to:
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111-3143
Attn: John F. Seegal
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
3. Termination. This Agreement shall terminate and be of no further
-----------
force and effect upon the consummation of an initial public offering and sale of
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended.
4. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
-3-
<PAGE>
5. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
6. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
7. Successors and Assigns; Transfer. This Agreement is intended to
--------------------------------
bind and inure to the benefit of and be enforceable by the Company, the
Investors, the Key Employees and their respective successors and assigns;
provided that the Key Employees may not assign any of their rights hereunder
without the written consent of the Investors.
8. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of New York.
9. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
10. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company, the
Investors holding a majority of the Common Stock held by all the Investors at
such time, and the Key Employees holding a majority of the fully-diluted Common
Stock held by all the Key Employees at such time.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
THE COMPANY: THERMA-WAVE, INC.
By:
---------------------------------------
Its:
---------------------------------------
INVESTORS: BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By:
---------------------------------------
Its:
---------------------------------------
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By:
---------------------------------------
Its:
---------------------------------------
BCIP ASSOCIATES
By:
-------------------------------
A General Partner
[Signature Page to Voting Agreement]
<PAGE>
BCIP TRUST ASSOCIATES, L.P.
By:
------------------------------
A General Partner
RANDOLPH STREET PARTNERS
By:
------------------------------
Its: General Partner
SUTTER HILL VENTURES, a California limited
partnership
By:
------------------------------
Its:
------------------------------
SUTTER HILL ASSOCIATES, L.P.
By:
------------------------------
Its:
------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO DAVID L. ANDERSON
By:
------------------------------
Its:
------------------------------
[Signature Page to Voting Agreement]
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO LEONARD BAKER, JR.
By:
-------------------------------
Its:
-------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO WILLIAM H. YOUNGER, JR.
By:
-------------------------------
Its:
-------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO TENCH COXE
By:
-------------------------------
Its:
-------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO SHERRYL W. HOSSACK
By:
-------------------------------
Its:
-------------------------------
[Signature Page to Voting Agreement]
<PAGE>
KEY EMPLOYEES:
-------------------------------
ALLAN ROSENCWAIG
-------------------------------
ANTHONY W. LIN
-------------------------------
JON L. OPSAL
-------------------------------
W. LEE SMITH
-------------------------------
DAVID L. WILLENBORG
[Signature Page to Voting Agreement]
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO PAUL M. WYTHES
By:
-------------------------------
Its:
-------------------------------
ANTARES INTERNATIONAL PARTNERS, INC.
By:
-------------------------------
Its:
-------------------------------
[Signature Page to Voting Agreement]
<PAGE>
Schedule 1
Investors:
- ---------
Bain Capital Fund V, L.P.
Bain Capital Fund V-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
Randolph Street Partners
Sutter Hill Ventures, a California limited partnership
Sutter HIll Associates, L.P.
Wells Fargo Bank, Trustee
SHV M/P/T FBO Paul M. Wythes
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
Wells Fargo Bank, Trustee
SHV M/P/T FBO Leonard Baker, Jr.
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack
[Signature Page to Voting Agreement]
<PAGE>
Schedule II
Key Employees:
- -------------
Allan Rosencwaig
Anthony Lin
David Willenborg
W. Lee Smith
Jon Opsal
[Signature Page to Voting Agreement]
<PAGE>
Exhibit 10.17
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
among
THERMA-WAVE, INC.,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
________________________________
Dated as of May 16, 1997
________________________________
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 1. Amount and Terms of Credit........................... 1
1.01 Commitments.......................................... 1
1.02 Minimum Borrowing Amounts, etc....................... 3
1.03 Notice of Borrowing.................................. 3
1.04 Disbursement of Funds................................ 4
1.05 Notes................................................ 5
1.06 Conversions.......................................... 5
1.07 Pro Rata Borrowings.................................. 6
1.08 Interest............................................. 6
1.09 Interest Periods..................................... 7
1.10 Increased Costs, Illegality, etc..................... 8
1.11 Compensation......................................... 10
1.12 Change of Lending Office............................. 11
1.13 Replacement of Banks................................. 11
SECTION 2. Letters of Credit.................................... 12
2.01 Letters of Credit.................................... 12
2.02 Letter of Credit Requests; Notices of Issuance....... 14
2.03 Agreement to Repay Letter of Credit Payments......... 14
2.04 Letter of Credit Participations...................... 15
2.05 Increased Costs...................................... 17
SECTION 3. Fees; Commitments.................................... 18
3.01 Fees................................................. 18
3.02 Voluntary Termination or Reduction of Total
Revolving Loan Commitment Unutilized ............... 19
3.03 Mandatory Reduction of
Revolving Loan Commitments........................... 20
SECTION 4. Payments............................................. 22
4.01 Voluntary Prepayments................................ 22
4.02 Mandatory Prepayments................................ 23
4.03 Method and Place of Payment.......................... 23
4.04 Net Payments......................................... 24
(i)
</TABLE>
<PAGE>
<TABLE> Page
<CAPTION> ----
<C> <S> <C>
SECTION 5. Conditions Precedent................................ 26
5.01 Execution of Agreement; Notes....................... 26
5.02 No Default; Representations and Warranties.......... 26
5.03 Officer's Certificate............................... 26
5.04 Opinions of Counsel................................. 26
5.05 Corporate Proceedings............................... 27
5.06 Adverse Change, etc................................. 27
5.07 Litigation.......................................... 27
5.08 Approvals........................................... 27
5.09 Consummation of the Transaction..................... 28
5.10 Security Documents.................................. 30
5.11 Subsidiary Guaranty................................. 31
5.12 Existing Indebtedness, etc.......................... 31
5.13 Plans; Collective Existing
Indebtedness Agreements; Shareholders' Agreements;
Bargaining Agreements; Management Agreements;
Employment Agreements; Tax Allocation Agreements;
Material Contracts................................. 31
5.14 Solvency Opinion; Evidence of Insurance............. 32
5.15 Pro Forma Balance Sheet............................. 33
5.16 Projections......................................... 33
5.17 Payment of Fees..................................... 33
5.18 Notice of Borrowing; Letter of Credit Request....... 33
SECTION 6. Representations, Warranties and Agreements.......... 34
6.01 Corporate Status.................................... 34
6.02 Corporate Power and Authority....................... 34
6.03 No Violation........................................ 34
6.04 Litigation.......................................... 35
6.05 Use of Proceeds; Margin Regulations................. 35
6.06 Governmental Approvals.............................. 35
6.07 Investment Company Act.............................. 35
6.08 Public Utility Holding Company Act.................. 35
6.09 True and Complete Disclosure........................ 36
6.10 Financial Condition; Financial Statements........... 36
6.11 Security Interests.................................. 37
6.12 Transaction......................................... 37
6.13 Compliance with ERISA............................... 38
6.14 Capitalization...................................... 39
6.15 Subsidiaries........................................ 39
6.16 Intellectual Property............................... 40
6.17 Compliance with Statutes, etc....................... 40
(ii)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <S> <C>
6.18 Environmental Matters....................................... 40
6.19 Properties.................................................. 41
6.20 Labor Relations............................................. 41
6.21 Tax Returns and Payments.................................... 41
6.22 Existing Indebtedness....................................... 42
SECTION 7. Affirmative Covenants....................................... 42
7.01 Information Covenants....................................... 42
7.02 Books, Records and Inspections.............................. 45
7.03 Insurance................................................... 46
7.04 Payment of Taxes............................................ 46
7.05 Corporate Franchises........................................ 46
7.06 Compliance with Statutes, etc............................... 46
7.07 Compliance with Environmental Laws.......................... 47
7.08 ERISA....................................................... 47
7.09 Good Repair................................................. 48
7.10 End of Fiscal Years; Fiscal Quarters........................ 48
7.11 Additional Security; Further Assurances..................... 48
7.12 Register.................................................... 49
7.13 Foreign Subsidiaries Security............................... 50
SECTION 8. Negative Covenants.......................................... 51
8.01 Changes in Business......................................... 51
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc...... 51
8.03 Liens....................................................... 55
8.04 Indebtedness................................................ 57
8.05 Advances, Investments and Loans............................. 59
8.06 Dividends, etc.............................................. 62
8.07 Transactions with Affiliates................................ 63
8.08 Capital Expenditures........................................ 64
8.09 Minimum Consolidated EBITDA................................. 65
8.10 Interest Coverage Ratio..................................... 67
8.11 Leverage Ratio.............................................. 67
8.12 Limitation on Voluntary Indebtedness; Modifications of
Certificate of Payments and Modifications Incorporation,
By-Laws and Certain Other Agreements; of Issuance of
Capital Stock; etc......................................... 69
8.13 Limitation on Certain Restrictions on Subsidiaries.......... 70
8.14 Limitation on the Creation of Subsidiaries.................. 70
(iii)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 9. Events of Default................................... 71
9.01 Payments............................................ 71
9.02 Representations, etc................................ 71
9.03 Covenants........................................... 71
9.04 Default Under Other Agreements...................... 71
9.05 Bankruptcy, etc..................................... 72
9.06 ERISA............................................... 72
9.07 Security Documents.................................. 73
9.08 Subsidiary Guaranty................................. 73
9.09 Judgments........................................... 73
9.10 Ownership........................................... 73
SECTION 10. Definitions........................................... 74
SECTION 11. The Agent........................................... 96
11.01 Appointment......................................... 96
11.02 Delegation of Duties................................ 97
11.03 Exculpatory Provisions.............................. 97
11.04 Reliance by Agent................................... 97
11.05 Notice of Default................................... 98
11.06 Non-reliance on Agent and Other Banks............... 98
11.07 Indemnification..................................... 99
11.08 Agent in its Individual Capacity.................... 99
11.09 Holders............................................. 99
11.10 Resignation of the Agent; Successor Agent........... 100
SECTION 12. Miscellaneous....................................... 100
12.01 Payment of Expenses, etc............................ 100
12.02 Right of Setoff; Collateral Matters................. 101
12.03 Notices............................................. 102
12.04 Benefit of Agreement................................ 102
12.05 No Waiver; Remedies Cumulative...................... 104
12.06 Payments Pro Rata................................... 104
12.07 Calculations; Computations.......................... 105
12.08 Governing Law; Submission to Jurisdiction; Venue.... 105
12.09 Counterparts........................................ 106
12.10 Effectiveness....................................... 106
12.11 Headings Descriptive................................ 107
12.12 Amendment or Waiver; etc............................ 107
12.13 Surviva............................................. 108
12.14 Domicile of Loans................................... 108
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
12.15 Confidentiality............................................. 108
12.16 Waiver of Jury Trial........................................ 109
</TABLE>
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
ANNEX III Real Properties
ANNEX IV Projections
ANNEX V Subsidiaries
ANNEX VI Existing Indebtedness
ANNEX VII Insurance
ANNEX VIII Existing Liens
ANNEX IX Existing Investments
ANNEX X Patent Matters
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Letter of Credit Request
EXHIBIT B-1 -- Form of Revolving Note
EXHIBIT B-2 -- Form of Swingline Note
EXHIBIT C -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT D -- Form of Opinion of Kirkland & Ellis
EXHIBIT E -- Form of Officers' Certificate
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Subsidiary Guaranty
EXHIBIT I -- Form of Subordination Provisions
EXHIBIT J -- Form of Assignment and Assumption Agreement
EXHIBIT K -- Form of Intercompany Note
EXHIBIT L -- Form of Shareholder Subordinated Note
(v)
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CREDIT AGREEMENT, dated as of May 16, 1997, among THERMA-WAVE, INC., a
Delaware corporation (the "Borrower"), the lenders from time to time party
hereto (each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST
COMPANY, as Agent (in such capacity, the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
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WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available the credit facilities provided
for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. (a) Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees, at any time and from time to time
after the Effective Date and prior to the Final Maturity Date, to make a
revolving loan or loans (each, a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower, which Revolving Loans (i) shall be
denominated in U.S. Dollars, (ii) except as hereinafter provided, may, at the
option of the Borrower, be incurred and maintained as and/or converted into Base
Rate Loans or Eurodollar Loans, provided, that (x) all Revolving Loans made as
part of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Revolving Loans of the same Type and (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), no Revolving Loans to be maintained as
Eurodollar Loans may be incurred prior to the 90th day after the Effective Date,
(iii) may be repaid and reborrowed in accordance with the provisions hereof and
(iv) shall not exceed for any Bank at any time outstanding that aggregate
principal amount which, when combined with (I) the aggregate principal amount of
all other then outstanding Revolving Loans made by such Bank and (II) such
Bank's Percentage of the Swingline Loans then outstanding and the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, Revolving Loans or
Swingline Loans) at such time, equals the Revolving Loan Commitment, if any, of
such Bank at such time.
(b) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
after the
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Effective Date and prior to the Swingline Expiry Date, a revolving loan or loans
to the Borrower (each, a "Swingline Loan" and, collectively, the "Swingline
Loans"), which Swingline Loans (i) shall be made and maintained as Base Rate
Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid and
reborrowed in accordance with the provisions hereof, (iv) shall not exceed in
aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, an amount equal to the Total Revolving Loan
Commitment then in effect and (v) shall not exceed in aggregate principal amount
at any time outstanding the Maximum Swingline Amount. BTCo shall not be
obligated to make any Swingline Loans at a time when a Bank Default exists
unless BTCo has entered into arrangements satisfactory to it and the Borrower to
eliminate BTCo's risk with respect to the Defaulting Bank's or Banks'
participation in such Swingline Loans, including by cash collateralizing such
Defaulting Bank's or Banks' Percentage of the outstanding Swingline Loans. BTCo
will not make a Swingline Loan after it has received written notice from the
Borrower or the Required Banks stating that a Default or an Event of Default
exists until such time as BTCo shall have received a written notice of (i)
rescission of such notice from the party or parties originally delivering the
same or (ii) a waiver of such Default or Event of Default from the Required
Banks.
(c) On any Business Day, BTCo may, in its sole discretion, give
notice to the Banks that its outstanding Swingline Loans shall be funded with a
Borrowing of Revolving Loans (provided that each such notice shall be deemed to
have been automatically given upon the occurrence of a Default or an Event of
Default under Section 9.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 9), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Banks pro rata based on each Bank's Percentage, and the proceeds thereof shall
be applied directly to repay BTCo for such outstanding Swingline Loans. Each
Bank hereby irrevocably agrees to make Base Rate Loans upon one Business Day's
notice pursuant to each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the date specified in writing by BTCo
notwithstanding (i) that the amount of the Mandatory Borrowing may not comply
with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any
conditions specified in Section 5 are then satisfied, (iii) whether a Default or
an Event of Default has occurred and is continuing, (iv) the date of such
Mandatory Borrowing and (v) any reduction in the Total Revolving Loan Commitment
after any such Swingline Loans were made. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code in respect of the Borrower), each Bank (other than
BTCo) hereby agrees that it shall forthwith purchase from BTCo (without recourse
or warranty) such assignment of the outstanding Swingline Loans as shall be
necessary to cause the Banks to share in such
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Swingline Loans ratably based upon their respective Percentages, provided that
all interest payable on the Swingline Loans shall be for the account of BTCo
until the date the respective assignment is purchased and, to the extent
attributable to the purchased assignment, shall be payable to the Bank
purchasing same from and after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount of
each Borrowing shall not be less than the applicable Minimum Borrowing Amount.
More than one Borrowing may be incurred on any day, provided, that at no time
shall there be outstanding more than eight Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur
Revolving Loans hereunder (excluding Borrowings of Revolving Loans incurred
pursuant to a Mandatory Borrowing), it shall give the Agent at its Notice
Office, prior to 11:00 A.M. (New York time), at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Eurodollar Loans and at least one Business Day's prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Base Rate Loans to be made hereunder. Each such notice (each, a "Notice of
Borrowing") shall, except as provided in Section 1.10, be irrevocable, and, in
the case of each written notice and each confirmation of telephonic notice,
shall be in the form of Exhibit A-1, appropriately completed to specify (i) the
aggregate principal amount of the Revolving Loans to be made pursuant to such
Borrowing, (ii) the date of such Borrowing (which shall be a Business Day) and
(iii) whether the respective Borrowing shall consist of Base Rate Loans or, to
the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Agent shall promptly
give each Bank written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on the
day such Swingline Loan is to be made, written notice (or telephonic notice
promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each
such notice shall be irrevocable and shall specify in each case (x) the date of
such Borrowing (which shall be a Business Day) and (y) the aggregate principal
amount of the Swingline Loan to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(c), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(c).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the Letter of
Credit Issuer (in the case
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of Letters of Credit), as the case may be, may prior to receipt of written
confirmation act without liability upon the basis of such telephonic notice,
believed by the Agent, BTCo or the Letter of Credit Issuer, as the case may be,
in good faith to be from an Authorized Officer of the Borrower. In each such
case, the Borrower hereby waives the right to dispute the Agent's, BTCo's or the
Letter of Credit Issuer's record of the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, no later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later than
12:00 Noon (New York time) on the date specified in Section 1.01(c)), each Bank
will make available its pro rata share, if any, of each Borrowing requested to
be made on such date (or in the case of Swingline Loans, BTCo shall make
available the full amount thereof) in the manner provided below. All amounts
shall be made available to the Agent in U.S. Dollars and immediately available
funds at the Payment Office and the Agent promptly will make available to the
Borrower by depositing to its account at the Payment Office the aggregate of the
amounts so made available in the type of funds received. Unless the Agent shall
have been notified by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Agent its portion of the Borrowing or
Borrowings to be made on such date, the Agent may assume that such Bank has made
such amount available to the Agent on such date of Borrowing, and the Agent, in
reliance upon such assumption, may (in its sole discretion and without any
obligation to do so) make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Bank and the Agent has made available same to the Borrower, the Agent shall be
entitled to recover such corresponding amount from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Agent's demand therefor,
the Agent shall promptly notify the Borrower, and the Borrower shall immediately
pay such corresponding amount to the Agent. The Agent shall also be entitled to
recover from the Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to (x)
if paid by such Bank, the overnight Federal Funds Rate or (y) if paid by the
Borrower, the then applicable rate of interest, calculated in accordance with
Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Bank as a result of any default by such Bank
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of, and
interest on, all the Loans made to it by each Bank shall be evidenced (i) if
Revolving Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropri-
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ately completed in conformity herewith (each, a "Revolving Note" and,
collectively, the "Revolving Notes") and (ii) if Swingline Loans, by a
promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (the "Swingline Note").
(b) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Revolving
Loan Commitment of such Bank (or, if issued after the termination of such
Revolving Loan Commitment, be in a stated principal amount equal to the
outstanding Revolving Loans of such Bank at such time) and be payable in the
principal amount of the Revolving Loans evidenced thereby, (iv) mature on the
Final Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii)
be entitled to the benefits of this Agreement and the other Credit Documents.
(c) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo and be dated the Effective Date,
(iii) be in a stated principal amount equal to the Maximum Swingline Amount and
be payable in the principal amount of the Swingline Loans evidenced thereby,
(iv) mature on the Swingline Expiry Date, (v) bear interest as provided in
Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02, and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(d) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect the Borrower's obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert on any
Business Day occurring on or after the earlier of (x) the Syndication Date and
(y) the 90th day after the Effective Date, all or a portion at least equal to
the applicable Minimum Borrowing Amount of the outstanding principal amount of
Revolving Loans made pursuant to one or more Borrowings of one or more Types of
Revolving Loans into a Borrowing or Borrowings of another Type of Revolving
Loan; provided, that (i) except as otherwise provided in Section 1.10(b), no
partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
Base Rate Loans may only be converted into Eurodollar Loans if no payment
Default, or no Event of Default, is in existence on the date of the conversion,
and (iii) Borrowings of Eurodollar
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Loans resulting from this Section 1.06 shall be limited in number as provided in
Section 1.02. Each such conversion shall be effected by the Borrower by giving
the Agent at its Notice Office, prior to 11:00 A.M. (New York time), at least
three Business Days' (or one Business Day's in the case of a conversion into
Base Rate Loans) prior written notice (or telephonic notice promptly confirmed
in writing) (each a "Notice of Conversion") specifying the Revolving Loans to be
so converted, the Borrowing(s) pursuant to which the Revolving Loans were made
and, if to be converted into a Borrowing of Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Agent shall give each Bank prompt
notice of any such proposed conversion affecting any of its Revolving Loans.
1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans shall be
made by the Banks pro rata on the basis of their Revolving Loan Commitments. It
is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Revolving Loans hereunder and that each Bank
shall be obligated to make the Revolving Loans to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its commitments
hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate Loan
shall bear interest from the date of the Borrowing thereof until the earlier of
(i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan
and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to
Section 1.06, at a rate per annum which shall at all times be the Applicable
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all
times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (x) the rate which is 2% in excess of the rate then borne by
such Loans and (y) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans from time to time. Interest which accrues under
this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date
of any prepayment or repayment thereof (on the amount prepaid or repaid), (y)
the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) the last
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day of each Interest Period applicable thereto and, in the case of an Interest
Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period and (iii) in respect of
each Loan, at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower
and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower shall have the right to elect by
giving the Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period applicable to such Borrowing, which Interest
Period shall, at the option of the Borrower, be a one, two, three or six month
period or, to the extent approved by all of the Banks, a twelve month period.
Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have the same
Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
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(v) no Interest Period may be elected if it would extend beyond the
Final Maturity Date; and
(vi) no Interest Period may be elected at any time when a payment
Default, or an Event of Default, is then in existence.
If upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect
by virtue of the application of clause (vi) above, a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans as provided above,
the Borrower shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such current
Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period, that, by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of net income taxes or similar charges) because of (x) any
change since the date of this Agreement in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having the
force of law), or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule, regulation,
guideline, order or request (such as, for example, but not limited to, a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making
or continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law but with which
such Bank customarily complies even though
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the failure to comply therewith would not be unlawful), or has become
impracticable as a result of a contingency occurring after the date of this
Agreement which materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall (x) on such date and (y) as promptly as practicable (and in any
event within five Business Days) after the date on which such event no longer
exists give notice (by telephone confirmed in writing) to the Borrower and
(except in the case of clause (i)) to the Agent of such determination (which
notice the Agent shall promptly transmit to each of the other Banks).
Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no
longer be available until such time as the Agent notifies the Borrower and the
Banks that the circumstances giving rise to such notice by the Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower
with respect to Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower agrees to pay to such Bank, upon written demand therefor (accompanied
by the written notice referred to below), such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the Borrower by such Bank shall, absent manifest error, be final
and conclusive and binding upon all parties hereto) and (z) in the case of
clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstances described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan (or such
earlier date as shall be required by applicable law)); provided, that if more
than one Bank is affected at any time, then all affected Banks must be treated
the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof, the
adoption or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by the National Association of Insurance Commissioners
("NAIC") or any governmental
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authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or any corporation
controlling such Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of the NAIC or any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's or such other corporation's capital or assets as a
consequence of such Bank's Revolving Loan Commitment or obligations hereunder to
a level below that which such Bank or such other corporation could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's or such other corporation's policies with respect to
capital adequacy), then from time to time, upon written demand by such Bank
(with a copy to the Agent), accompanied by the notice referred to in the last
sentence of this clause (c), the Borrower agrees to pay to such Bank such
additional amount or amounts as will compensate such Bank or such other
corporation for such reduction. Each Bank, upon determining in good faith that
any additional amounts will be payable pursuant to this Section 1.10(c), will
give prompt written notice thereof to the Borrower, which notice shall set forth
the basis of the calculation of such additional amounts, although the failure to
give any such notice shall not release or diminish the Borrower's obligations to
pay additional amounts pursuant to this Section 1.10(c) upon the subsequent
receipt of such notice.
1.11 Compensation. The Borrower agrees to compensate each Bank,
promptly upon its written request (which request shall set forth the basis for
requesting such compensation and shall be made through the Agent), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Bank to fund its Eurodollar Loans
but excluding loss of anticipated profit with respect to any Eurodollar Loans)
which such Bank may sustain: (i) if for any reason (other than a default by such
Bank or the Agent) a Borrowing of Eurodollar Loans does not occur on a date
specified therefor in a Notice of Borrowing or Notice of Conversion (whether or
not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a));
(ii) if any repayment (including any prepayment or repayment made pursuant to
Section 4.01 or 4.02 or as a result of an acceleration of the Loans pursuant to
Section 9) or conversion of any Eurodollar Loans occurs on a date which is not
the last day of an Interest Period applicable thereto; (iii) if any prepayment
of any Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans when required by the terms
of this Agreement or (y) an election made pursuant to Section 1.10(b).
Calculation of all amounts payable to a Bank under this Section 1.11 shall be
made as though that Bank had actually funded its relevant Eurodollar Loan
through the purchase of a Eurodollar deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of that Loan, having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of that Bank to a domestic office of that Bank
in the United States of America; provided, however, that each Bank may fund each
of its Eurodollar Loans in any manner it sees fit and the foregoing assumption
shall be utilized
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only for the calculation of amounts payable under this Section 1.11. It is
further understood and agreed that if any prepayment of Eurodollar Loans
pursuant to Section 4.01 or any conversion of Eurodollar Loans pursuant to
Section 1.06 in either case occurs on a date which is not the last day of an
Interest Period applicable thereto, such prepayment or conversion shall be
accompanied by any amounts owing to any Bank pursuant to this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such designation is made on such
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank,
(y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Borrower increased costs
in excess of those being generally charged by the other Banks or (z) in the case
of a refusal by a Bank to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks as provided in Section 12.12(b), the Borrower shall have the
right, if no payment Default, or no Event of Default, then exists, to replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees reasonably acceptable to the Agent, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank"), provided that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire the Revolving Loan Commitment and
outstanding Revolving Loans of, and in each case participations in Letters of
Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the
Replaced Bank in respect thereof an amount equal to the sum of (A) an amount
equal to the principal of, and all accrued interest on, all outstanding
Revolving Loans of the Replaced Bank, (B) an amount equal to all Unpaid Drawings
that have been funded by (and not reimbursed to) such Replaced Bank, together
with all then unpaid interest with respect thereto at such time and (C) an
amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced
Bank pursuant to Section 3.01, (y) the Letter of Credit Issuer an amount equal
to such Replaced Bank's Percentage of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) with respect to any Letter of Credit to the extent
such amount was not theretofore
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funded by such Replaced Bank and (z) BTCo an amount equal to such Replaced
Bank's Percentage of any Mandatory Borrowing to the extent such amount was not
theretofore funded by such Replaced Bank, and (ii) all obligations (including,
without limitation, all such amounts, if any, due and owing under Section 1.11)
of the Borrower due and owing to the Replaced Bank (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Bank concurrently with such replacement. Upon the execution of
the respective Assignment and Assumption Agreements, the payment of amounts
referred to in clauses (i) and (ii) above, recordation of the assignment on the
Register by the Agent pursuant to Section 7.12 and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of the appropriate Revolving
Note or Revolving Notes executed by the Borrower, (x) the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Bank and (y) Annex I shall be
deemed modified to reflect the changed Revolving Loan Commitments resulting from
the assignment from the Replaced Bank to the Replacement Bank.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request the Letter of Credit
Issuer at any time and from time to time on or after the Effective Date and
prior to the Final Maturity Date to issue, for the account of the Borrower and
in support of, (x) trade obligations of the Borrower or any of its Subsidiaries
that arise in the ordinary course of business and are in respect of general
corporate purposes of the Borrower or its Subsidiaries, as the case may be,
and/or (y) on a standby basis, L/C Supportable Indebtedness, and subject to and
upon the terms and conditions herein set forth, the Letter of Credit Issuer
agrees to issue from time to time, irrevocable letters of credit in such form as
may be approved by the Letter of Credit Issuer (each such letter of credit, a
"Letter of Credit" and, collectively, the "Letters of Credit"). Notwithstanding
the foregoing, the Letter of Credit Issuer shall not be under any obligation to
issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain the Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to the Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over the Letter of Credit Issuer shall prohibit, or
request that the Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon the Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which the
Letter of Credit Issuer is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost
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or expense which was not applicable, in effect or known to the Letter of
Credit Issuer as of the date hereof and which the Letter of Credit Issuer
in good faith deems material to it; or
(ii) the Letter of Credit Issuer shall have received notice from the
Required Banks prior to the issuance of such Letter of Credit of the type
described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $10,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans and Swingline Loans then outstanding, the Total
Revolving Loan Commitment at such time; (ii) (x) each standby Letter of Credit
shall have an expiry date occurring not later than one year after such standby
Letter of Credit's date of issuance, provided, that any standby Letter of Credit
may be automatically extendable for periods of up to one year so long as such
standby Letter of Credit provides that the Letter of Credit Issuer retains an
option, satisfactory to the Letter of Credit Issuer, to terminate such standby
Letter of Credit within a specified period of time prior to each scheduled
extension date and (y) each trade Letter of Credit shall have an expiry date
occurring not later than 180 days after such trade Letter of Credit's date of
issuance; (iii) (x) no standby Letter of Credit shall have an expiry date
occurring later than the Business Day next preceding the Final Maturity Date and
(y) no trade Letter of Credit shall have an expiry date occurring later than 30
days prior to the Final Maturity Date; (iv) each Letter of Credit shall be
denominated in U.S. Dollars and payable on a sight basis; (v) the initial Stated
Amount of each Letter of Credit shall not be less than $100,000 or such lesser
amount as is acceptable to the Letter of Credit Issuer; and (vi) the Letter of
Credit Issuer will not issue any Letter of Credit after it has received written
notice from the Borrower or the Required Banks stating that a Default or an
Event of Default exists until such time as the Letter of Credit Issuer shall
have received a written notice of (i) rescission of such notice from the party
or parties originally delivering the same or (ii) a waiver of such Default or
Event of Default by the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, the Letter of Credit Issuer shall not be required to issue any Letter of
Credit unless the Letter of Credit Issuer has entered into arrangements
satisfactory to it and the Borrower to eliminate the Letter of Credit Issuer's
risk with respect to the participation in Letters of Credit of the Defaulting
Bank or Banks, including by cash collateralizing such Defaulting Bank's or
Banks' Percentage of the Letter of Credit Outstandings.
2.02 Letter of Credit Requests; Notices of Issuance. (a) Whenever the
Borrower desires that a Letter of Credit be issued, it shall give the Agent and
the Letter of Credit Issuer written notice (or telephonic notice confirmed in
writing) thereof prior to
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12:00 Noon (New York time) at least five Business Days (or such shorter period
as may be acceptable to the Letter of Credit Issuer) prior to the proposed date
of issuance (which shall be a Business Day) which written notice shall be in the
form of Exhibit A-2 (each such notice, a "Letter of Credit Request"). Each
Letter of Credit Request shall include any other documents as the Letter of
Credit Issuer customarily requires in connection therewith.
(b) The Letter of Credit Issuer shall, promptly after the date of
each issuance of or amendment or modification to a Letter of Credit, give the
Agent, each Bank and the Borrower written notice of the issuance of or amendment
or modification to such Letter of Credit, accompanied by a copy to the Agent of
such Letter of Credit or Letters of Credit or such amendment or modification.
2.03 Agreement to Repay Letter of Credit Payments. (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Agent in immediately available funds at the Payment Office, for any payment or
disbursement made by the Letter of Credit Issuer under any Letter of Credit
issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid
Drawing") no later than one Business Day following the date of such payment or
disbursement, with interest on the amount so paid or disbursed by the Letter of
Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time)
on the date of such payment or disbursement, from and including the date paid or
disbursed to but not including the date the Letter of Credit Issuer is
reimbursed therefor at a rate per annum which shall be the Applicable Base Rate
Margin plus the Base Rate as in effect from time to time (plus an additional 2%
per annum if not reimbursed by the third Business Day after the date of such
payment or disbursement), such interest also to be payable on demand. The Letter
of Credit Issuer shall provide the Borrower prompt notice of any payment or
disbursement made by it under any Letter of Credit, although the failure of, or
delay in, giving any such notice shall not release or diminish the obligations
of the Borrower under this Section 2.03(a) or under any other Section of this
Agreement.
(b) The Borrower's obligation under this Section 2.03 to reimburse
the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower or any of its Subsidiaries may have or have had against the
Letter of Credit Issuer, the Agent or any Bank, including, without limitation,
any defense based upon the failure of any drawing under a Letter of Credit to
substantially conform to the terms of the Letter of Credit or any non-
application or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Borrower shall not be obligated to
reimburse the Letter of Credit Issuer for any wrongful payment made by the
Letter of Credit Issuer under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence as determined by a
court of competent jurisdiction on the part of the Letter of Credit Issuer.
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2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (each, a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from the Letter of Credit Issuer,
without recourse or warranty, an undivided interest and participation, to the
extent of such Participant's Percentage, in such Letter of Credit, each
substitute Letter of Credit, each drawing made thereunder and the obligations of
the Borrower under this Agreement with respect thereto (although Letter of
Credit Fees shall be payable directly to the Agent for the account of the Banks
as provided in Section 3.01(b) and the Participants shall have no right to
receive any portion of any Facing Fees) and any security therefor or guaranty
pertaining thereto. Upon any change in the Revolving Loan Commitments of the
Banks pursuant to Section 1.13 or 12.04(b) or otherwise, it is hereby agreed
that, with respect to all outstanding Letters of Credit and Unpaid Drawings,
there shall be an automatic adjustment to the participations pursuant to this
Section 2.04 to reflect the new Percentages of the assigning and assignee Banks.
(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer
under or in connection with any Letter of Credit if taken or omitted in the
absence of gross negligence or willful misconduct as determined by a court of
competent jurisdiction, shall not create for the Letter of Credit Issuer any
resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to the Letter of Credit Issuer pursuant to Section 2.03(a), the
Letter of Credit Issuer shall promptly notify the Agent, and the Agent shall
promptly notify each Participant of such failure, and each Participant shall
promptly and unconditionally pay to the Agent for the account of the Letter of
Credit Issuer, the amount of such Participant's Percentage of such payment in
U.S. Dollars and in same day funds; provided, however, that no Participant shall
be obligated to pay to the Agent its Percentage of such unreimbursed amount for
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer as determined by a court
of competent jurisdiction. If the Agent so notifies any Participant required to
fund a payment under a Letter of Credit prior to 11:00 A.M. (New York time) on
any Business Day, such Participant shall make available to the Agent for the
account of the Letter of Credit Issuer such Participant's Percentage of the
amount of such payment on such Business Day in same day funds. If and to the
extent such Participant shall not have so made its Percentage of the amount of
such payment available to the Agent for the account of the Letter of Credit
Issuer, such Participant agrees to pay to the Agent for the account of the
Letter of Credit Issuer, forthwith on demand such
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amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Agent for the account of the Letter of Credit
Issuer at the overnight Federal Funds Rate. The failure of any Participant to
make available to the Agent for the account of the Letter of Credit Issuer its
Percentage of any payment under any Letter of Credit shall not relieve any other
Participant of its obligation hereunder to make available to the Agent for the
account of the Letter of Credit Issuer its Percentage of any payment under any
such Letter of Credit on the date required, as specified above, but no
Participant shall be responsible for the failure of any other Participant to
make available to the Agent for the account of the Letter of Credit Issuer such
other Participant's Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
the Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, the Letter of Credit Issuer shall promptly pay to the Agent
and the Agent shall promptly pay to each Participant which has paid its
Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to
such Participant's Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the Letter of Credit Issuer with respect to Letters of Credit
shall be irrevocable and not subject to counterclaim, set-off or other defense
or any other qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, the Letter of Credit Issuer, any Bank, or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between the Borrower or any of its Subsidiaries and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
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(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If after the date hereof, the adoption or
effectiveness of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by the Letter
of Credit Issuer or such Participant's participation therein, or (ii) impose on
the Letter of Credit Issuer or any Participant any other conditions affecting
this Agreement, any Letter of Credit or such Participant's participation
therein; and the result of any of the foregoing is to increase the cost to the
Letter of Credit Issuer or such Participant of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Letter of Credit Issuer or such Participant
hereunder, then, upon written demand to the Borrower by the Letter of Credit
Issuer or such Participant (a copy of which notice shall be sent by the Letter
of Credit Issuer or such Participant to the Agent), accompanied by the
certificate described in the last sentence of this Section 2.05, the Borrower
shall pay to the Letter of Credit Issuer or such Participant such additional
amount or amounts as will compensate the Letter of Credit Issuer or such
Participant for such increased cost or reduction. A certificate submitted to the
Borrower by the Letter of Credit Issuer or such Participant, as the case may be
(a copy of which certificate shall be sent by the Letter of Credit Issuer or
such Participant to the Agent), setting forth the basis for the determination of
such additional amount or amounts necessary to compensate the Letter of Credit
Issuer or such Participant as aforesaid shall be final and conclusive and
binding on the Borrower absent manifest error, although the failure to deliver
any such certificate shall not release or diminish the Borrower's obligations to
pay additional amounts pursuant to this Section 2.05 upon subsequent receipt of
such certificate.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower shall pay to the Agent for distribution
to each Non-Defaulting Bank a commitment fee (the "Commitment Fee") for the
period from the Effective Date to but not including the Final Maturity Date (or
such earlier date as the Total Revolving Loan Commitment has been terminated),
computed at a rate for each day equal to 1/2 of 1% per annum of the daily
average Unutilized Revolving Loan Commitment of such Non-Defaulting Bank,
provided, however, if during any Quarterly Payment Period the daily average
Revolving Outstandings during such period was less than one-half of the
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amount of the Total Revolving Loan Commitment during such period, then the
foregoing percentage in respect of such period shall instead be 3/4 of 1%.
Accrued Commitment Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the Final Maturity Date (or such earlier date upon
which the Total Revolving Loan Commitment has been terminated).
(b) The Borrower shall pay to the Agent for the account of the Banks
pro rata on the basis of their Percentages, a fee in respect of each Letter of
Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Eurodollar Margin then in effect on the daily Stated Amount of such
Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and upon the first day after
the termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(c) The Borrower shall pay to the Agent for the account of the Letter
of Credit Issuer a fee in respect of each Letter of Credit (the "Facing Fee")
computed at the rate of 1/4 of 1% per annum on the daily Stated Amount of such
Letter of Credit; provided, that in no event shall the annual Facing Fee with
respect to each Letter of Credit be less than $500; it being agreed that, on the
date of issuance of any Letter of Credit and on each anniversary thereof prior
to the termination of such Letter of Credit, if $500 will exceed the amount of
Facing Fees that will accrue with respect to such Letter of Credit for the
immediately succeeding 12-month period, the full $500 shall be payable on the
date of issuance of such Letter of Credit and on each such anniversary thereof
prior to the termination of such Letter of Credit. Except as provided in the
immediately preceding sentence, accrued Facing Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and upon the first day after
the termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to the Letter of
Credit Issuer upon each issuance of, payment under, and/or amendment of, a
Letter of Credit such amount as shall at the time of such issuance, payment or
amendment be the administrative charge which the Letter of Credit Issuer is
customarily charging for issuances of, payments under or amendments of, letters
of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account, such
fees as may be agreed to from time to time between the Borrower and the Agent,
when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
Loan Commitment. (a) Upon at least two Business Days' prior written notice (or
tele-
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phonic notice promptly confirmed in writing) to the Agent at its Notice Office
(which notice the Agent shall promptly transmit to each of the Banks), the
Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Revolving Loan Commitment; provided that
(x) any such termination or partial reduction shall apply to proportionately and
permanently reduce the Revolving Loan Commitment of each of the Banks and (y)
any partial reduction pursuant to this Section 3.02(a) shall be in the amount of
at least $1,000,000.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to terminate the entire Revolving Loan
Commitment of such Bank, so long as all Revolving Loans, together with accrued
and unpaid interest, Fees and all other amounts, due and owing to such Bank are
repaid concurrently with the effectiveness of such termination pursuant to
Section 4.01(b) and the Borrower shall pay to the Agent at such time an amount
in cash and/or Cash Equivalents equal to such Bank's Percentage of the
outstanding Letters of Credit (which cash and/or Cash Equivalents shall be held
by the Agent as security for the obligations of the Borrower hereunder in
respect of the outstanding Letters of Credit pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Agent, which shall permit certain investments in Cash Equivalents reasonably
satisfactory to the Agent until the proceeds are applied to the secured
obligations) (at which time Annex I shall be deemed modified to reflect such
changed amounts), and at such time, such Bank shall no longer constitute a
"Bank" for purposes of this Agreement, except with respect to indemnifications
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05,
4.04, 12.01 and 12.06), which shall survive as to such repaid Bank.
3.03 Mandatory Reduction of Revolving Loan Commitments. (a) The Total
Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall
terminate in its entirety on May 30, 1997 unless the Effective Date has occurred
on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Effective Date on which the
Borrower or any of its Subsidiaries receives Proceeds from any Asset Sale, the
Total Revolving Loan Commitment shall be permanently reduced by an amount equal
to 100% of the Net Proceeds from such Asset Sale, provided that with respect to
no more than $500,000 in the aggregate of such Net Proceeds in any fiscal year
of the Borrower, such Net Proceeds shall not give rise to a reduction to the
Total Revolving Loan Commitment on such date to the extent that no Default or
Event of Default then exists and the Borrower delivers a certificate to the
Agent on or prior to such date stating that such Net Proceeds shall be used to
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purchase assets used or to be used in the businesses permitted pursuant to
Section 8.01 (including, without limitation (but only to the extent permitted by
Section 8.02), the purchase of the capital stock of a Person engaged in such
businesses) within one year following the date of receipt of such Net Proceeds
from such Asset Sale (which certificate shall set forth the estimates of the
proceeds to be so expended), and provided further, that (1) if all or any
portion of such Net Proceeds are not so used (or contractually committed to be
used) within such one year period, the Total Revolving Loan Commitment shall be
permanently reduced on the last day of such period by an amount equal to such
remaining portion and (2) if all or any portion of such Net Proceeds are not so
used within such one year period referred to in clause (1) above because such
amount is contractually committed to be used and subsequent to such date such
contract is terminated or expires without such portion being so used, the Total
Revolving Loan Commitment shall be permanently reduced on the date of such
termination or expiration by an amount equal to such remaining portion.
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Effective Date on which the
Borrower or any of its Subsidiaries receives any cash proceeds from any
incurrence of Indebtedness (other than Indebtedness permitted to be incurred
pursuant to Section 8.04 as in effect on the Effective Date) by the Borrower or
any of its Subsidiaries, the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 100% of the cash proceeds (net of all
underwriting discounts, fees and commissions and other costs and expenses
associated therewith) of the respective incurrence of Indebtedness.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on or after the Effective Date on which the
Borrower or any of its Subsidiaries receives any cash proceeds from any sale or
issuance of preferred or common equity of (or cash capital contributions to) the
Borrower or any of its Subsidiaries (other than proceeds received (i) on the
Effective Date in connection with the Equity Financing, (ii) from (x) the
issuance by the Borrower of options to purchase Common Stock to management,
directors and employees of the Borrower and its Subsidiaries and (y) the
issuance by the Borrower of Common Stock (including as a result of the exercise
of any options with regard thereto) to management, directors and employees of
the Borrower and its Subsidiaries) or (iii) from equity contributions to any
Subsidiary of the Borrower to the extent made by the Borrower or any other
Subsidiary of the Borrower), the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to 50% of such cash proceeds (net of all
underwriting discounts, fees and commissions and other costs and expenses
associated therewith) of the respective equity issuance or capital contribution.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, within 10 days following each date on or after the
Effective Date on which the Borrower or any of its Subsidiaries receives any
cash proceeds from any Recovery Event, the Total Revolving Loan Commitment shall
be permanently reduced by
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an amount equal to 100% of such cash proceeds of such Recovery Event (net of all
costs, expenses and taxes incurred in connection with such Recovery Event),
provided that so long as no Default or Event of Default then exists, and such
proceeds do not exceed $5,000,000, such proceeds shall not give rise to a
reduction to the Total Revolving Loan Commitment on such date to the extent that
the Borrower has delivered a certificate to the Agent on or prior to such date
stating that such proceeds shall be used to replace or restore any properties or
assets in respect of which such proceeds were paid within one year following the
date of receipt of such proceeds (which certificate shall set forth the
estimates of the proceeds to be so expended), and provided further, that (i) if
the amount of such proceeds exceeds $5,000,000, then the Total Revolving Loan
Commitment shall be reduced by the entire amount of such proceeds and not just
the portion in excess of $5,000,000 as provided above in this Section 3.03(e),
(ii) if all or any portion of such proceeds are not so used (or contractually
committed to be used) within such one year period, the Total Revolving Loan
Commitment shall be permanently reduced on the last day of such period by an
amount equal to such remaining portion and (iii) if all or any portion of such
proceeds are not so used within such one year period referred to in clause (ii)
above because such amount is contractually committed to be used and subsequent
to such date such contract is terminated or expires without such portion being
so used, the Total Revolving Loan Commitment shall be permanently reduced on the
date of such termination or expiration by an amount equal to such remaining
portion.
(f) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate in its entirety on the earlier of (i)
the date on which a Change of Control Event occurs and (ii) the Final Maturity
Date.
(g) Each reduction to the Total Revolving Loan Commitment pursuant to
this Section 3.03 shall apply proportionately to permanently reduce the
Revolving Loan Commitment of each Bank.
SECTION 4. Payments.
4.01 Voluntary Prepayments. (a) The Borrower shall have the right to
prepay the Loans made to it, in whole or in part, without premium or penalty,
except as otherwise provided in this Agreement, from time to time on the
following terms and conditions: (i) the Borrower shall give the Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay such Loans, whether such Loans are Revolving
Loans or Swingline Loans, the amount of such prepayment and (in the case of
Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower prior to 11:00 A.M. (New York time) (x) at least
one Business Day prior to the date of such prepayment in the case of Revolving
Loans maintained as Base Rate Loans, (y) on the date of such prepayment in the
case of Swingline Loans and (z) at least three Business Days prior to the date
of such prepayment in the case
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of Eurodollar Loans, which notice shall, except in the case of Swingline Loans,
promptly be transmitted by the Agent to each of the Banks; (ii) each prepayment
shall be in an aggregate principal amount of (A) at least $1,000,000 in the case
of Eurodollar Loans and (B) at least $500,000 in the case of Base Rate Loans (or
$100,000 in the case of Swingline Loans); provided, that no partial prepayment
of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Eurodollar Loans outstanding pursuant to such Borrowing
to an amount less than the Minimum Borrowing Amount applicable thereto; and
(iii) each prepayment in respect of any Revolving Loans made pursuant to a
Borrowing shall be applied pro rata among such Revolving Loans; provided, that
at the Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to any
Revolving Loans of a Defaulting Bank.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks) to repay all Revolving Loans of such
Bank, together with accrued and unpaid interest, Fees and all other amounts due
and owing to such Bank in accordance with said Section 12.12(b), so long as (A)
in the case of the repayment of Revolving Loans of any Bank pursuant to this
clause (b), the Revolving Loan Commitment of such Bank is terminated
concurrently with such repayment pursuant to Section 3.02(b) (at which time
Annex I shall be deemed modified to reflect the changed Revolving Loan
Commitments) and (B) in the case of the repayment of Revolving Loans of any
Bank, the consents required by Section 12.12(b) in connection with the repayment
pursuant to this clause (b) shall have been obtained.
4.02 Mandatory Prepayments. (a) If on any date the sum of (i) the
aggregate outstanding principal amount of Revolving Loans and Swingline Loans
(after giving effect to all other repayments thereof on such date) plus (ii) the
Letter of Credit Outstandings on such date exceeds the Total Revolving Loan
Commitment as then in effect, the Borrower shall repay on such date the
principal of Swingline Loans, and if no Swingline Loans are or remain
outstanding, Revolving Loans, in an aggregate amount equal to such excess. If,
after giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Loans, the aggregate amount of Letter of Credit Outstandings exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower agrees to
pay to the Agent on such date an amount in cash and/or Cash Equivalents equal to
such excess (up to the aggregate amount of Letter of Credit Outstandings at such
time) and the Agent shall hold such payment as security for the obligations of
the Borrower hereunder pursuant to a cash collateral agreement to be entered
into in form and substance reasonably satisfactory to the Agent (which shall
permit certain investments in Cash Equivalents reasonably satisfactory to the
Agent until the proceeds are applied to the secured obligations).
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(b) With respect to each repayment of Revolving Loans required by
Section 4.02(a), the Borrower may designate the Types of Revolving Loans which
are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing(s)
pursuant to which made; provided, that (i) Eurodollar Loans may be designated
for repayment pursuant to Section 4.02(a) only on the last day of an Interest
Period applicable thereto unless all Eurodollar Loans with Interest Periods
ending on such date of required prepayment and all Base Rate Loans have been
paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount, such Borrowing
shall be immediately converted into Base Rate Loans; and (i) each repayment of
any Revolving Loans made pursuant to a Borrowing shall be applied pro rata among
such Revolving Loans. In the absence of a designation by the Borrower as
described in the preceding sentence, the Agent shall, subject to the above, make
such designation in its sole discretion with a view, but no obligation, to
minimize breakage costs owing under Section 1.11.
(c) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date, (ii) all then outstanding Revolving Loans shall be
repaid in full on the Final Maturity Date and (iii) all then outstanding Loans
shall be repaid in full on the date on which a Change of Control Event occurs.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the Agent
for the ratable account of the Banks entitled thereto, not later than 12:00 Noon
(New York time) on the date when due and shall be made in immediately available
funds and in U.S. Dollars at the Payment Office, it being understood that
written, telex or facsimile transmission notice by the Borrower to the Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 12:00
Noon (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
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of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Agent within 45 days
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Effective Date, or in the case of a Bank that
is an assignee or transferee of an interest under this Agreement pursuant to
Section 1.13 or 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Agent two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a
Section
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4.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Agent of its inability to deliver any such Form or
Certificate in which case such Bank shall not be required to deliver any such
Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything
to the contrary contained in Section 4.04(a), but subject to Section 12.04(b)
and the immediately succeeding sentence, (x) the Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Bank which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for U.S.
Federal income tax purposes to the extent that such Bank has not provided to the
Borrower U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be obligated
pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Bank in
respect of income or similar taxes imposed by the United States if (I) such Bank
has not provided to the Borrower the Internal Revenue Service Forms required to
be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case
of a payment, other than interest, to a Bank described in clause (ii) above, to
the extent that such Forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 4.04 and except as set forth
in Section 12.04(b), the Borrower agrees to pay additional amounts and to
indemnify each Bank in the manner set forth in Section 4.04(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of income or similar Taxes.
SECTION 5. Conditions Precedent. The occurrence of the Effective
Date pursuant to Section 12.10 and the obligation of each Bank to make each Loan
to the Borrower hereunder, and the obligation of the Letter of Credit Issuer to
issue each Letter of Credit hereunder, is subject, at the time of each such
Credit Event (except as otherwise hereinafter indicated), to the satisfaction of
the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Effective
Date, (i) this Agreement shall have been executed and delivered as provided in
Section 12.10 and (ii) there shall have been delivered to the Agent for the
account of each Bank the appropriate Revolving Note and to BTCo the Swingline
Note, in each case executed by the Borrower and in the amount, maturity and as
otherwise provided herein.
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5.02 No Default; Representations and Warranties. At the time of each
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
5.03 Officer's Certificate. On the Effective Date, the Agent shall
have received a certificate dated such date signed by an appropriate officer of
the Borrower stating that all of the applicable conditions set forth in Sections
5.02, 5.07, 5.08 and 5.09 have been satisfied as of such date.
5.04 Opinions of Counsel. On the Effective Date, the Agent shall have
received (i) an opinion, addressed to the Agent and each of the Banks and dated
the Effective Date, from Kirkland & Ellis, counsel to the Credit Parties, which
opinion shall cover the matters contained in Exhibit D and such other matters
incident to the transactions contemplated herein as the Agent may reasonably
request and (ii) a reliance letter, addressed to the Agent and each of the Banks
and dated the Effective Date, from Weil, Gotshal & Manges with respect to the
legal opinion delivered by Weil, Gotshal & Manges pursuant to the
Recapitalization Documents.
5.05 Corporate Proceedings. (a) On the Effective Date, the Agent
shall have received from each Credit Party a certificate, dated the Effective
Date, signed by the chairman, a vice chairman, the president or any vice-
president of such Credit Party, and attested to by the secretary or any
assistant secretary of such Credit Party, in the form of Exhibit E with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws of such Credit Party and the resolutions of such Credit Party
referred to in such certificate and all of the foregoing (including each such
Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to
the Agent.
(b) On the Effective Date, all corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated by
this Agreement and the other Documents shall be reasonably satisfactory in form
and substance to the Agent, and the Agent shall have received all information
and copies of all certificates, documents and papers, including good standing
certificates, bring-down certificates and any other records of corporate
proceedings and governmental approvals, if any, which the Agent reasonably may
have requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental authorities.
5.06 Adverse Change, etc. On or prior to the Effective Date, nothing
shall have occurred since March 31, 1996 (and neither the Banks nor the Agent
shall have
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become aware of any facts or conditions not previously known) which the Required
Banks or the Agent shall determine (a) has, or could reasonably be expected to
have, a material adverse effect on the rights or remedies of the Banks or the
Agent, or on the ability of any Credit Party to perform its obligations to them
hereunder or under any other Credit Document or (b) has, or could reasonably be
expected to have, a Material Adverse Effect (other than any change generally
affecting the industry in which the Borrower operates and not just the Borrower
in particular).
5.07 Litigation. On the Effective Date, there shall be no actions,
suits or proceedings pending or threatened (a) with respect to this Agreement or
any other Document or the Transaction or (b) which the Agent or the Required
Banks shall determine could reasonably be expected to (i) have a Material
Adverse Effect or (ii) have a material adverse effect on the Transaction, or the
rights or remedies of the Banks or the Agent hereunder or under any other Credit
Document or on the ability of any Credit Party to perform its respective
obligations to the Banks or the Agent hereunder or under any other Credit
Document.
5.08 Approvals. On or prior to the Effective Date, all necessary
governmental (domestic and foreign) and third party approvals in connection with
the Transaction and the transactions contemplated by the Documents and otherwise
referred to herein or therein shall have been obtained and remain in effect, and
all applicable waiting periods shall have expired without any action being taken
by any competent authority which restrains, prevents or imposes materially
adverse conditions upon the consummation of the Transaction or the transactions
contemplated by the Documents and otherwise referred to herein. Additionally,
there shall not exist any judgment, order, injunction or other restraint issued
or filed or a hearing seeking injunctive relief or other restraint pending or
notified prohibiting or imposing materially adverse conditions upon the
consummation of the Transaction or the making of Loans.
5.09 Consummation of the Transaction. (a) On or prior to the
Effective Date, the Recapitalization shall have been consummated in accordance
with the Recapitalization Documents and all applicable laws, and each of the
conditions precedent to the consummation of the Recapitalization as set forth in
the Recapitalization Documents shall have been satisfied and not waived except
with the consent of the Agent and the Required Banks to the reasonable
satisfaction of the Agent and the Required Banks.
(b) (i) On or prior to the Effective Date, the total commitments in
respect of the Indebtedness to be Refinanced shall have been terminated, all
loans with respect thereto shall have been repaid in full, together with
interest thereon, all letters of credit issued thereunder shall have been
terminated and all other amounts due and owing pursuant to the Indebtedness to
be Refinanced shall have been repaid in full and all documents in respect of the
Indebtedness to be Refinanced and all guarantees with respect thereto shall
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have been terminated (except as to indemnification provisions which may survive
to the extent provided therein) and be of no further force and effect.
(ii) On or prior to the Effective Date, the creditors in respect of
the Indebtedness to be Refinanced shall have terminated and released all
security interests and Liens on the assets owned by the Borrower and its
Subsidiaries. The Agent shall have received such releases of security interests
in and Liens on the assets owned by the Borrower and its Subsidiaries as may
have been requested by the Agent, which releases shall be in form and substance
reasonably satisfactory to the Agent. Without limiting the foregoing, there
shall have been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where a
financing statement (Form UCC-1 or the appropriate equivalent) was filed with
respect to the Borrower or any of its Subsidiaries in connection with the
security interests created with respect to the Indebtedness to be Refinanced and
the documentation related thereto, (ii) termination or reassignment of any
security interest in, or Lien on, any patents, trademarks, copyrights, or
similar interests of the Borrower or any of its Subsidiaries on which filings
have been made, (iii) terminations of all mortgages, leasehold mortgages, deeds
of trust and leasehold deeds of trust created with respect to property of the
Borrower or any of its Subsidiaries, in each case, to secure the obligations in
respect of the Indebtedness to be Refinanced, all of which shall be in form and
substance reasonably satisfactory to the Agent, and (iv) all collateral owned by
the Borrower or any of its Subsidiaries in the possession of any of the
creditors in respect of the Indebtedness to be Refinanced or any collateral
agent or trustee under any related security document shall have been returned to
the Borrower or such Subsidiary.
(c) On or prior to the Effective Date, the Borrower shall have
received gross cash proceeds of $115,000,000 from the issuance of a like
principal amount of the Senior Notes (it being understood that such cash
proceeds shall include all amounts directly applied to finance the Transaction
and pay related fees and expenses incurred in connection therewith), and the
Banks shall have received true and correct copies of all Senior Note Documents
(certified as such by an appropriate officer of the Borrower), and all of the
terms and conditions of such Senior Note Documents (including, without
limitation, amortization, maturities, interest rates, absence of security,
covenants, default, remedies, sinking fund provisions and other provisions) and
the purchasers thereof shall be satisfactory to the Agent and the Required
Banks. All of the Senior Note Documents shall have been duly executed and
delivered by the parties thereto, shall be in full force and effect and each of
the conditions precedent to the obligations of the parties to effectuate the
issuance of the Senior Notes as set forth in the Senior Note Documents shall
have been satisfied and not waived except with the consent of the Agent and the
Required Banks to the reasonable satisfaction of the Agent and the Required
Banks, and the Senior Notes shall have been issued in accordance with the Senior
Note Documents and all applicable laws, rules and regulations.
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(d) On or prior to the Effective Date, (i) the Borrower shall have
received gross cash proceeds of at least $20,000,000 from the Equity Financing
and (ii) the Borrower shall have issued the Seller Stock having a value of
$15,000,000 as part of the Equity Financing (and with the value of the Seller
Preferred Stock not to exceed $13,800,000).
(e) On or prior to the Effective Date, (x) the Borrower shall have
used the net cash proceeds received by it pursuant to each of the Equity
Financing and the issuance of the Senior Notes to make payments owing in
connection with the Transaction, (y) after giving effect to the payments made
pursuant to preceding clause (x), the Borrower and its Subsidiaries shall have
at least $13,000,000 of cash on hand and (z) the Agent shall have received
evidence in form, scope and substance reasonably satisfactory to it that the
matters set forth in this Section 5.09 have been satisfied on such date.
(f) On or prior to the Effective Date, there shall have been
delivered to the Banks true and correct copies of all Documents entered into in
connection with the Recapitalization (including, without limitation, all of the
Recapitalization Documents, the Equity Financing Documents and the Refinancing
Documents), and all of the terms and conditions of such Documents, as well as
the structure of the Recapitalization and the ownership interests in the
Borrower after giving effect to the Recapitalization, shall be in form and
substance reasonably satisfactory to the Agent and the Required Banks.
5.10 Security Documents. (a) On the Effective Date, each Credit
Party shall have duly authorized, executed and delivered a Pledge Agreement in
the form of Exhibit F (as modified, amended or supplemented from time to time in
accordance with the terms thereof and hereof, the "Pledge Agreement") and shall
have delivered to the Collateral Agent, as pledgee thereunder, all of the
Pledged Securities referred to therein, endorsed in blank in the case of
promissory notes or accompanied by executed and undated stock powers in the case
of capital stock, and the Pledge Agreement shall be in full force and effect.
(b) On the Effective Date, each Credit Party shall have duly
authorized, executed and delivered a Security Agreement in the form of Exhibit G
(as modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, the "Security Agreement") covering all of the Security
Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1) or
appropriate local equivalent in appropriate form for filing under the UCC
or appropriate local equivalent of each jurisdiction as may be necessary to
perfect the security interests purported to be created by the Security
Agreement;
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(B) certified copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, each of a recent date listing all effective
financing statements that name the Borrower or any of its Domestic
Subsidiaries or a division or operating unit of any such Person as debtor
and that are filed in the jurisdictions referred to in clause (A) above,
together with copies of such financing statements that name the Borrower or
any of its Domestic Subsidiaries as debtor (none of which shall cover the
Collateral except (x) those with respect to which appropriate termination
statements executed by the secured lender thereunder have been delivered to
the Agent and (y) to the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement shall be in full force and effect.
5.11 Subsidiary Guaranty. On the Effective Date, each Subsidiary
Guarantor, if any, shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit H (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
5.12 Existing Indebtedness, etc. On the Effective Date and after
giving effect to the Transaction, neither the Borrower nor any of its
Subsidiaries shall have any preferred stock or Indebtedness outstanding except
for the Seller Preferred Stock and for Indebtedness permitted under Section
8.04. On and as of the Effective Date, all of the Existing Indebtedness shall
remain outstanding after giving effect to the Transaction and the other
transactions contemplated hereby without any default or events of default
existing thereunder or arising as a result of the Transaction and the other
transactions contemplated hereby (except to the extent amended or waived by the
parties thereto on terms and conditions reasonably satisfactory to the Agent and
the Required Banks). On and as of the Effective Date, the Agent and the
Required Banks shall be satisfied with the amount of and the terms and
conditions of all Existing Indebtedness.
5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness
Agreements; Shareholders' Agreements; Management Agreements; Employment
Agreements; Tax Allocation Agreements; Material Contracts. On or prior to the
Effective
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Date, there shall have been delivered to the Banks copies, certified
as true and correct by an appropriate officer of the Borrower of:
(a) any Plans of the Borrower or any of its Subsidiaries after giving
effect to the consummation of the Transaction and for each such Plan (i)
that is a "single-employer plan" (as defined in Section 4001(a)(15) of
ERISA) the most recently completed actuarial valuation prepared therefor by
such Plan's regular enrolled actuary and the Schedule B, "Actuarial
Information" to the IRS Form 5500 (Annual Report) most recently filed with
the Internal Revenue Service and (ii) that is a "multi-employer plan" (as
defined in Section 4001(a)(3) of ERISA), each of the documents referred to
in clause (i) either in the possession of the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate or reasonably available thereto from
the sponsor or trustees of such Plan;
(b) any collective bargaining agreements or any other similar
agreement or arrangement covering the employees of the Borrower or any of
its Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Collective Bargaining
Agreements");
(c) all agreements evidencing or relating to the Existing Indebtedness
that are to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Existing Indebtedness Agreements");
(d) all agreements entered into by the Borrower or any of its
Subsidiaries governing the terms and relative rights of its capital stock,
and any agreements entered into by shareholders relating to any such entity
with respect to their capital stock, in each case that are to remain in
effect after giving effect to the consummation of the Transaction
(collectively, the "Shareholders' Agreements");
(e) any material agreements (or the forms thereof) with members of, or
with respect to, the management of the Borrower or any of its Subsidiaries
that are to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Management Agreements");
(f) any employment agreements entered into by the Borrower or any of
its Subsidiaries (collectively, the "Employment Agreements");
(g) any tax sharing or tax allocation agreements entered into by the
Borrower or any of its Subsidiaries (collectively, the "Tax Allocation
Agreements"); and
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(h) all material contracts and licenses of the Borrower or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts");
all of which Plans, Collective Bargaining Agreements, Existing Indebtedness
Agreements, Shareholders' Agreements, Management Agreements, Employment
Agreements, Tax Allocation Agreements and Material Contracts shall be in form
and substance reasonably satisfactory to the Agent and the Required Banks and
shall be in full force and effect on the Effective Date.
5.14 Solvency Opinion; Evidence of Insurance. On the Effective Date,
the Agent shall have received:
(a) a solvency opinion in form and substance reasonably satisfactory
to the Agent and the Required Banks from Murray, Devine & Co., Inc.,
addressed to the Agent and each of the Banks and dated the Effective Date
and supporting the conclusions, that, after giving effect to the
Transaction and the incurrence of all financings contemplated herein, the
Borrower and its Subsidiaries (on a consolidated basis) are not insolvent
and will not be rendered insolvent by the indebtedness incurred in
connection herewith, will not be left with unreasonably small capital
with which to engage in their respective businesses and will not have
incurred debts beyond their ability to pay such debts as they mature and
become due; and
(b) evidence of insurance complying with the requirements of Section
7.03 for the business and properties of the Borrower and its Subsidiaries,
in scope, form and substance reasonably satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be cancelled
or revised without at least 30 days prior written notice by the insurer to
the Collateral Agent.
5.15 Pro Forma Balance Sheet. On or prior to the Effective Date,
there shall have been delivered to the Agent, an unaudited pro forma
consolidated balance sheet of the Borrower and its Subsidiaries after giving
effect to the Transaction and prepared in accordance with GAAP, together with a
related funds flow statement, which pro forma balance sheet and funds flow
statement shall be reasonably satisfactory in form and substance to the Agent
and the Required Banks.
5.16 Projections. On or prior to the Effective Date, the Banks shall
have received the financial projections (the "Projections") set forth on Annex
IV, which include the projected results of the Borrower and its Subsidiaries for
the five fiscal years ended after the Effective Date.
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5.17 Payment of Fees. On the Effective Date, all costs, fees and
expenses, and all other compensation contemplated by this Agreement, due to the
Agent or the Banks (including, without limitation, legal fees and expenses)
shall have been paid to the extent due.
5.18 Notice of Borrowing; Letter of Credit Request. Prior to the
incurrence of any Loan, the Agent shall have received a Notice of Borrowing
satisfying the requirements of Section 1.03. Prior to the issuance of any
Letter of Credit, the Agent and the Letter of Credit Issuer shall have received
a Letter of Credit Request satisfying the requirements of Section 2.02.
The occurrence of the Effective Date and the acceptance of the
benefits of each other Credit Event shall constitute a representation and
warranty by each Credit Party to each of the Banks that all of the applicable
conditions specified above exist as of the date of such Credit Event. All of
the certificates, legal opinions and other documents and papers referred to in
this Section 5, unless otherwise specified, shall be delivered to the Agent at
its Notice Office for the account of each of the Banks and, except for the
Notes, in sufficient counterparts for each of the Banks and shall be
satisfactory in form and substance to the Agent and the Required Banks.
SECTION 6. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, the Borrower
makes the following representations, warranties and agreements with the Banks in
each case after giving effect to the Transaction, all of which shall survive the
execution and delivery of this Agreement, the making of the Loans and the
issuance of the Letters of Credit (with the occurrence of the Effective Date and
each other Credit Event being deemed to constitute a representation and warranty
that the matters specified in this Section 6 are true and correct in all
material respects on and as of the Effective Date and the date of each such
other Credit Event, unless stated to relate to a specific earlier date in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date):
6.01 Corporate Status. Each of the Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing (to the extent such concept is relevant in such jurisdiction) under the
laws of the jurisdiction of its organization, (ii) has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (iii) is duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified would
have a Material Adverse Effect.
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6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of each
Document to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will contravene any applicable
provision of any law, statute, rule or regulation, or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of the Borrower or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or any
other material agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws of the Borrower or any of its
Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower or any of its Subsidiaries, threatened,
with respect to the Borrower or any of its Subsidiaries (i) that could
reasonably be expected to have a Material Adverse Effect or (ii) that could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Banks or on the ability of any Credit Party to perform its
respective obligations to the Banks hereunder and under the other Credit
Documents to which it is, or will be, a party. Additionally, there does not
exist any judgment, order or injunction prohibiting or imposing material adverse
conditions upon the occurrence of any Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of the
Loans shall be utilized only for the general corporate and working capital
purposes of the Borrower and its Subsidiaries.
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, nor the occurrence of any other Credit Event, will violate the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System and no
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part of the proceeds of any Loan or the use of any Letter of Credit will be used
to purchase or carry any Margin Stock or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
6.07 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither the Borrower nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information (taken as
a whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower or any of its Subsidiaries in writing to the Agent or any Bank
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Persons in writing to the Agent or any
Bank will be, true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
6.10 Financial Condition; Financial Statements. (a) On and as of the
Effective Date, on a pro forma basis after giving effect to the Transaction and
to all Indebtedness incurred and to be incurred (including, without limitation,
the Loans) and Liens created, and to be created, by each Credit Party in
connection therewith, with respect to each of the Borrower and its Subsidiaries
(on a consolidated basis) and of the Borrower (on a stand-alone basis) (x) the
sum of the assets, at a fair valuation, of each of the Borrower and its
Subsidiaries (on a consolidated basis) and of the Borrower (on a stand-alone
basis) will exceed its debts, (y) it has not incurred nor intended to, nor
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature and (z) it will have sufficient capital with which to conduct its
business. For purposes of this Section 6.10, "debt" means any liability on a
claim, and "claim" means (i) right to payment whether or not such a right
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is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The consolidated balance sheets of the Borrower and its
Subsidiaries at March 31, 1996 and at January 5, 1997 and the related statements
of operations and cash flows and changes in shareholders' equity of the Borrower
and its Subsidiaries for the fiscal year or nine-month period, as the case may
be, ended as of said dates, copies of which have heretofore been furnished to
each Bank, present fairly in all material respects the consolidated financial
position of the Borrower and its Subsidiaries at the dates of said statements
and the results of operations and cash flows for the periods covered thereby.
All such financial statements have been prepared in accordance with GAAP
consistently applied except to the extent provided in the notes to said
financial statements and subject, in the case of the January 5, 1997 statements,
to normal year-end audit adjustments and the absence of footnotes.
(c) Since March 31, 1996, nothing has occurred that has had or could
reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described in
Section 6.10(b) and the Indebtedness incurred under this Agreement and under the
Senior Notes, (i) there were as of the Effective Date, no liabilities or
obligations (excluding current obligations incurred in the ordinary course of
business) with respect to the Borrower or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due), and (ii) the Borrower does not know of any basis for the assertion
against the Borrower or any of its Subsidiaries of any such liability or
obligation which, in the case of clause (i) or (ii) either individually or in
the aggregate, is, or would be reasonably likely to have, a Material Adverse
Effect.
(e) The Projections are based on good faith estimates and assumptions
made by the management of the Borrower, and on the Effective Date such
management believed that the Projections were reasonable and attainable, it
being recognized by the Banks, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by the Projections probably will differ from the projected
results and that the differences may be material. There is no fact known to the
Borrower or any of its Subsidiaries which would have a Material Adverse Effect,
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Banks for use in connection with the transactions
contemplated hereby.
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6.11 Security Interests. On and after the Effective Date, each of the
Security Documents creates (or after the execution and delivery thereof will
create), as security for the Obligations, a valid and enforceable perfected
security interest in and Lien on all of the Collateral subject thereto, superior
to and prior to the rights of all third Persons, and subject to no other Liens
(except that the Security Agreement Collateral, the Mortgaged Properties and the
collateral covered by the Additional Security Documents may be subject to
Permitted Liens relating thereto), in favor of the Collateral Agent. No filings
or recordings are required in order to perfect the security interests created
under any Security Document except for filings or recordings required in
connection with any such Security Document which shall have been made on or
prior to the Effective Date as contemplated by Section 5.10(b) or on or prior to
the execution and delivery thereof as contemplated by Sections 7.11, 7.13 and
8.14.
6.12 Transaction. At the time of consummation thereof, the
Transaction shall have been consummated in all material respects in accordance
with the terms of the Documents and all applicable laws. At the time of
consummation thereof, all consents and approvals of, and filings and
registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required in order to make or
consummate the Transaction have been obtained, given, filed or taken or waived
and are or will be in full force and effect (or effective judicial relief with
respect thereto has been obtained) except where the failure to obtain, give,
file, or take would not reasonably be expected to have a Material Adverse
Effect. All applicable waiting periods with respect thereto have or, prior to
the time when required, will have, expired without, in all such cases, any
action being taken by any competent authority which restrains, prevents, or
imposes material adverse conditions upon the Transaction. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transaction or the performance by the
Borrower and its Subsidiaries of their obligations under the Documents and all
applicable laws.
6.13 Compliance with ERISA. (a) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency, has permitted decreases in its funding standard account or has
applied for a waiver of the minimum funding standard or an extension of any
amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither the Borrower nor any Subsidiary of the
Borrower nor any ERISA Affiliate has incurred any material liability to or on
account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code or reasonably expects to incur any material liability
(including any indirect, contingent or secondary liability) under any of the
foregoing Sections with respect to any Plan (other than liabilities of any ERISA
Affiliate which could not, by operation of law or otherwise, become a liability
of the Borrower or
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any of its Subsidiaries); no proceedings have been instituted to terminate, or
to appoint a trustee to administer, any Plan; no condition exists which presents
a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to the
foregoing provisions of ERISA and the Code; using actuarial assumptions and
computation methods consistent with subpart 1 of subtitle E of Title IV of
ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its
ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as
of the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent Credit Event, would not result in a Material Adverse
Effect; no lien imposed under the Code or ERISA on the assets of the Borrower or
any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to
arise on account of any Plan; and the Borrower and its Subsidiaries do not
maintain or contribute to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA) the
obligations with respect to which could reasonably be expected to have a
Material Adverse Effect.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither the
Borrower nor any of its Subsidiaries has incurred any material obligation in
connection with the termination of or withdrawal from any Foreign Pension Plan.
The present value of the accrued benefit liabilities (whether or not vested)
under each Foreign Pension Plan which is funded, determined as of the end of the
most recently ended fiscal year of the Borrower on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan, and for each Foreign Pension Plan which
is not funded, the obligations of such Foreign Pension Plan are properly
accrued.
6.14 Capitalization. On the Effective Date and after giving effect to
the Transaction, the authorized capital stock of the Borrower shall consist of
(i) 20,000,000 shares of Class A Common Stock, $0.01 par value per share (the
"Class A Common Stock"), (ii) 2,000,000 shares of Class L Common Stock, $0.01
par value per share (the "Class L Common Stock"), (iii) 4,000,000 shares of
Class B Common Stock, $0.01 par value per share (the "Class B Common Stock"),
and (iv) 1,000,000 shares of Series A Convertible Preferred Stock, $0.01 par
value per share (the "Seller Preferred Stock"), of which 749,856 shares have
been issued. All such outstanding shares have been duly and validly issued, are
fully paid and nonassessable. The Borrower does not have outstanding any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock
except for the Seller Preferred Stock and
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options to purchase Class A Common Stock and Class B Common Stock issued or to
be issued to management and other employees of the Borrower and its
Subsidiaries.
6.15 Subsidiaries. On and as of the Effective Date and after giving
effect to the consummation of the Transaction, the Borrower has no Subsidiaries
other than those Subsidiaries listed on Annex V. Annex V correctly sets forth,
as of the Effective Date and after giving effect to the Transaction, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof. All outstanding shares of capital stock of each Subsidiary of the
Borrower have been duly and validly issued, are fully paid and nonassessable and
have been issued free of preemptive rights. No Subsidiary of the Borrower has
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any right to subscribe for or to purchase, or any options
or warrants for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of or any calls, commitments or claims of any
character relating to, its capital stock or any stock appreciation or similar
rights. Therma-Wave Domestic Sales Corp. has no operations and has no
significant assets or liabilities.
6.16 Intellectual Property. Except as disclosed on Annex X, each of
the Borrower and each of its Subsidiaries owns or holds a valid license to use
all the material patents, trademarks, permits, service marks, trade names,
technology, know-how and formulas or other rights with respect to the foregoing,
free from restrictions that are materially adverse to the use thereof, that are
used in the operation of the business of the Borrower and each of its
Subsidiaries as presently conducted.
6.17 Compliance with Statutes, etc. The Borrower and its Subsidiaries
are in compliance with all applicable statutes, regulations and orders of, and
all applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including compliance with all applicable Environmental Laws with
respect to any Real Property or governing its business and the requirements of
any permits issued under such Environmental Laws with respect to any such Real
Property or the operations of the Borrower or any of its Subsidiaries), except
such non-compliance as is not likely to, individually or in the aggregate, have
a Material Adverse Effect.
6.18 Environmental Matters. (a) The Borrower and its Subsidiaries
have complied with, and on the date of each Credit Event are in compliance with,
all applicable Environmental Laws and the requirements of any permits issued
under such Environmental Laws. There are no pending or, to the best knowledge
of the Borrower, past or threatened Environmental Claims against the Borrower or
any of its Subsidiaries or any Real Property owned or operated by the Borrower
or any of its Subsidiaries. There are no facts, circumstances, conditions or
occurrences concerning the business or operations of the Borrower or any of its
Subsidiaries or any Real Property at any time owned or operated by the Bor-
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rower or any of its Subsidiaries or, to the best knowledge of the Borrower, on
any property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such currently owned or operated
Real Property or (ii) to cause any such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property by the Borrower or any of its Subsidiaries under any applicable
Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by the Borrower or any of its Subsidiaries where such generation, use,
treatment or storage has violated or would reasonably be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries. There are not now any underground storage tanks located on any
Real Property owned or operated by the Borrower or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.18, the
representations made in this Section 6.18 shall only be untrue if the aggregate
effect of all restrictions, failures, noncompliance, Environmental Claims,
Releases and presence of underground storage tanks, in each case of the types
described above, would reasonably be expected to have a Material Adverse Effect.
6.19 Properties. All Real Property owned or leased by the Borrower or
any of its Domestic Subsidiaries as of the Effective Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Annex III. The Borrower and its Subsidiaries have good and
marketable title to, or a validly subsisting leasehold interest in, all material
properties owned or leased by it, including all Real Property reflected in Annex
III or in the financial statements referred to in Section 6.10(b), free and
clear of all Liens, other than Permitted Liens.
6.20 Labor Relations. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or,
to the best knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower, threatened against the Borrower or any of
its Subsidiaries, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against the Borrower or any of its Subsidiaries and (iii)
to the best knowledge of the Borrower, no union representation question existing
with respect to the employees of the Borrower or any of its Subsidi-
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aries and, to the best knowledge of the Borrower, no union organizing activities
are taking place, except (with respect to any matter specified in clause (i),
(ii) or (iii) above, either individually or in the aggregate) such as is not
reasonably likely to have a Material Adverse Effect.
6.21 Tax Returns and Payments. All Federal, state, foreign and other
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Borrower and/or any of its Subsidiaries have been timely filed with the
appropriate taxing authority. The Returns accurately reflect all liability for
taxes of the Borrower and its Subsidiaries for the periods covered thereby. The
Borrower and each of its Subsidiaries have paid all taxes payable by them other
than immaterial taxes and other taxes which are not yet due and payable, and
other than those contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP. Except
as disclosed in the financial statements referred to in Section 6.10(b), there
is no material action, suit, proceeding, investigation, audit, or claim now
pending or, to the knowledge of the Borrower, threatened by any authority
regarding any taxes relating to the Borrower or any of its Subsidiaries. As of
the Effective Date, neither the Borrower nor any of its Subsidiaries has entered
into an agreement or waiver or been requested to enter into an agreement or
waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations. Neither the Borrower nor any of its
Subsidiaries have provided, with respect to themselves or property held by them,
any consent under Section 341 of the Code. Neither the Borrower nor any of its
Subsidiaries has incurred, or will incur, any material tax liability in
connection with the Transaction and the other transactions contemplated hereby.
6.22 Existing Indebtedness. Annex VI sets forth a true and complete
list of all Indebtedness of the Borrower and its Subsidiaries as of the
Effective Date and which is to remain outstanding after giving effect to the
Transaction (excluding the Loans, the Letters of Credit and the Senior Notes,
the "Existing Indebtedness"), in each case showing the aggregate principal
amount thereof and the name of the respective borrower and any other entity
which directly or indirectly guaranteed such debt.
SECTION 7. Affirmative Covenants. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Revolving Loan Commitment has
terminated, no Letters of Credit (other than Letters of Credit, together with
all Fees that have accrued and will accrue thereon through the stated
termination date of such Letters of Credit, which have been supported in a
manner satisfactory to the Letter of Credit Issuer in its sole and absolute
discretion) or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and
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all other Obligations (other than any indemnities described in Section 12.13
hereof which are not then due and payable) incurred hereunder, are paid in full:
7.01 Information Covenants. The Borrower will furnish to each Bank:
(a) Monthly Reports. Within 30 days after the end of each fiscal
month of the Borrower, the consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal month and the related
consolidated statements of income and retained earnings and of cash flows
for such fiscal month and for the elapsed portion of the fiscal year ended
with the last day of such fiscal month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal year
and comparative budgeted figures for such fiscal month, all of which shall
be certified by the chief financial officer or other Authorized Officer of
the Borrower, subject to normal year-end audit adjustments and the absence
of footnote disclosure.
(b) Quarterly Financial Statements. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and of cash
flows for such quarterly accounting period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly accounting
period, all of which shall be in reasonable detail and certified by the
chief financial officer or other Authorized Officer of the Borrower that
they fairly present in all material respects the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results of
their operations and changes in their cash flows for the periods indicated,
subject to normal year-end audit adjustments and the absence of footnote
disclosure.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for such fiscal year, in each case setting forth comparative figures
for the preceding fiscal year and comparative budgeted figures for such
fiscal year, and, in the case of all such financial statements (but
excluding such comparative budgeted figures), certified by such independent
certified public accountants of recognized national standing as shall be
reasonably acceptable to the Agent, in each case to the effect that such
statements fairly present in all material respects the financial condition
of the Borrower and its Subsidiaries as of the dates indicated and the
results of their operations and cash flows, together with a certificate of
such accounting firm stating that in the course of its regular audit of the
business of the Borrower and its Subsidiaries, which audit was conducted in
accordance with generally accepted auditing standards, no Default or Event
of Default which has occurred and is continuing has come to their attention
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insofar as such Default or Event of Default relates to financial and
accounting matters or, if such a Default or an Event of Default has come to
their attention a statement as to the nature thereof.
(d) Budgets, etc. Not more than 60 days after the commencement of
each fiscal year of the Borrower, budgets of the Borrower and its
Subsidiaries in reasonable detail for each of the four fiscal quarters of
such fiscal year as customarily prepared by management for its internal use
setting forth, with appropriate discussion, the principal assumptions upon
which such budgets are based. Together with each delivery of financial
statements pursuant to Sections 7.01(b) and (c), a comparison of the
current year to date financial results (other than in respect of the
balance sheets included therein) against the budgets required to be
submitted pursuant to this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 7.01(b) and (c), a
certificate of the chief financial officer or other Authorized Officer of
the Borrower to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall set forth the calculations required
to establish whether the Borrower and its Subsidiaries were in compliance
with the provisions of Sections 8.04(e), 8.05 and 8.08 through and
including 8.11, as at the end of such fiscal quarter or year, as the case
may be.
(f) Notice of Default or Litigation. Promptly, and in any event
within five Business Days (or 10 Business Days in the case of clause (y)
below) after any Senior Officer of the Borrower or any of its Subsidiaries
obtains knowledge thereof, notice of (x) the occurrence of any event which
constitutes a Default or an Event of Default, which notice shall specify
the nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto and shall state that such
notice is a "notice of default" and (y) the commencement of, or threat of,
or any significant development in, any litigation or governmental
proceeding pending against the Borrower or any of its Subsidiaries which is
likely to have a Material Adverse Effect, or a material adverse effect on
the ability of any Credit Party to perform its respective obligations
hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
report or "management letter" submitted to the Borrower or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower or any
of its Subsidiaries.
(h) Environmental Matters. Promptly after obtaining knowledge of any
of the following, written notice of:
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(i) any pending or threatened material Environmental Claim
against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that (x) results
in material noncompliance by the Borrower or any of its Subsidiaries
with any applicable Environmental Law or (y) could reasonably be
anticipated to form the basis of a material Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any material restrictions on the ownership, occupancy, use or
transferability by the Borrower or its Subsidiary, as the case may be,
of its interest in such Real Property under any Environmental Law; and
(iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries where the Borrower or any of its Subsidiaries is or is
reasonably expected to be responsible for the cost of such action or
where the taking of such action could reasonably be expected to
materially interfere with the operations of the Borrower or any of its
Subsidiaries at such Real Property.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's response thereto. In addition, the Borrower agrees to
provide the Banks with copies of all material written communications by the
Borrower or any of its Subsidiaries with any Person, government or
governmental agency relating to any of the matters set forth in clauses
(i)-(iv) above, and such detailed reports relating to any of the matters
set forth in clauses (i)-(iv) above as may reasonably be requested by the
Agent or the Required Banks.
(i) Other Information. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the SEC by the Borrower
or any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as the Borrower or any of its Subsidiaries
shall generally send to analysts or the holders of their capital stock or
the holders of the Senior Notes in their capacity as such holders (to the
extent not theretofore delivered to the Banks pursuant to this Agreement)
and, with reasonable promptness, such other infor-
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mation or documents (financial or otherwise) as the Agent on its own behalf
or on behalf of any Bank may reasonably request from time to time.
7.02 Books, Records and Inspections. The Borrower will, and will cause
each of its Subsidiaries to, permit, upon notice to the chief financial officer
or other Authorized Officer of the Borrower, (x) officers and designated
representatives of the Agent or any Bank to visit and inspect any of the
properties or assets of the Borrower and any of its Subsidiaries in whomsoever's
possession, and to examine the books of account of the Borrower and any of its
Subsidiaries and discuss the affairs, finances and accounts of the Borrower and
of any of its Subsidiaries with, and be advised as to the same by, their
officers and independent accountants, all at such reasonable times and intervals
and to such reasonable extent as the Agent or any Bank may desire and (y) the
Agent, at the request of the Required Banks, to conduct, at the Borrower's
expense, an audit of the accounts receivable and/or inventories of the Borrower
and its Subsidiaries at such times (but no more frequently than once a year
unless an Event of Default has occurred and is continuing) as the Required Banks
shall reasonably require.
7.03 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, at all times from and after the Effective Date maintain in full
force and effect insurance with reputable and solvent insurance carriers in such
amounts, covering such risks and liabilities and with such deductibles or self-
insured retentions as are in accordance with normal industry practice. At any
time that insurance at the levels described in Annex VII is not being maintained
by the Borrower and its Subsidiaries, the Borrower will notify the Banks in
writing thereof and, if thereafter notified by the Agent to do so, the Borrower
will obtain insurance at such levels to the extent then generally available (but
in any event within deductible or self-insured retention limitations set forth
in the preceding sentence) or otherwise as are acceptable to the Agent. The
Borrower will furnish to the Agent on the Effective Date and on each date as the
Agent or the Required Banks may reasonably request, a summary of the insurance
carried in respect of the Borrower and its Subsidiaries and the assets of the
Borrower and its Subsidiaries together with certificates of insurance and other
evidence of such insurance, if any, naming the Collateral Agent as an additional
insured and/or loss payee.
7.04 Payment of Taxes. The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims for sums that have become due
and payable which, if unpaid, might become a Lien not otherwise permitted under
Section 8.03(a) or charge upon any properties of the Borrower or any of its
Subsidiaries; provided, that neither the Borrower nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
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7.05 Corporate Franchises. The Borrower will do, and will cause each
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; provided, however, that any transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) other than
such non-compliance as would not have a Material Adverse Effect or a material
adverse effect on the ability of any Credit Party to perform its obligations
under any Credit Document to which it is a party.
7.07 Compliance with Environmental Laws. (a) The Borrower will pay,
and will cause each of its Subsidiaries to pay, all costs and expenses incurred
by it in keeping in compliance with all Environmental Laws, and will keep or
cause to be kept all Real Properties owned or operated by the Borrower or any of
its Subsidiaries free and clear of any Liens imposed pursuant to such
Environmental Laws; and (b) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of, Hazardous Materials
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, unless the failure to comply with the
requirements specified in clause (a) or (b) above, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
If the Borrower or any of its Subsidiaries, or any tenant or occupant of any
Real Property, cause or permit any intentional or unintentional act or omission
resulting in the presence or Release of any Hazardous Material (except in
compliance with applicable Environmental Laws), the Borrower agrees to
undertake, and/or to cause any of its Subsidiaries, tenants or occupants to
undertake, at their sole expense, any clean up, removal, remedial or other
action required pursuant to Environmental Laws to remove and clean up any
Hazardous Materials from any Real Property except where the failure to do so
would not be reasonably expected to have a Material Adverse Effect; provided
that neither the Borrower nor any of its Subsidiaries shall be required to
comply with any such order or directive which is being contested in good faith
and by proper proceedings so long as it has maintained adequate reserves with
respect to such compliance to the extent required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within 10 days
after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following events to
the extent that one or more of such events is reasonably likely to result in a
material liability to the Borrower or any
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Subsidiary of the Borrower, the Borrower will deliver to each of the Banks a
certificate of the chief financial officer or other Authorized Officer of the
Borrower setting forth details as to such occurrence and the action, if any,
which the Borrower, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by the Borrower, such Subsidiary, such ERISA Affiliate, the
PBGC, a Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred, that an accumulated funding deficiency has been
incurred or an application may be or has been made to the Secretary of the
Treasury for a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period
under Section 412 of the Code with respect to a Plan; that a contribution
required to be made to a Plan or Foreign Pension Plan has not been timely made;
that a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings may be or have
been instituted to terminate or appoint a trustee to administer a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate will or may incur any liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980
of the Code or Section 409, 502(i) or 502(l) of ERISA; or that the Borrower or
any Subsidiary of the Borrower has or may incur any liability under any employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA). At the request of any Bank, the Borrower will deliver to
such Bank a complete copy of the annual report (Form 5500) of each Plan required
to be filed with the Internal Revenue Service. In addition, at the request of
any Bank, copies of annual reports and any notices received by the Borrower or
any Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan
or Foreign Pension Plan shall be delivered to such Bank no later than 10 days
after the date of any such request.
7.09 Good Repair. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 8.08, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
7.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on the Sunday on or immediately following
March 31 of each year and (ii) each of its,
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and each of its Subsidiaries', fiscal quarters to end on dates which are
consistent with a fiscal year ending as provided in preceding clause (i).
7.11 Additional Security; Further Assurances. (a) The Borrower will,
and will cause each of its Domestic Subsidiaries (and to the extent Section 7.13
is operative, each of its Foreign Subsidiaries) to, grant to the Collateral
Agent security interests and mortgages in such assets and properties of the
Borrower and its Subsidiaries as are not covered by the initial Security
Documents, and as may be requested from time to time by the Agent or the
Required Banks (collectively, the "Additional Security Documents"). All such
security interests and mortgages shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Agent and shall constitute
valid and enforceable perfected security interests and mortgages superior to and
prior to the rights of all third Persons and subject to no other Liens except
for Permitted Liens. The Additional Security Documents or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens in
favor of the Collateral Agent required to be granted pursuant to the Additional
Security Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(b) The Borrower will, and will cause each of its Subsidiaries to, at
the expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices,
schedules, confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, the Borrower shall cause to be delivered to the
Collateral Agent such opinions of counsel, title insurance and other related
documents as may be reasonably requested by the Agent to assure themselves that
this Section 7.11 has been complied with.
(c) If the Agent or the Required Banks determine that they are
required by law or regulation to have appraisals prepared in respect of the Real
Property of the Borrower and its Subsidiaries constituting Collateral, the
Borrower shall provide to the Agent appraisals which satisfy the applicable
requirements of the Real Estate Appraisal Reform Amendments of the Financial
Institution Reform, Recovery and Enforcement Act of 1989 and which shall be in
form and substance satisfactory to the Agent.
(d) The Borrower agrees that each action required above by this
Section 7.11 shall be completed as soon as possible, but in no event later than
90 days after such action is either requested to be taken by the Agent or the
Required Banks or required to be taken by the Borrower and its Subsidiaries
pursuant to the terms of this Section 7.11; provided that in no event shall the
Borrower be required to take any action, other than
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using its reasonable efforts, to obtain consents from third parties with respect
to its compliance with this Section 7.11.
7.12 Register. The Borrower hereby designates the Agent to serve as
the Borrower's agent, solely for purposes of this Section 7.12, to maintain a
register (the "Register") on which it will record the Revolving Loan Commitments
from time to time of each of the Banks, the Loans made by each of the Banks and
each repayment in respect of the principal amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordations shall
not affect the Borrower's obligations in respect of such Loans. With respect to
any Bank, the transfer of the Revolving Loan Commitment of such Bank and the
rights to the principal of, and interest on, any Revolving Loan made pursuant to
such Revolving Loan Commitment shall not be effective until such transfer is
recorded on the Register maintained by the Agent with respect to ownership of
such Revolving Loan Commitment and Revolving Loans and prior to such recordation
all amounts owing to the transferor with respect to such Revolving Loan
Commitment and Revolving Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Revolving Loan
Commitment and Revolving Loans shall be recorded by the Agent on the Register
only upon the acceptance by the Agent of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident
with the delivery of such an Assignment and Assumption Agreement to the Agent
for acceptance and registration of assignment or transfer of all or part of a
Revolving Loan Commitment, or as soon thereafter as practicable, the assigning
or transferor Bank shall surrender its Revolving Note, and thereupon one or more
new Revolving Notes in the same aggregate principal amount shall be issued to
the assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 7.12.
7.13 Foreign Subsidiaries Security. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Agent and the Required Banks does not
within 30 days after a request from the Agent or the Required Banks deliver
evidence, in form and substance mutually satisfactory to the Agent and the
Borrower, with respect to any Foreign Subsidiary which has not already had all
of its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of
66-2/3% or more of the total combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory
note issued by such Foreign Subsidiary to the Borrower or any of its Domestic
Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement and (iii) the
entering into by such Foreign Subsidiary of a guaranty in substantially the form
of the Subsidiary Guaranty, in any such case could reasonably be expected to
cause (I) the undistributed earnings of such Foreign Subsidiary as determined
for Federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary's United
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States parent for Federal income tax purposes or (II) other material adverse
federal income tax consequences to the Credit Parties, then in the case of a
failure to deliver the evidence described in clause (i) above, that portion of
such Foreign Subsidiary's outstanding capital stock or any promissory notes so
issued by such Foreign Subsidiary, in each case not theretofore pledged pursuant
to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit
of the Secured Creditors pursuant to the Pledge Agreement (or another pledge
agreement in substantially similar form, if needed), and in the case of a
failure to deliver the evidence described in clause (ii) above, such Foreign
Subsidiary shall execute and deliver the Security Agreement (or another security
agreement in substantially similar form, if needed), granting the Secured
Creditors a security interest in all of such Foreign Subsidiary's assets and
securing the Obligations of the Borrower under the Credit Documents and under
any Interest Rate Protection Agreement or Other Hedging Agreement and, in the
event the Subsidiary Guaranty shall have been executed by such Foreign
Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the
case of a failure to deliver the evidence described in clause (iii) above, such
Foreign Subsidiary shall execute and deliver the Subsidiary Guaranty (or another
guaranty in substantially similar form, if needed), guaranteeing the Obligations
of the Borrower under the Credit Documents and under any Interest Rate
Protection Agreement or Other Hedging Agreement, in each case to the extent that
the entering into such Security Agreement or Subsidiary Guaranty is permitted by
the laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 7.13 to be in form and substance reasonably
satisfactory to the Agent and the Required Banks.
SECTION 8. Negative Covenants. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Revolving Loan Commitment has
terminated, no Letters of Credit (other than Letters of Credit, together with
all Fees that have accrued and will accrue thereon through the stated
termination date of such Letters of Credit, which have been supported in a
manner satisfactory to the Letter of Credit Issuer in its sole and absolute
discretion) or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 12.13 hereof which are not then due and payable) incurred
hereunder, are paid in full:
8.01 Changes in Business. The Borrower and its Subsidiaries will not
engage in any business other than the business engaged in by the Borrower and
its Subsidiaries as of the Effective Date and activities directly related
thereto, and similar or related businesses. Notwithstanding anything to the
contrary contained in this Agreement, Therma-Wave Domestic Sales Corp. shall not
engage in any business activities (other than in connection with its
dissolution) and shall not have any significant assets or liabilities.
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8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or any part of
its property or assets (other than inventory in the ordinary course of
business), or enter into any partnerships, joint ventures or sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of related
transactions) any part of the property or assets (other than purchases or other
acquisitions of inventory, materials and equipment in the ordinary course of
business) of any Person (or agree to do any of the foregoing at any future
time), except that the following shall be permitted:
(a) the Borrower and its Subsidiaries may lease as lessee or lessor
or license as licensee or licensor real or personal property in the
ordinary course of business and otherwise in compliance with this
Agreement, so long as any such lease or license by the Borrower or any of
its Subsidiaries in its capacity as lessor or licensor, as the case may be,
does not prohibit the granting of a Lien by the Borrower or any of its
Subsidiaries pursuant to the Mortgages in the real property covered by such
lease or pursuant to the Security Agreement in the personal property
covered by such lease or license, as the case may be;
(b) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 8.08;
(c) the advances, investments and loans permitted pursuant to Section
8.05;
(d) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivable arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(e) the Borrower and its Subsidiaries may sell or exchange specific
items of equipment, so long as the purpose of each such sale or exchange is
to acquire (and results within 180 days of such sale or exchange in the
acquisition of) replacement items of equipment which are, in the reasonable
business judgment of the Borrower and its Subsidiaries, the functional
equivalent of the item of equipment so sold or exchanged;
(f) the Borrower and its Subsidiaries may, in the ordinary course of
business, license, as licensee or licensor, patents, trademarks, copyrights
and know-how to or from third Persons and to one another so long as any
such license by the Borrower or any of its Subsidiaries in its capacity as
licensor is permitted to be assigned pursuant to the Security Agreement (to
the extent that a security interest in such patents, trademarks, copyrights
and know-how is granted thereunder) and
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does not otherwise prohibit the granting of a Lien by the Borrower or any
of its Subsidiaries pursuant to the Security Agreement in the intellectual
property covered by such license;
(g) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any Wholly-
Owned Foreign Subsidiary so long as (i) such Wholly-Owned Foreign
Subsidiary is the surviving corporation of any such merger, dissolution or
liquidation and (ii) in each case at least 65% of the total combined voting
power of all classes of capital stock of all first-tier Foreign
Subsidiaries are pledged pursuant to the Pledge Agreement;
(h) the assets of any Foreign Subsidiary may be transferred to the
Borrower or any of its Wholly-Owned Domestic Subsidiaries, and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated into,
the Borrower or any of its Wholly-Owned Domestic Subsidiaries so long as
the Borrower or such Wholly-Owned Domestic Subsidiary is the surviving
corporation of any such merger, dissolution or liquidation;
(i) the Borrower and its Subsidiaries may sell or otherwise transfer
inventory to their respective Subsidiaries for resale by such Subsidiaries,
and Subsidiaries of the Borrower may sell or otherwise transfer inventory
to the Borrower for resale by the Borrower, so long as the security
interest granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Security Agreement in the inventory so
transferred (or the proceeds thereof, in the case of a transfer to a
Foreign Subsidiary) shall remain in full force and effect and perfected (to
at least the same extent as in effect immediately prior to such transfer);
(j) each of the Borrower and its Subsidiaries may sell assets,
provided that (x) the aggregate sale proceeds from all assets subject to
such sales pursuant to this clause (j) shall not exceed $500,000 in any
fiscal year of the Borrower, (y) any such asset sale is for at least 80% in
cash and at fair market value (as determined in good faith by the Board of
Directors or senior management of the Borrower) and (z) the Net Proceeds
therefrom are either applied to reduce the Total Revolving Loan Commitment
as provided in Section 3.03(b) or reinvested to the extent permitted by
Section 3.03(b);
(k) each of the Borrower and its Subsidiaries may sell other assets,
provided that the aggregate sale proceeds from all assets subject to such
sales pursuant to this clause (k) shall not exceed $100,000 in any fiscal
year of the Borrower;
(l) any Domestic Subsidiary of the Borrower may transfer assets
(other than inventory) to the Borrower or to any other Wholly-Owned
Domestic Subsidiary of the Borrower so long as the security interests
granted to the Collateral Agent for
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<PAGE>
the benefit of the Secured Creditors pursuant to the Security Documents in
the assets so transferred shall remain in full force and effect and
perfected (to at least the same extent as in effect immediately prior to
such transfer);
(m) any Wholly-Owned Domestic Subsidiary of the Borrower may merge
with and into, or be dissolved or liquidated into, the Borrower so long as
(i) the Borrower is the surviving corporation of such merger, dissolution
or liquidation and (ii) the security interests granted to the Collateral
Agent for the benefit of the Secured Creditors pursuant to the Security
Documents in the assets of such Wholly-Owned Domestic Subsidiary shall
remain in full force and effect and perfected (to at least the same extent
as in effect immediately prior to such merger);
(n) any Domestic Subsidiary of the Borrower may merge with and into,
or be dissolved or liquidated into, any Wholly-Owned Domestic Subsidiary of
the Borrower so long as (i) such Wholly-Owned Domestic Subsidiary of the
Borrower is the surviving corporation of such merger, dissolution or
liquidation and (ii) the security interests granted to the Collateral Agent
for the benefit of the Secured Creditors pursuant to the Security Documents
in the assets of such Domestic Subsidiary shall remain in full force and
effect and perfected (to at least the same extent as in effect immediately
prior to such merger, dissolution or liquidation);
(o) the Borrower and its Subsidiaries may, in the ordinary course of
business, sell, transfer or otherwise dispose of assets (including, without
limitation, patents, trademarks, copyrights and know-how) which, in the
reasonable judgment of the Borrower or such Subsidiary, are determined to
be uneconomical, negligible or obsolete in the conduct of its business; and
(p) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower and its Wholly-Owned Subsidiaries may
acquire the assets or the capital stock of any Person (any such acquisition
permitted by this clause (p), a "Permitted Acquisition"), provided, that
(i) such Person (or the assets so acquired) was, immediately prior to such
acquisition, engaged (or used) primarily in the businesses permitted
pursuant to Section 8.01, (ii) if such acquisition is structured as a stock
acquisition, then either (A) the Person so acquired becomes a Wholly-Owned
Subsidiary of the Borrower or (B) such Person is merged with and into the
Borrower or a Wholly-Owned Subsidiary of the Borrower (with the Borrower or
such Wholly-Owned Subsidiary, as the case may be, being the surviving
corporation of such merger), and in any case, all of the provisions of
Section 8.14 have been complied with in respect of such Person, (iii) any
Liens or Indebtedness assumed or issued in connection with such acquisition
are otherwise permitted under Section 8.03 or 8.04, as the case may be,
(iv) the only consideration paid in connection with such Permitted
Acquisition consists of cash, Common Stock, Qualified Preferred Stock
and/or Qualified PIK Debt Securities, provided that Qualified PIK
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<PAGE>
Debt Securities may only be issued to the extent that same is justified as
being incurred under the "Consolidated Fixed Charge Coverage Ratio" set
forth in Section 4.12 of the Senior Note Indenture, (v) any such Permitted
Acquisition shall not be consummated unless the Leverage Ratio (determined
before giving effect to such Permitted Acquisition) and the Pro Forma
Leverage Ratio (determined after giving effect to such Permitted
Acquisition) on the date of such Permitted Acquisition are each less than
or equal to 4.00:1.00, (vi) no Permitted Acquisition may be consummated
prior to the Borrower's fiscal year ending closest to March 31, 1998, (vii)
the aggregate amount expended (including the fair market value of all
Common Stock, the aggregate liquidation preference of all Qualified
Preferred Stock and the aggregate face amount of all Qualified PIK Debt
Securities issued) in connection with all such Permitted Acquisitions shall
not exceed $5,000,000.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or disposed of as permitted by this Section 8.02 (and such Collateral is
permitted to be released from the Liens created by the respective Security
Document), such Collateral in each case shall be sold or otherwise disposed of
free and clear of the Liens created by the Security Documents and the Agent
shall take such actions (including, without limitation, directing the Collateral
Agent to take such actions) as are appropriate in connection therewith.
8.03 Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
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<PAGE>
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Effective Date which are listed, and the
property subject thereto described, in Annex VIII, without giving effect to
any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
(f) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money) and (y) to secure
the performance of leases of Real Property, to the extent incurred or made
in the ordinary course of business consistent with past practices;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower or
any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor under any
lease permitted by this Agreement;
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages, Capital Leases
or security interests securing Indebtedness representing the purchase price
(or financing of the purchase price within 90 days after the respective
purchase) of assets acquired after the Effective Date, provided that (i)
any such Liens attach only to the assets so purchased, (ii) the
Indebtedness secured by any such Lien does not exceed
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<PAGE>
100%, nor is less than 70%, of the lesser of the fair market value or the
purchase price of the property being purchased at the time of the
incurrence of such Indebtedness and (iii) the Indebtedness secured thereby
is permitted to be incurred pursuant to Section 8.04(e);
(m) Liens securing Indebtedness of Foreign Subsidiaries permitted to
be incurred pursuant to Section 8.04(k), so long as any such Lien attaches
only to the assets of the respective Foreign Subsidiary that has incurred
such Indebtedness;
(n) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 8.04(j) and (ii) such Liens are
not incurred in connection with or in anticipation of such Permitted
Acquisition and do not attach to any other asset of the Borrower or any of
its Subsidiaries; and
(o) additional Liens incurred by the Borrower and its Subsidiaries so
long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed $25,000.
8.04 Indebtedness. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Annex VI, without giving effect to any subsequent extension,
renewal or refinancing thereof;
(c) Indebtedness of the Borrower incurred under the Senior Notes and
the other Senior Note Documents in an aggregate principal amount not to
exceed $115,000,000 (as reduced by any repayments or prepayments of
principal thereof);
(d) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations;
(e) Capitalized Lease Obligations and Indebtedness of the Borrower and
its Subsidiaries incurred pursuant to purchase money Liens, provided, that
(x) all such Capitalized Lease Obligations are permitted under Section 8.08
and (y) the sum of (i) the aggregate Capitalized Lease Obligations plus
(ii) the aggregate
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<PAGE>
principal amount of such purchase money Indebtedness outstanding at any
time (A) during the period (taken as one accounting period) from the
Effective Date and ending on the last day of the Borrower's fiscal year
ending closest to March 31, 1998, shall not exceed $1,000,000 and (B)
during any fiscal year of the Borrower thereafter shall not exceed the
amount set forth opposite such fiscal year as set forth below:
<TABLE>
<CAPTION>
Fiscal Year
Ending Closest To Amount
----------------- ------
<S> <C>
March 31, 1999 $1,250,000
March 31, 2000 $1,500,000
March 31, 2001 $1,750,000
March 31, 2002 $2,000,000
March 31, 2003 $2,250,000
</TABLE>
(f) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(g) Indebtedness under Other Hedging Agreements providing protection
against fluctuations in currency values in connection with the Borrower's
or any of its Subsidiaries' operations so long as management of the
Borrower or such Subsidiary, as the case may be, has determined that the
entering into of such Other Hedging Agreements are bona fide hedging
activities;
(h) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness, leases and other obligations permitted to be incurred by
Wholly-Owned Domestic Subsidiaries, (y) by Domestic Subsidiaries of
Indebtedness, leases and other obligations permitted to be incurred by the
Borrower or other Wholly-Owned Domestic Subsidiaries and (z) by Foreign
Subsidiaries of Indebtedness, leases and other obligations permitted to be
incurred by other Wholly-Owned Foreign Subsidiaries, provided that no
Subsidiary shall be permitted to enter into any such guaranties to the
extent that such Subsidiary would be required to guaranty the Senior Notes
pursuant to the Senior Note Indenture as a result thereof;
(i) Indebtedness of the Borrower under the Shareholder Subordinated
Notes in an aggregate principal amount not to exceed $2,000,000;
(j) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness), provided that (i) such
Indebtedness was not incurred in connection with or in anticipation of such
Permitted Acquisition, (ii) such Indebtedness does not constitute debt for
borrowed money (other than debt for bor-
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<PAGE>
rowed money incurred in connection with industrial revenue or industrial
development bond financings), it being understood and agreed that
Capitalized Lease Obligations and purchase money Indebtedness shall not
constitute debt for borrowed money for purposes of this clause (j), and
(iii) at the time of such Permitted Acquisition such Indebtedness does not
exceed 10% of the total value of the assets of the Subsidiary so acquired,
or of the asset so acquired, as the case may be;
(k) Indebtedness of Foreign Subsidiaries under lines of credit
extended by third Persons to any such Foreign Subsidiary the proceeds of
which Indebtedness are used for such Foreign Subsidiary's working capital
purposes, provided that the aggregate principal amount of all such
Indebtedness outstanding at any time for all Foreign Subsidiaries shall not
exceed $1,000,000;
(l) Indebtedness of the Borrower incurred under Qualified PIK Debt
Securities in connection with a Permitted Acquisition but only to the
extent that such Qualified PIK Debt Securities are permitted to be incurred
at such time pursuant to Section 8.02(p), provided that the aggregate
outstanding principal amount thereof shall not exceed at any time
$5,000,000 plus the amount of interest on such Qualified PIK Debt
Securities paid in kind or through accretion; and
(m) additional Indebtedness of the Borrower and its Subsidiaries not
otherwise permitted hereunder not exceeding $1,000,000 in aggregate
principal amount at any time outstanding.
8.05 Advances, Investments and Loans. The Borrower will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents, and Foreign Subsidiaries may invest in Foreign Cash
Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold receivables
owing to it, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms of the
Borrower or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obliga-
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<PAGE>
tions of, and other disputes with, customers and suppliers arising in the
ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.04(d) shall be permitted;
(e) the Borrower may acquire and hold obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
Common Stock or options to purchase shares of Common Stock so long as no
cash is paid by the Borrower or any of its Subsidiaries in connection with
the acquisition of any such obligations;
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases shall be permitted;
(g) the Borrower and its Subsidiaries may make intercompany loans and
advances between or among one another ("Intercompany Loans"), provided,
that (w) at no time shall the aggregate outstanding principal amount of
Intercompany Loans made pursuant to this clause (g) by the Borrower and its
Domestic Subsidiaries to Foreign Subsidiaries, when added to the amount of
contributions, capitalizations and forgiveness theretofore made pursuant to
Section 8.05(j), exceed $2,500,000 (determined without regard to any write-
downs or write-offs of such loans and advances), (x) each Intercompany Loan
made by a Foreign Subsidiary to the Borrower or a Domestic Subsidiary shall
contain the subordination provisions set forth on Exhibit I, (y) each
Intercompany Loan shall be evidenced by an Intercompany Note and (z) each
such Intercompany Note (other than (1) Intercompany Notes issued by Foreign
Subsidiaries to the Borrower or Domestic Subsidiaries and (2) Intercompany
Notes held by Foreign Subsidiaries (except, in either case, to the extent
otherwise required to be pledged pursuant to Section 7.13)) shall be
pledged to the Collateral Agent pursuant to the Pledge Agreement;
(h) loans and advances by the Borrower and its Subsidiaries to
employees of the Borrower and its Subsidiaries for moving and travel
expenses and other similar expenses, in each case incurred in the ordinary
course of business, in an aggregate outstanding principal amount not to
exceed $500,000 at any time (determined without regard to any write-down or
write-offs of such loans and advances) shall be permitted;
(i) Other Hedging Agreements may be entered into in compliance with
Section 8.04(g);
(j) the Borrower and its Domestic Subsidiaries may make cash capital
contributions to Foreign Subsidiaries, and may capitalize or forgive any
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Indebtedness owed to them by a Foreign Subsidiary and outstanding under
clause (g) of this Section 8.05, provided that the aggregate amount of such
contributions, capitalizations and forgiveness made pursuant to this clause
(j), shall not exceed an amount equal to the lesser of (x) $1,000,000 or
(y) when added to the aggregate outstanding principal amount of
Intercompany Loans made to Foreign Subsidiaries under clause (g) of this
Section 8.05, $2,500,000 (in either case determined without regard to any
write-downs or write-offs thereof);
(k) the Borrower and its Domestic Subsidiaries may make and hold
investments in their respective Foreign Subsidiaries to the extent that
such investments arise from the sale of inventory in the ordinary course of
business by the Borrower or such Domestic Subsidiary to such Foreign
Subsidiaries for resale by such Foreign Subsidiaries (including any such
investments resulting from the extension of the payment terms with respect
to such sales);
(l) the Borrower and its Subsidiaries may hold additional investments
in their respective Subsidiaries to the extent that such investments
reflect an increase in the value of such Subsidiaries;
(m) the Borrower and its Subsidiaries may make transfers of assets to
their respective Subsidiaries in accordance with Section 8.02(g), (h), (i)
and (l);
(n) advances, loans and investments in existence on the Effective Date
and listed on Annex IX shall be permitted, without giving effect to any
additions thereto or replacements thereof (except those additions or
replacements which are existing obligations as of the Effective Date),
provided that those loans outstanding to Subsidiaries on the Effective Date
may be repaid and reborrowed so long as the aggregate outstanding principal
amount of all such loans does not exceed that aggregate principal amount
outstanding on the Existing Date;
(o) the Borrower and its Subsidiaries may acquire and hold debt and/or
equity securities as partial consideration for a sale of assets pursuant to
Section 8.02(j), (k) or (o) to the extent permitted by any such Section;
(p) the Borrower may make loans to certain members of management of
the Borrower at the times, and in the amounts, necessary for such members
to pay certain tax liabilities incurred by them in connection with the
Recapitalization, provided that the aggregate amount of all such loans made
pursuant to this clause (p) shall not exceed $1,500,000;
(q) Permitted Acquisitions shall be permitted;
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<PAGE>
(r) the Borrower may contribute cash to one or more of its Wholly-
Owned Domestic Subsidiaries formed after the Effective Date in accordance
with Section 8.14 so long as the aggregate amount of all such cash so
contributed to all such Wholly-Owned Domestic Subsidiaries does exceed
$500,000; and
(s) in addition to investments permitted by clauses (a) through (r)
above, so long as no Default or Event of Default then exists or would
result therefrom, the Borrower and its Subsidiaries may make additional
loans, advances and investments to or in a Person so long as the aggregate
amount of all such loans, advances or investments does not exceed $500,000
(determined without regard to any write-downs or write-offs thereof and net
of cash repayments of principal in the case of loans and cash equity
returns (whether as a dividend or redemption) in the case of equity
investments), provided that neither the Borrower nor any of its
Subsidiaries may make or own any investment in Margin Stock.
8.06 Dividends, etc. The Borrower will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock of the Borrower) or return any capital to, its
stockholders or authorize or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock, now or hereafter outstanding (or any warrants
for or options or stock appreciation rights in respect of any of such shares),
or set aside any funds for any of the foregoing purposes, and the Borrower will
not permit any of its Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock of the Borrower or
any other Subsidiary, as the case may be, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "Dividends"), except that:
(i) the Recapitalization shall be permitted;
(ii) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower; and
(iii) the Borrower may redeem or purchase shares of Common Stock or
options to purchase Common Stock held by former employees of the Borrower
or any of its Subsidiaries following the termination of their employment,
provided that (x) the only consideration paid by the Borrower in respect of
such redemptions and/or purchases shall be cash, Shareholder Subordinated
Notes and/or cancellation of Indebtedness owing to the Borrower from such
employees, (y) the sum of (1) the aggregate amount of cash paid by the
Borrower in respect of all such redemptions and/or purchases plus (2) the
aggregate amount of all principal and interest payments made on Shareholder
Subordinated Notes shall not exceed (A) $250,000 in any fiscal year of the
Borrower ending on or prior to its fiscal year ending
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closest to March 31, 2000 and (B) $1,000,000 in any fiscal year of the
Borrower thereafter, provided that each such amount shall be increased by
an amount (not to exceed (I) $250,000 in the case of any fiscal year of the
Borrower ending on or prior to its fiscal year ending closest to March 31,
2000 or (II) $1,000,000 in the case of any fiscal year of the Borrower
thereafter, in either case for purposes of this clause (iii)) equal to the
cash proceeds received by the Borrower after the Effective Date from the
sale or issuance of Common Stock to management of the Borrower or any of
its Subsidiaries and (z) at the time of any payment permitted to be made
pursuant to this Section 8.06, no Default or Event of Default shall then
exist or result therefrom; and
(iv) the Borrower may pay regularly scheduled Dividends on the
Qualified Preferred Stock pursuant to the terms thereof solely through the
issuance of additional shares of such Qualified Preferred Stock, provided
that in lieu of issuing additional shares of such Qualified Preferred Stock
as Dividends, the Borrower may increase the liquidation preference of the
shares of Qualified Preferred Stock in respect of which such Dividends have
accrued.
8.07 Transactions with Affiliates. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than an Affiliate;
provided, that the following shall in any event be permitted: (i) the
Transaction; (ii) the payment on the Effective Date of one time fees to Bain
Capital and/or any Related Party in an aggregate amount (for all such Related
Parties taken together) not to exceed $1,800,000 (plus reasonable out-of-pocket
expenses incurred by Bain Capital and all such Related Parties in providing
services to the Borrower); (iii) the payment, on a quarterly basis, of
management fees to Bain Capital and/or Related Parties in an aggregate amount
(for all such Persons taken together) not to exceed $250,000 in any fiscal
quarter of the Borrower, provided, that if during any fiscal quarter of the
Borrower a Default or an Event of Default exists, then only one-half of such fee
for such fiscal quarter may be paid and the remaining one-half of such fee may
continue to accrue (without interest) and only may be paid at such time as all
Defaults and Events of Default have been cured or waived; (iv) the payment by
the Borrower, in connection with any acquisition, divestiture or financing
transaction that is consummated, of a transaction fee to Bain Capital and/or any
Related Party in an aggregate amount (for all such Persons taken together) not
to exceed 1% of the aggregate value of any such transaction; and (v) the
entering into, and performance with the terms and provisions, of the Development
Agreements.
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8.08 Capital Expenditures. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(i) during the period from the Effective Date through and including the last day
of the Borrower's fiscal year ending closest to March 31, 1998, the Borrower and
its Subsidiaries may make Capital Expenditures in an aggregate amount not to
exceed $3,000,000 and (ii) during any fiscal year of the Borrower thereafter,
the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate
amount not to exceed $4,000,000; provided, however, that if Consolidated EBITDA
for the Test Period ending on the last day of any fiscal year of the Borrower
(commencing with the Test Period ending on the last day of the Borrower's fiscal
year ending closest to March 31, 1999) equals or exceeds $35,000,000, then,
except as set forth below, the aggregate amount of Capital Expenditures
permitted to be made by the Borrower and its Subsidiaries in the immediately
succeeding fiscal year shall be $6,000,000. Notwithstanding the proviso in the
immediately preceding sentence, if during any fiscal year of the Borrower in
which the aggregate permitted Capital Expenditure amount has been increased to
$6,000,000, Consolidated EBITDA for any Test Period ending during such fiscal
year is less than $35,000,000, then the aggregate amount of Capital Expenditures
permitted to be made by the Borrower and its Subsidiaries during such fiscal
year shall be reduced to $4,000,000 until such time, if any, as Consolidated
EBITDA for any subsequent Test Period ending in such fiscal year equals or
exceeds $35,000,000; it being understood and agreed, however, to the extent that
the Borrower and its Subsidiaries have theretofore spent more than $4,000,000 of
Capital Expenditures in such fiscal year (but only to the extent that such
excess was spent at a time when the permitted Capital Expenditure amount was
increased to $6,000,000), no Default or Event of Default will occur as a result
thereof.
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year of the Borrower (before giving
effect to any increase in such amount pursuant to this clause (b)) is greater
than the amount of such Capital Expenditures made by the Borrower and its
Subsidiaries during such fiscal year, the lesser of (x) such excess and (y) 25%
of such permitted amount (such lesser amount, the "Rollover Amount") may be
carried forward and utilized to make Capital Expenditures in the immediately
succeeding fiscal year of the Borrower, provided that no amounts once carried
forward pursuant to this Section 8.08(b) may be carried to any fiscal year of
the Borrower thereafter and such Rollover Amount may only be utilized after the
Borrower and its Subsidiaries have utilized in full the permitted Capital
Expenditure amount for such fiscal year as set forth in clause (a) above
(without giving effect to any increase in such amount by operation of this
clause (b)). In the event that any portion of the Rollover Amount for any
fiscal year of the Borrower represents unutilized Capital Expenditure capacity
in a fiscal year in which the permitted Capital Expenditure amount is
$6,000,000, such portion of such Rollover Amount only may be utilized in such
immediately succeeding fiscal year of the Borrower (in addition to the
requirements of the proviso to the immediately preceding sentence) to
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the extent that, and for so long as, the aggregate permitted Capital Expenditure
amount in such fiscal year is $6,000,000.
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) in connection with any
Permitted Acquisition.
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the proceeds of Asset
Sales to the extent such proceeds are not required to be applied to reduce the
Total Revolving Loan Commitment pursuant to Section 3.03(b).
(e) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance proceeds
received by the Borrower or any of its Subsidiaries from any Recovery Event so
long as such Capital Expenditures are to replace or restore any properties or
assets in respect of which such proceeds were paid within one year following the
date of the receipt of such insurance proceeds to the extent such insurance
proceeds are not required to be applied to reduce the Total Revolving Loan
Commitment pursuant to Section 3.03(e).
8.09 Minimum Consolidated EBITDA. (a) The Borrower will not permit
Consolidated EBITDA (i) for the Borrower's fiscal quarter ending closest to June
30, 1997 to be less than $2,500,000 and (ii) for any Test Period ending on the
last day of a fiscal quarter of the Borrower set forth below to be less than the
amount set forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter
Ending Closest To Amount
----------------- ------
<S> <C>
September 30, 1997 $5,000,000
December 31, 1997 $5,000,000
March 31, 1998 $5,000,000
June 30, 1998 $5,000,000
September 30, 1998 $5,000,000
December 31, 1998 $5,000,000
March 31, 1999 $5,000,000
June 30, 1999 $5,000,000
</TABLE>
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<TABLE>
<S> <C>
September 30, 1999 $ 5,000,000
December 31, 1999 $ 5,000,000
March 31, 2000 $ 5,000,000
June 30, 2000 $10,000,000
September 30, 2000 $15,000,000
December 31, 2000 $15,000,000
March 31, 2001 $15,000,000
June 30, 2001 $15,750,000
September 30, 2001 $16,500,000
December 31, 2001 $16,500,000
March 31, 2002 $16,500,000
June 30, 2002 $16,500,000
</TABLE>
(b) The Borrower will not permit Consolidated EBITDA for the period
from April 6, 1997 to the last day of a fiscal quarter of the Borrower set forth
below (in each case taken as one accounting period) to be less than the amount
set forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter
Ending Closest To Amount
----------------- ------
<S> <C> <C>
June 30, 1997 $ 2,500,000
September 30, 1997 $ 5,000,000
December 31, 1997 $ 7,500,000
March 31, 1998 $10,000,000
June 30, 1998 $13,000,000
September 30, 1998 $16,000,000
December 31, 1998 $19,000,000
March 31, 1999 $22,000,000
June 30, 1999 $28,250,000
</TABLE>
<PAGE>
September 30, 1999 $34,500,000
December 31, 1999 $40,750,000
March 31, 2000 $47,000,000
8.10 Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio for any Test Period ending on the last day of a fiscal
quarter of the Borrower set forth below to be less than the ratio set forth
opposite such fiscal quarter below:
Fiscal Quarter
Ending Closest To Ratio
----------------- -----
June 30, 2000 1.45:1.00
September 30, 2000 1.55:1.00
December 31, 2000 1.65:1.00
March 31, 2001 1.75:1.00
June 30, 2001 1.85:1.00
September 30, 2001 1.95:1.00
December 31, 2001 2.05:1.00
March 31, 2002 2.25:1.00
June 30, 2002 2.25:1.00
8.11 Leverage Ratio. The Borrower will not permit the Leverage Ratio
at any time during a period set forth below to be more than the ratio set forth
opposite such period below:
Period Ratio
------ -----
The first day of the Borrower's fiscal quarter ending closest
to June 30, 2000 through but not including the last day of
such fiscal quarter. 5.75:1.00
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The last day of the Borrower's fiscal quarter
ending closest to June 30, 2000 through but
not including the last day of the Borrower's fiscal
quarter ending closest to September 30, 2000 5.75:1.00
The last day of the Borrower's fiscal quarter
ending closest to September 30, 2000 through
but not including the last day of the Borrower's
fiscal quarter ending closest to December 31, 2000 5.25:1.00
The last day of the Borrower's fiscal quarter ending
closest to December 31, 2000 through but not including
the last day of the Borrower's fiscal quarter ending
closest to March 31, 2001 4.75:1.00
The last day of the Borrower's fiscal quarter ending
closest to March 31, 2001 through but not including
the last day of the Borrower's fiscal quarter ending
closest to June 30, 2001 4.25:1.00
The last day of the Borrower's fiscal quarter ending
closest to June 30, 2001 through but not including
the last day of the Borrower's fiscal quarter ending
closest to September 30, 2001 4.25:1.00
The last day of the Borrower's fiscal quarter ending
closest to September 30, 2001 through but not
including the last day of the Borrower's fiscal quarter
ending closest to December 31, 2001 4.00:1.00
The last day of the Borrower's fiscal quarter ending
closest to December 31, 2001 through but not including
the last day of the Borrower's fiscal quarter ending
closest to March 31, 2002 3.75:1.00
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<PAGE>
Thereafter 3.50:1.00
8.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; Issuance of Capital Stock; etc. The Borrower will not, and
will not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) any Senior Note;
(ii) make (or give any notice in respect of) any prepayment or
redemption of any Senior Note as a result of any asset sale, change of
control or similar event (including, without limitation, by way of
depositing with the trustee with respect thereto or any other Person money
or securities before due for the purpose of paying when due any Senior
Note), provided that so long as no Default or Event of Default then exists,
the Borrower may use the net cash proceeds received by it from an initial
registered public offering of Common Stock to mandatorily prepay
outstanding Senior Notes in accordance with the terms thereof but only to
the extent that such net cash proceeds are not required to reduce the Total
Revolving Commitment pursuant to Section 3.03(d);
(iii) make (or give any notice in respect of) any payment, prepayment,
redemption or acquisition for value of (including, without limitation, by
way of depositing with the trustee with respect thereto or any other Person
money or securities before due for the purpose of paying when due) (x) any
Shareholder Subordinated Note (whether in respect of principal, interest or
otherwise) except as otherwise permitted by Section 8.06(iii) or (y) any
Qualified PIK Debt Securities (whether in respect of principal, interest or
otherwise) except for the payment of interest thereon through the issuance
of additional Qualified PIK Debt Securities rather than in cash;
(iv) amend or modify, or permit the amendment or modification of, any
provision of any Senior Note Document or any Shareholder Subordinated Note
(other than any amendment or modification to any Shareholder Subordinated
Note which extends the maturity date thereof or reduces the interest rate
thereon, in each case so long as no consideration is paid by the Borrower
or any of its Subsidiaries in connection therewith);
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<PAGE>
(v) amend, modify or change in any way adverse to the interests of
the Banks, any Management Agreement, any Tax Allocation Agreement, its
Certificate of Incorporation (including, without limitation, by the filing
or modification of any certificate of designation) or By-Laws, or any
agreement entered into by it with respect to its capital stock (including
any Shareholders' Agreement) or enter into any new agreement with respect
to its capital stock, in each case, which would be adverse to the interests
of the Banks; and
(vi) issue any class of capital stock other than (x) non-redeemable
common stock and (y) in the case of the Borrower, (A) the issuance on the
Effective Date of the Seller Preferred Stock and (B) the issuance of
Qualified Preferred Stock in connection with a Permitted Acquisition.
8.13 Limitation on Certain Restrictions on Subsidiaries. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the Borrower'
Subsidiaries or (c) transfer any of its properties or assets to the Borrower or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) this Agreement and the other
Credit Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Borrower or a
Subsidiary of the Borrower, (iv) customary provisions restricting assignment of
any licensing agreement entered into by the Borrower or any Subsidiary of the
Borrower in the ordinary course of business, (v) the Note Documents, (vi) the
Existing Indebtedness Agreements, and (vii) customary provisions restricting the
transfer of assets subject to Liens permitted under Section 8.03(l).
8.14 Limitation on the Creation of Subsidiaries. Notwithstanding
anything to the contrary contained in this Agreement, the Borrower will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Effective Date any Subsidiary; provided that, the Borrower and its Wholly-
Owned Subsidiaries shall be permitted to establish or create (x) Subsidiaries as
a result of investments made pursuant to Section 8.05(s) and (y) Wholly-Owned
Subsidiaries so long as, in each case, (i) at least 30 days' prior written
notice thereof (or such shorter period of time as is acceptable to the Agent) is
given to the Agent, (ii) the capital stock of each such new Subsidiary is
pledged pursuant to, and to the extent required by, this Agreement and the
Pledge Agreement and the certificates, if any, representing such stock, together
with stock powers duly executed in blank, are delivered to the Collateral Agent,
(iii) each such new Subsidiary (other than a Foreign Subsidiary except to the
extent otherwise required pursuant to Section 7.13) executes a counter-part of
the Subsidiary Guaranty, the Pledge Agreement and the Security Agreement, and
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(iv) to the extent requested by the Agent or the Required Banks, takes all
actions required pursuant to Section 7.11. In addition, each new Subsidiary that
is required to execute any Credit Document shall execute and deliver, or cause
to be executed and delivered, all other relevant documentation of the type
described in Section 5 as such new Subsidiary would have had to deliver if such
new Subsidiary were a Credit Party on the Effective Date.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when due
of any principal of the Loans or (ii) default, and such default shall continue
for three or more days, in the payment when due of any Unpaid Drawing, any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
9.02 Representations, etc. Any representation, warranty or statement
made by the Borrower or any other Credit Party herein or in any other Credit
Document or in any statement or certificate delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 7.11, 7.13 or 8, or (b) default in the due performance or observance by
it of any term, covenant or agreement (other than those referred to in Section
9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and
such default shall continue unremedied for a period of at least 30 days after
notice to the defaulting party by the Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) The Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which Indebtedness was created or (ii) default in
the observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause any such Indebtedness to become due prior to its
stated maturity; or (b) any Indebtedness (other than the Obligations) of the
Borrower or any of its Subsidiaries shall be declared to be due and payable, or
shall be required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment (unless such required prepayment or
mandatory prepayment results from a default thereunder or an event of the type
that constitutes an Event of Default), prior to the stated maturity thereof;
provided, that it shall not constitute an Event of Default pursuant to clause
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<PAGE>
(a) or (b) of this Section 9.04 unless the principal amount of any one issue of
such Indebtedness, or the aggregate amount of all such Indebtedness referred to
in clauses (a) and (b) above, exceeds $1,500,000 at any one time; or
9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the
Borrower or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Borrower or any of
its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan is, shall have been or is likely to be terminated
or the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made to a Plan or a
Foreign Pension Plan has not been timely made, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971,
4975 or 4980 of the Code, or the Borrower or any Subsidiary of the Borrower has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) which provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or employee pension benefit plans (as defined in
Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall result from any
such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and (c)
which lien, security
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interest or liability which arises from such event or events will have a
Material Adverse Effect; or
9.07 Security Documents. (a) Except in each case to the extent
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the Collateral
Agent, or (b) any Credit Party shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any such Security Document and such default shall continue
beyond any cure or grace period specifically applicable thereto pursuant to the
terms of such Security Document; or
9.08 Subsidiary Guaranty. The Subsidiary Guaranty or any provision
thereof shall cease to be in full force and effect, or any Subsidiary Guarantor
or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or
disaffirm such Subsidiary Guarantor's obligations under the Subsidiary Guaranty
or any Subsidiary Guarantor shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to the Subsidiary Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving a liability (not paid
or not fully covered by insurance) in excess of $1,500,000 for all such
judgments and decrees and all such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof; or
9.10 Ownership. A Change of Control Event shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Subsidiary Guarantor or the Borrower, except as
otherwise specifically provided for in this Agreement (provided, that if an
Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Revolving Loan
Commitment terminated, whereupon the Revolving Loan Commitment of each Bank
shall forthwith terminate immediately and any Commitment Fees shall forthwith
become due and payable without any other notice of any kind; (ii) declare the
principal of and any accrued interest in respect of all Loans and all
Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; (iii) enforce, as Collateral
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Agent (or direct the Collateral Agent to enforce), any or all of the Liens and
security interests created pursuant to the Security Documents; (iv) terminate
any Letter of Credit which may be terminated in accordance with its terms; and
(v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of
such notice, or upon the occurrence of any Event of Default specified in Section
9.05, to pay) to the Collateral Agent at the Payment Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement
obligations in respect of Letters of Credit then outstanding, equal to the
aggregate Stated Amount of all Letters of Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquired Entity or Business" shall have the meaning set forth in the
definition of "Consolidated Net Income."
"Additional Security Documents" shall have the meaning provided in
Section 7.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
BTCo to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 5% or more
of the securities having ordinary voting power
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for the election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.10.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean a percentage per annum equal
to 1.75%.
"Applicable Eurodollar Margin" shall mean a percentage per annum equal
to 3.00%.
"Asset Sale" shall mean any sale, transfer or other disposition by the
Borrower or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person, but
excluding the sale by such Person of its own capital stock) of the Borrower or
such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to Sections 8.02 (a), (d), (e), (f), (i), (k) and (o).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit J (appropriately
completed).
"Authorized Officer" shall mean the Chief Executive Officer, the
President, the Chief Financial Officer, the Treasurer, the Controller or the
Secretary or any other senior officer of the Borrower designated as such in
writing to the Agent by the Borrower, in each case to the extent reasonably
acceptable to the Agent.
"Bain Capital" shall mean Bain Capital, Inc., a Delaware corporation.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or to fund
its portion of any unreimbursed payment under Section 2.04(c) or (ii) a Bank
having notified the Agent and/or the Borrower that it does not intend to comply
with the obligations under Section 1.01(a), 1.01(c) or 2.04(c), in the case of
either clause (i) or (ii) above as a result of the
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appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y) the
Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the borrowing of one Type of Revolving
Loan from all of the Banks on a given date (or resulting from conversions on a
given date), having in the case of Eurodollar Loans the same Interest Period;
provided, that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, without
duplication, all expenditures by such Person which should be capitalized in
accordance with GAAP, including, without duplication, all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with GAAP)
and the amount of all Capitalized Lease Obligations incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
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"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided, that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and bankers acceptances of (x) any Bank
or (y) any bank whose short-term commercial paper rating from Standard & Poor's
Ratings Service ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank or Bank, an "Approved Bank"), in each case with
maturities of not more than twelve months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within twelve months
after the date of acquisition, (iv) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within twelve months from
the date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either S&P or Moody's and (v)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Change of Control Event" shall mean (a) Bain Capital and its Related
Parties shall cease to own on a fully diluted basis in the aggregate at least
51% of the economic and voting interest in the Borrower's capital stock or (b) a
"change of control", "change of ownership" or similar event shall occur as
provided in the Senior Note Indenture or in the Seller Preferred Stock.
"Class A Common Stock" shall have the meaning provided in Section
6.14.
"Class B Common Stock" shall have the meaning provided in Section
6.14.
"Class L Common Stock" shall have the meaning provided in Section
6.14.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any
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subsequent provisions of the Code amendatory thereof, supplemental thereto or
substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.13(b).
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Common Stock" shall mean, collectively, the Class A Common Stock, the
Class B Common Stock and the Class L Common Stock.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Borrower and its Subsidiaries determined on a consolidated basis at such time,
provided, that for purposes of this definition, the amount of Indebtedness in
respect of Interest Rate Protection Agreements shall be at any time the
unrealized net loss portion, if any, of the Borrower and/or its Subsidiaries
thereunder on a marked-to-market basis determined no more than one month prior
to such time.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income for such period, before (i) total interest expense (inclusive of
amortization of deferred financing fees, premiums on Interest Rate Protection
Agreements and any other original issue discount) of the Borrower and its
Subsidiaries determined on a consolidated basis, (ii) the write-off of inventory
step-up and in-process research and development costs in accordance with
purchase accounting, (iii) any non-cash charges deducted in determining
Consolidated Net Income for such period and related to the issuance by the
Borrower or any of its Subsidiaries of stock, warrants or options to management
(or any exercise of any such warrants or options), (iv) provisions for taxes
based on income and foreign withholding taxes, (v) giving effect to any
extraordinary gains or losses but with giving effect to gains or losses from
sales of assets sold in the ordinary course of business and (vi) any non-cash
charges related to the write-up of samples in accordance with purchase
accounting.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT
for such period, adjusted by adding thereto the amount of all depreciation
expense and amortization expense that were deducted in determining Consolidated
EBIT for such period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Bor-
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rower and its Subsidiaries determined on a consolidated basis for such period
with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, in each case net of total cash interest income of the Borrower and
its Subsidiaries for such period, but excluding, however, amortization of any
payments made to obtain any Interest Rate Protection Agreement and deferred
financing costs and any interest expense on deferred compensation arrangements
to the extent included in total interest expense.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period but
excluding any unrealized losses and gains for such period resulting from marked-
to-market of Other Hedging Agreements; provided that (x) for purposes of
determining compliance with Sections 8.02(p) and 8.11 there shall be included
(to the extent not already included) in determining Consolidated Net Income for
any period the net income (or loss) of any Person, business, property or asset
acquired during such period pursuant to Section 8.02(p) and not subsequently
sold or otherwise disposed of by the Borrower or one of its Subsidiaries during
such period (each such Person, business, property or asset acquired and not
subsequently disposed of during such period, an "Acquired Entity or Business"),
in each case based on the actual net income (or loss) of such Acquired Entity or
Business for the entire period (including the portion thereof occurring prior to
such acquisition) and (y) for purposes of calculating Consolidated Net Income
for any period, Consolidated Net Income shall be adjusted for factually
supportable and identifiable pro forma cost savings for such period determined
in accordance with GAAP and concurred in by the Borrower's independent
accountants that are directly attributable to the acquisition of an Acquired
Entity or Business pursuant to a Permitted Acquisition.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in
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the ordinary course of business. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes, the
Subsidiary Guaranty and each Security Document.
"Credit Event" shall mean (i) the occurrence of the Effective Date and
(ii) the making of a Loan (other than a Revolving Loan made pursuant to a
Mandatory Borrowing) or the issuance of a Letter of Credit.
"Credit Party" shall mean the Borrower and each Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Development Agreements" shall mean, collectively, (i) the Development
License Agreement, dated June 16, 1992, among the Borrower, Therma-Wave (Japan),
Toray Industries and Shimadzu, (ii) the New Development Agreement, dated
December 22, 1995, between the Borrower and Toray Industries and (iii)
additional Development Agreements entered into pursuant to the Development
Agreement referred to in clause (i) of this definition.
"Dividends" shall have the meaning provided in Section 8.06.
"Documents" shall mean the Credit Documents, the Refinancing
Documents, the Equity Financing Documents and the Recapitalization Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
investment company, financial institution or other "accredited investor" (as
defined in Regulation D of the Securities Act).
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"Employment Agreements" shall have the meaning provided in Section
5.13(f).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to the Borrower or any of its Subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials or
health and safety to the extent health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"Equity Financing" shall mean the issuance by the Borrower of shares
of its Common Stock to Bain Capital and/or its Related Parties, Sutter Hill
Ventures, certain related investors and members of the Borrower's senior
management team on or prior to the Effective Date as part of the Transaction.
"Equity Financing Documents" shall mean each of the documents and
agreements entered into in connection with the consummation of the Equity
Financing.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or any Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
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"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by BTCo for U.S. dollar deposits of amounts in same day funds comparable
to the outstanding principal amount of the Eurodollar Loan of BTCo for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Existing Indebtedness" shall have the meaning provided in Section
6.22.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.13(c).
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 3.01.
"Final Maturity Date" shall mean May 16, 2002.
"Foreign Cash Equivalents" shall mean certificates of deposit or
bankers acceptances of any bank organized under the laws of Canada, Japan or any
country that is a member of the European Economic Community whose short-term
commercial paper rat-
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ing from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof, in each case with maturities of not more
than twelve months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated under the laws of any jurisdiction other than the United States
of America, any State thereof or any territory thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as promulgated by the American Institute of Certified
Public Accountants and its committees, as in effect from time to time; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted,
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i.e., take-or-pay and similar obligations, (vii) all obligations under Interest
Rate Protection Agreements and Other Hedging Agreements and (viii) all
Contingent Obligations of such Person, provided, that Indebtedness shall not
include trade payables and accrued expenses, in each case arising in the
ordinary course of business.
"Indebtedness to be Refinanced" shall mean (i) the Term Loan
Agreement, dated as of April 27, 1992, between the Borrower and The Long-Term
Credit Bank of Japan, Ltd., (ii) the Loan Agreement, dated as of April 27, 1992,
between the Borrower and The Sakura Bank, Limited, (iii) the Term Loan
Agreement, dated as of April 30, 1992, between the Borrower and Union Bank, (iv)
the Loan Agreement, dated as of April 30, 1992, between the Borrower and The
Mitsubishi Bank, Ltd., and (v) the four Lines of Credit with each of the above
four banks in the aggregate amount of $6,200,000.
"Intercompany Loan" shall have the meaning provided in Section
8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit K, evidencing Intercompany Loans.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Borrower or any of its Subsidiaries as are reasonably acceptable to the Agent
and the Letter of Credit Issuer and otherwise permitted to exist pursuant to the
terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
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"Letter of Credit Issuer" shall mean BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in Section
2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of (i)
Consolidated Debt at such time minus the amount of cash and Cash Equivalents
held by the Borrower and its Subsidiaries at such time to (ii) Consolidated
EBITDA for the Test Period then last ended.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Management Agreements" shall have the meaning provided in Section
5.13(e).
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower or of the Borrower and its Subsidiaries taken as a
whole.
"Material Contracts" shall have the meaning provided in Section
5.13(h).
"Maximum Swingline Amount" shall mean $2,500,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans,
$1,000,000 and (ii) for Swingline Loans, $250,000.
"Mortgaged Properties" shall mean and include each Real Property
subjected to a mortgage in favor of the Collateral Agent for the benefit of the
Secured Creditors pursuant to Section 7.11.
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"NAIC" shall have the meaning provided in Section 1.10(c).
"Net Proceeds" shall mean, with respect to any Asset Sale, the
Proceeds resulting therefrom net of (a) cash expenses of sale (including
brokerage fees, if any, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b) incremental income taxes paid or payable as a result
thereof.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent, the Letter of Credit Issuer or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Old Common Stock" shall mean the common stock, par value $.001, of
the Borrower outstanding prior to the consummation of the Recapitalization.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean, at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving
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Loan Commitment then in effect, provided, that if the Total Revolving Loan
Commitment has been terminated, the Percentage of each Bank shall be determined
by dividing such Bank's Revolving Loan Commitment as in effect immediately prior
to such termination by the Total Revolving Loan Commitment as in effect
immediately prior to such termination.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(p).
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Mortgaged Property listed in the Mortgage
Policies in respect thereof and found, on the date of delivery of such Mortgage
Policies to the Agent in accordance with the terms hereof, reasonably acceptable
by the Agent, (ii) as to any particular Mortgaged Property at any time, such
easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which do not, in the reasonable opinion
of the Agent, materially impair such Mortgaged Property for the purpose for
which it is held by the mortgagor thereof, or the lien held by the Collateral
Agent, (iii) municipal and zoning ordinances which are not violated in any
material respect by the existing improvements and the present use made by the
mortgagor thereof of the Premises (as defined in the respective Mortgage), (iv)
general real estate taxes and assessments not yet delinquent, and (v) such other
items with respect to Real Property as the Agent may consent to (such consent
not to be unreasonably withheld).
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, firm, corporation, limited liability company,
association, trust or other enterprise or any government or political
subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as defined
in Section 3(2) of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Borrower, any of its Subsidiaries
or any ERISA Affiliate and each such plan for the five calendar year period
immediately following the latest date on which the Borrower, any of its
Subsidiaries or any ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 5.10(a).
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
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"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with any such Asset Sale, other than
the portion of such deferred payment constituting interest, but only as and when
so received) received by the Borrower and/or any of its Subsidiaries from such
Asset Sale.
"Pro Forma Leverage Ratio" shall mean, at any time for the
determination thereof, the ratio of (x) Consolidated Debt at such time to (y)
Consolidated EBITDA for the Test Period then last ended, with such Pro Forma
Leverage Ratio to be determined on a pro forma basis as if the respective
Permitted Acquisition (and the incurrence, assumption and/or repayment of any
Indebtedness in connection with such Permitted Acquisition), as the case may be,
had occurred on the first day of such Test Period (and such Indebtedness, if
any, had remained outstanding (or had not been outstanding, as the case may be)
throughout such Test Period). On the date of a Permitted Acquisition pursuant to
which the Pro Forma Leverage Ratio is to be calculated, the Borrower shall
deliver to the Agent a certificate of the Borrower's chief financial officer
setting forth in reasonable detail the pro forma calculations required to
establish the Pro Forma Leverage Ratio (with such pro forma calculations to be
made on a basis reasonably satisfactory to the Agent and to assume that the
interest expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the date of such Permitted Acquisition (taking into account any
Interest Rate Protection Agreement applicable to such Indebtedness if such
Interest Rate Protection Agreement has a remaining term in excess of 12 months)
had been the applicable rate for the entire period. In calculating the Pro Forma
Leverage Ratio in connection with any Permitted Acquisition, it is understood
that Consolidated EBITDA shall include the results of operations of the Person
or assets acquired pursuant to such Permitted Acquisition on a pro forma basis
as if such acquisition had occurred on the first day of the respective Test
Period.
"Projections" shall have the meaning provided in Section 5.16.
"Qualified PIK Debt Securities" shall mean unsecured junior
subordinated notes issued by the Borrower so long as the terms of any such
junior subordinated note (i) do not provide any collateral security, (ii) do not
provide any guaranty or other support by any Subsidiaries of the Borrower, (iii)
do not contain any mandatory put, redemption, repayment, sinking fund or other
similar provision occurring before December 31, 2004, (iv) do not require the
cash payment of interest before December 31, 2004, (v) do not contain any
covenants other than periodic reporting requirements, (vi) do not grant the
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holders thereof any voting rights except for limited customary voting rights on
fundamental matters such as mergers, consolidations, sales of all or
substantially all of the assets of the Borrower, or liquidations involving the
Borrower, and (vii) are otherwise reasonably satisfactory to the Agent.
"Qualified Preferred Stock" shall mean any preferred stock of the
Borrower so long as the terms of any such preferred stock (i) do not provide any
collateral security, (ii) do not provide any guaranty or other support by the
Borrower or any Subsidiaries of the Borrower, (iii) do not contain any mandatory
put, redemption, repayment, sinking fund or other similar provision occurring
before December 31, 2004, (iv) do not require the cash payment of dividends
before December 31, 2004, (v) do not contain any covenants other than periodic
reporting requirements, (vi) do not grant the holders thereof any voting rights
except for (x) voting rights required to be granted to such holders under
applicable law and (y) limited customary voting rights on fundamental matters
such as mergers, consolidations, sales of all or substantially all of the assets
of the Borrower, or liquidations involving the Borrower, and (vii) are otherwise
reasonably satisfactory to the Agent.
"Quarterly Payment Date" shall mean the last Business Day of each
November, August, February and May.
"Quarterly Payment Period" shall mean the quarterly period between one
Quarterly Payment Date and the immediately succeeding Quarterly Payment Date.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization" shall mean, collectively, (i) the redemption by the
Borrower of approximately 86.6% of the Old Common Stock held by the Sellers for
an aggregate redemption price equal to $96,900,000, (ii) the purchase by Bain
Capital and/or its Related Parties, Sutter Hill Venture and other related
investors from the Borrower of shares of Old Common Stock for a purchase price
equal to approximately $17,100,000, (iii) the exchange by the Sellers of the
remaining shares of Old Common Stock owned by the Sellers and not redeemed
pursuant to clause (i) of this definition in exchange for Seller Preferred
Stock, Class A Common Stock, Class B Common Stock and Class L Common Stock, (iv)
the exchange by Bain Capital and/or its Related Parties, Sutter Hill Venture and
other related investors of all of their shares of Old Common Stock for Class A
Common Stock, Class B Common Stock and Class L Common Stock, in each case
pursuant to the Recapitalization Documents and (v) the purchase by certain
members of management of the Borrower from the Borrower of shares of Class A
Common Stock, Class B Common Stock and Class L Common Stock equal to
approximately $2,900,000.
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"Recapitalization Documents" shall mean the Recapitalization
Agreement, dated December 18, 1996, among the Borrower, the Sellers and Bain
and/or its Related Parties, and each other agreement, instrument and document
relating to the Recapitalization.
"Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
any theft, physical destruction or damage or any other similar event with
respect to any properties or assets of the Borrower or any of its Subsidiaries,
(ii) by reason any condemnation, taking, seizing or similar event with respect
to any properties or assets of the Borrower or any of its Subsidiaries and (iii)
under any policy of insurance required to be maintained under Section 7.03.
"Refinancing" shall mean the refinancing by the Borrower, and the
termination in full of all commitments and letters of credit in respect of,
together with the payment of all loans, accrued interest, premiums, fees,
commissions, expenses and other amounts owing in connection with, the
Indebtedness to be Refinanced.
"Refinancing Documents" shall mean each of the agreements, documents
and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 7.12.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof establishing margin requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof establishing margin requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof establishing margin requirements.
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"Related Party" shall mean any Affiliate of Bain Capital on the
Effective Date, provided that for purposes of the definition of "Change of
Control Event," the term Related Party shall not include (x) any portfolio
company of Bain Capital or any Affiliate of Bain Capital or (y) any officer or
director of the Borrower or any of its Subsidiaries if such officer or director
is not also a partner or stockholder of Bain Capital on the Effective Date.
"Release" shall mean the disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation 2615.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
Revolving Loan Commitments (or, if after the Total Revolving Loan Commitment has
been terminated, outstanding Revolving Loans and Percentages of outstanding
Swingline Loans and Letter of Credit Outstandings) constitute greater than 50%
of the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of Defaulting Banks (or, if after the Total Revolving Loan
Commitment has been terminated, the total outstanding Revolving Loans of
Non-Defaulting Banks and the aggregate Percentages of all Non-Defaulting Banks
of the total outstanding Swingline Loans and Letter of Credit Outstandings at
such time).
"Returns" shall have the meaning provided in Section 6.21.
"Revolving Loan" shall have the meaning provided in Section 1.01(a).
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "Revolving Loan Commitment," as the same may be reduced from time to
time pursuant to Section 3.02 or Section 3.03 and/or otherwise modified pursuant
to Section 1.13 and/or Section 12.04(b).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
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"Revolving Outstandings" shall mean, at any time, the sum of (I) the
aggregate principal amount of all Revolving Loans at such time plus (II) the
aggregate amount of all Letter of Credit Outstandings at such time.
"Rollover Amount" shall have the meaning provided in Section
8.08(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the respective
Security Documents.
"Security Agreement" shall have the meaning provided in Section
5.10(b).
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Mortgage, and each Additional Security Document, if
any.
"Seller Preferred Stock" shall have the meaning provided in Section
6.14.
"Seller Stock" shall mean the Seller Preferred Stock and the Common
Stock in each case issued to the Sellers as part of the Recapitalization.
"Sellers" shall mean, collectively, Toray Industries, Toray Industries
(America), and Shimadzu.
"Senior Note Documents" shall mean and include the Senior Note
Indenture and the Senior Notes, as in effect on the Effective Date, and as the
same may be modified, supplemented or amended from time to time pursuant to the
terms hereof and thereof.
"Senior Note Indenture" shall mean the Indenture, dated as of May 15,
1997, by and between the Borrower and IBJ Schroder Bank & Trust Company, as
trustee thereunder, as in effect on the Effective Date, and as the same may be
modified, amended or supplemented from time to time in accordance with the terms
hereof and thereof.
"Senior Notes" shall mean the Borrower's 10-5/8% Senior Notes due
2004, as in effect on the Effective Date, and as the same may be modified,
supplemented or amended from time to time pursuant to the terms hereof and
thereof.
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"Senior Officer" shall mean the Chief Executive Officer, the
President, the Chief Financial Officer, the Treasurer, the Controller or the
Secretary or any other senior officer of the Borrower or any of its Subsidiaries
with knowledge of, or responsibility for, the financial affairs of such Person.
"Shareholders' Agreements" shall have the meaning provided in Section
5.13(d).
"Shareholder Subordinated Notes" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by any of the Borrower's Subsidiaries) in the form of Exhibit L
(appropriately completed), as amended, modified or supplemented from time to
time in accordance with the terms of this Agreement.
"Shimadzu" shall mean Shimadzu Corporation, a Japanese corporation.
"Stated Amount" of each Letter of Credit shall mean at any time the
maximum amount available to be drawn thereunder (regardless of whether any
conditions for drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
(other than (x) Therma-Wave Domestic Sales Corp. so long as it does not have any
operations or any significant assets and (y) a Foreign Subsidiary except to the
extent otherwise provided in Section 7.13) that is or becomes a party to the
Subsidiary Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in Section 5.11.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(b).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
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"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower and the Banks) that the primary
syndication (and resulting addition of Persons as Banks pursuant to Section
12.04(b)) has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.13(g).
"Taxes" shall have the meaning provided in Section 4.04.
"Test Period" shall mean (i) for purposes of Sections 8.02(p), 8.10
and 8.11, the four consecutive fiscal quarters of the Borrower then last ended
(taken as one accounting period) and (ii) for purposes of Section 8.09(a), the
two consecutive fiscal quarters of the Borrower then last ended (taken as one
accounting period).
"Therma-Wave Domestic Sales Corp." shall mean Therma-Wave Domestic
International Sales Corp., a California corporation and a Wholly-Owned Domestic
Subsidiary of the Borrower.
"Therma-Wave (Japan)" shall mean Therma-Wave (Japan), K.K., a Japanese
corporation and a Wholly-Owned Subsidiary of the Borrower.
"Toray Industries" shall mean Toray Industries, Inc., a Japanese
corporation.
"Toray Industries (America)" shall mean Toray Industries (America),
Inc., a New York corporation.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of the
aggregate principal amount of all Revolving Loans and Swingline Loans at such
time plus the Letter of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Recapitalization, (ii)
the Equity Financing, (iii) the issuance of the Senior Notes, (iv) the
Refinancing, (v) the occurrence of the Effective Date, (vi) such other
transactions as contemplated by the Documents and (vii) the payment of fees and
expenses in connection with the foregoing.
"Type" shall mean any type of Revolving Loan determined with respect
to the interest option applicable thereto, i.e., a Base Rate Loan or a
Eurodollar Loan.
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"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"Unutilized Revolving Loan Commitment" with respect to any Bank at any
time shall mean such Bank's Revolving Loan Commitment at such time less the sum
of (i) the aggregate outstanding principal amount of all Revolving Loans made by
such Bank and (ii) such Bank's Percentage of the Letter of Credit Outstandings
at such time.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, limited
liability company, association, joint venture or other entity in which such
Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100%
equity interest (other than nominal amounts of equity interest required to be
held other than by such Person under applicable law) at such time.
"Written", "written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
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SECTION 11. The Agent.
11.01 Appointment. Each Bank hereby irrevocably designates and
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this Section 11. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Credit Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 11 are solely for the benefit of the Agent
and the Banks, and neither the Borrower nor any of its Subsidiaries shall have
any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or any of its Subsidiaries.
11.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Borrower,
any of its Subsidiaries or any of their respective officers contained in this
Agreement, any other Credit Document, any other Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Document
or for any failure of the Borrower or any of its Subsidiaries or any of their
respective officers to perform its obligations hereunder or thereunder. The
Agent shall not be under any obligation to any Bank to ascertain or to inquire
as to the observance or performance of any of the agree-
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ments contained in, or conditions of, this Agreement or the other Documents, or
to inspect the properties, books or records of the Borrower or any of its
Subsidiaries. The Agent shall not be responsible to any Bank for the
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Agreement or any other Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Banks or by or on behalf of the Borrower
or any of its Subsidiaries to the Agent or any Bank or be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
11.04 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of its
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Credit Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks (or at
all the Banks, to the extent required by this Agreement), and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Banks.
11.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has actually received notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default. In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Banks. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks;
provided, that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
11.06 Non-reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents,
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attorneys-in-fact or affiliates have made any representations or warranties to
it and that no act by the Agent hereinafter taken, including any review of the
affairs of the Borrower or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other condition, prospects
and creditworthiness of the Borrower and its Subsidiaries and made its own
decision to make its Loans hereunder and enter into this Agreement. Each Bank
also represents that it will, independently and without reliance upon the Agent
or any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Borrower and its Subsidiaries. The Agent shall not have
any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, assets, property, financial and
other condition, prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Total Revolving Loan
Commitment has terminated and all Loans have been repaid in full, as determined
immediately prior to such termination and repayment (with such "percentages" to
be determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower or any of its
Subsidiaries; provided, that no Bank shall be liable to the Agent for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
primarily from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired (other than as a result of the gross
negligence or willful misconduct of the Agent), the Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section 11.07 shall survive the payment of all Obligations.
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11.08 Agent in its Individual Capacity. The Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Agent shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity. The Agent
and/or its affiliates may own stock of the Borrower and may accept deposits
from, lend money to, and generally engage in any kind of banking, trust or other
business with the Borrower or any Affiliate of the Borrower as if it were not
performing the duties specified herein, and may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
11.09 Holders. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.10 Resignation of the Agent; Successor Agent. The Agent may resign
as the Agent upon 20 days' notice to the Banks and, unless a Default or an Event
of Default of the type referred to in Section 9.05 has occurred and is
continuing, to the Borrower. Upon the resignation of the Agent, the Required
Banks shall appoint from among the Banks a successor Agent which is a bank or a
trust company for the Banks subject, to the extent that no payment Default or
Event of Default has occurred and is then continuing, to prior approval by the
Borrower (such approval not to be unreasonably withheld), whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall include such successor agent effective upon its
appointment, and the resigning Agent's rights, powers and duties as the Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement. If a successor Agent
shall not have been so appointed within such 20 day period after the date such
notice of resignation was given by the Agent, the Agent's resignation shall
become effective and the Banks shall thereafter perform all duties of the Agent
hereunder and/or under any other Credit Documents until such time, if any, as
the Required Banks appoint a successor Agent as provided above. After the
resignation of the Agent hereunder, the provisions of this Section 11 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
SECTION 12. Miscellaneous.
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12.01 Payment of Expenses, etc. The Borrower hereby agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agent's syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each of the Banks
in connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein and, after an Event of Default shall have
occurred and be continuing, the protection of the rights of the Agent and each
of the Banks thereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) for the Agent and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent and each Bank, its officers,
directors, trustees, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not the Agent, the Collateral Agent or any Bank is a
party thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Bank, any
Credit Party or any third Person or otherwise) related to the entering into
and/or performance of this Agreement or any other Document or the use of the
proceeds of any Loans or any Letter of Credit hereunder or the Transaction or
the consummation of any other transactions contemplated in any Document (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified), or (b) the actual or alleged presence of Hazardous
Materials in the air, surface water or groundwater or on the surface or
subsurface of any Real Property or any Environmental Claim, in each case,
including, without limitation, the reasonable fees and disbursements of counsel
and independent consultants incurred in connection with any such investigation,
litigation or other proceeding.
12.02 Right of Setoff; Collateral Matters. (a) In addition to any
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of an Event of Default, each Bank is hereby authorized at any time
or from time to time, without presentment, demand, protest or other notice of
any kind to the Borrower or any of its Subsidiaries or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Bank (including, without limitation, by branches
and
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agencies of such Bank wherever located) to or for the credit or the account of
the Borrower or any of its Subsidiaries against and on account of the
Obligations of the Borrower or any of its Subsidiaries to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of the Borrower or any of its
Subsidiaries purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations shall be
contingent or unmatured.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL
AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH
RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND
VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS
HEREUNDER AND MAY BE AMENDED, MODIFIED OR WAIVED IN ANY RESPECT BY THE REQUIRED
BANKS WITHOUT THE REQUIREMENT OF PRIOR NOTICE TO OR CONSENT BY ANY CREDIT PARTY
AND DOES NOT CONSTITUTE A WAIVER OF ANY RIGHTS AGAINST ANY CREDIT PARTY OR
AGAINST ANY COLLATERAL.
12.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to the Agent, at its Notice Office; if
to any Bank, at its address specified for such Bank on Annex II; or, at such
other address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied or cabled or sent by overnight courier, and
shall be effective when received.
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<PAGE>
12.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of all the Banks and, provided
further, that, no Bank may assign or transfer all or any portion of its Total
Revolving Loan Commitment and/or its outstanding Loans except as provided in
Section 12.04(b) and, provided further, that although any Bank may transfer,
assign or grant participations in its rights hereunder in accordance with this
Section, such Bank shall remain a "Bank" for all purposes hereunder and such
participant shall not constitute a "Bank" hereunder and, provided further, that
no Bank shall grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan, Note or Letter of Credit (unless such
Letter of Credit is not extended beyond the Final Maturity Date) in which such
participant is participating, or reduce the rate or extend the time of payment
of interest or Fees thereon (except in connection with a waiver of applicability
of any post-default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Revolving Loan
Commitment shall not constitute a change in the terms of such participation, and
that an increase in any Revolving Loan Commitment or Loan shall be permitted
without the consent of any participant if the participant's participation is not
increased as a result thereof), (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement or (iii)
release all or substantially all of the Collateral under all of the Security
Documents (except as expressly provided in the Credit Documents) supporting the
Loans hereunder in which such participant is participating. In the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents (the participant's rights against
such Bank in respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant relating thereto)
and all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) to its parent
company and/or any affiliate of such Bank which is at least 50% owned by such
Bank or its parent company or to one or more Banks or (y) assign all, or if less
than all, a portion equal to at least $1,500,000 in the aggregate for the
assigning Bank or assigning Banks, of such Revolving Loan Commitment (and
related outstanding Obligations hereunder) to one or more Eligible Transferees,
each of which assignees shall become a party to this Agreement as a Bank by
execution of an Assignment and Assumption Agreement, provided that (i) at such
time Annex I shall be deemed modified to reflect the Revolving Loan Commitments
of such new Bank and of the existing Banks, (ii) upon surrender of the old
Revolving Notes, new
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<PAGE>
Revolving Notes will be issued, at the Borrower's expense, to such new Bank and
to the assigning Bank, such new Revolving Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Revolving Loan Commitments, (iii) the consent of
the Agent shall be required in connection with any such assignment pursuant to
clause (y) of this Section 12.04(b) (which consent shall not be unreasonably
withheld or delayed) and (iv) the Agent shall receive at the time of each such
assignment, from the assigning or assignee Bank, the payment of a non-refundable
assignment fee of $3,500 and, provided further, that such transfer or assignment
will not be effective until recorded by the Agent on the Register pursuant to
Section 7.12. To the extent of any assignment pursuant to this Section 12.04(b),
the assigning Bank shall be relieved of its obligations hereunder with respect
to its assigned Revolving Loan Commitment. At the time of each assignment
pursuant to this Section 12.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide to the Borrower and the Agent the appropriate
Internal Revenue Service Forms (and, if applicable a Section 4.04(b)(ii)
Certificate) described in Section 4.04(b). To the extent that an assignment of
all or any portion of a Bank's Revolving Loan Commitment and related outstanding
Obligations pursuant to Section 1.13 or this Section 12.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or
4.04 from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Banks to any other or further action in any circumstances without notice
or demand.
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<PAGE>
12.06 Payments Pro Rata. (a) The Agent agrees that promptly after
its receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall, except as otherwise provided in
this Agreement, distribute such payment to the Banks (other than any Bank that
has consented in writing to waive its pro rata share of such payment) pro rata
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount; provided, that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
12.07 Calculations; Computations. (a) The financial statements to
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided, that (A) except as otherwise
specifically provided herein, all computations determining compliance with
Section 8, including definitions used therein, shall, in each case, utilize
accounting principles and policies in effect at the time of the preparation of,
and in conformity with those used to prepare, the March 31, 1996 financial
statements of the Borrower delivered to the Banks pursuant to Section 6.10(b),
but shall not give effect to (without duplication) (i) purchase accounting
adjustments required or permitted by APB 16 (including non-cash write-ups and
non-cash charges relating to inventory, fixed assets and in-process research and
development, in each case arising in connection with the Recapitalization and
any Permitted Acquisition) and APB 17 (including non-cash charges relating to
intangibles and goodwill arising in connection with the Recapitalization and any
Permitted Acquisition) or (ii) the fees paid to Bain and/or its Related Parties
pursuant to Section 8.07(ii) and (B) for purposes of the computations described
in preceding (A), any outstanding Shareholder Subordinated Notes and Qualified
PIK Debt Securities shall be treated as if same did not exist and as if there
were no interest expense applicable thereto.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
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<PAGE>
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or any
other Credit Document brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Credit Party, at its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing. Each Credit Party hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other Credit Document that service of process
was in any way invalid or ineffective. Nothing herein shall affect the right of
the Agent, any Bank or the holder of any Note to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
12.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which (i) the Borrower, the Agent and each of the
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Agent at the Notice
Office or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written, telex or facsimile notice (actually received)
at such office that the same has been signed and mailed to it and (ii) the
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<PAGE>
conditions contained in Section 5 are met to the satisfaction of the Agent and
the Required Banks. Unless the Agent has received actual notice from any Bank
that the conditions described in clause (ii) of the preceding sentence have not
been met to its satisfaction, upon the satisfaction of the condition described
in clause (i) of the immediately preceding sentence and upon the Agent's good
faith determination that the conditions described in clause (ii) of the
immediately preceding sentence have been met, then the Effective Date shall have
deemed to have occurred, regardless of any subsequent determination that one or
more of the conditions thereto had not been met (although the occurrence of the
Effective Date shall not release the Borrower from any liability for failure to
satisfy one or more of the applicable conditions contained in Section 5). The
Agent will give the Borrower and each Bank prompt written notice of the
occurrence of the Effective Date.
12.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Final Maturity Date, or reduce the
rate or extend the time of payment of interest or Fees thereon, or reduce the
principal amount thereof, (ii) release all or substantially all of the
Collateral (except as expressly provided in the Security Documents) under all
the Security Documents, (iii) amend, modify or waive any provision of this
Section 12.12, (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Revolving Loan Commitments are included on the
Effective Date) or (v) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement; provided further, that
no such change, waiver, discharge or termination shall (1) increase the
Revolving Loan Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Revolving Loan Commitment shall not
constitute an increase of the Revolving Loan Commitment of any Bank, and that an
increase in the available portion of any Revolving Loan Commitment of any Bank
shall not constitute an increase in the Revolving Loan Commitment of such Bank),
(2) without the consent of the Letter of Credit Issuer, amend, modify or waive
any provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (3) without the consent of BTCo,
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<PAGE>
alter its rights or obligations with respect to Swingline Loans, (4) without the
consent of the Agent, amend, modify or waive any provision of Section 11 as same
applies to the Agent or any other provision as same relates to the rights or
obligations of the Agent or (5) without the consent of the Collateral Agent,
amend, modify or waive any provision relating to the rights or obligations of
the Collateral Agent.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 12.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks with one or more
Replacement Banks pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change, waiver,
discharge or termination or (B) terminate such non-consenting Bank's Revolving
Loan Commitment and repay in full its outstanding Revolving Loans in accordance
with Sections 3.02(b) and/or 4.01(b), provided that, unless the Revolving Loan
Commitment which is terminated and Revolving Loans which are repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through the
addition of new Banks or the increase of the Revolving Loan Commitments and/or
outstanding Revolving Loans of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined before giving effect to the
proposed action) shall specifically consent thereto, provided further, that the
Borrower shall not have the right to replace a Bank solely as a result of the
exercise of such Bank's rights (and the withholding of any required consent by
such Bank) pursuant to the second proviso to Section 12.12(a).
12.13 Survival. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any branch office, Subsidiary or affiliate of such
Bank; provided, that the Borrower shall not be responsible for costs arising
under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12) to the extent such costs would not
otherwise be applicable to such Bank in the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it will use
its best efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
to affiliates or to another Bank if the Bank or such Bank's holding or parent
company in its sole discretion determines that
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<PAGE>
any such party should have access to such information) any information with
respect to the Borrower or any of its Subsidiaries which is furnished pursuant
to this Agreement; provided, that any Bank may disclose any such information (a)
as has become generally available to the public or has become available to such
Bank on a non-confidential basis, (b) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over such Bank or to the
Federal Reserve Board, the Federal Deposit Insurance Corporation, the NAIC or
similar organizations (whether in the United States or elsewhere) or their
successors, (c) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation, (d) in order to comply with any
law, order, regulation or ruling applicable to such Bank, and (e) to any
prospective transferee in connection with any contemplated transfer of any of
the Notes or any interest therein by such Bank; provided, that such prospective
transferee agrees to be bound by the provisions this Section 12.15 to the same
extent as such Bank.
(b) The Borrower hereby acknowledges and agrees that each Bank may
share with any of its affiliates any information related to the Borrower or any
of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its
Subsidiaries), provided that such Persons shall be subject to the provisions of
this Section 12.15 to the same extent as such Bank.
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
- -------
47320 Mission Falls Court THERMA-WAVE, INC.
Fremont, California 94539
Telephone No.: (510) 490-3663
Facsimile No.: (510) 490-0843 By:
Attention: President ------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By:
------------------------------
Title:
<PAGE>
ANNEX I
-------
LIST OF BANKS AND COMMITMENTS
-----------------------------
<TABLE>
<CAPTION>
Revolving Loan
Bank Commitment
- ---- --------------
<S> <C>
Bankers Trust Company $30,000,000
-----------
Total: $30,000,000
</TABLE>
<PAGE>
ANNEX II
--------
BANK ADDRESSES
--------------
Bank Address
- ---- -------
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218
<PAGE>
ANNEX III
---------
REAL PROPERTIES
---------------
<PAGE>
ANNEX IV
--------
PROJECTIONS
-----------
<PAGE>
ANNEX V
-------
SUBSIDIARIES
------------
<PAGE>
ANNEX VI
--------
EXISTING INDEBTEDNESS
---------------------
<PAGE>
ANNEX VII
---------
INSURANCE
---------
<PAGE>
ANNEX VIII
----------
EXISTING LIENS
--------------
<TABLE>
<CAPTION>
Filing File Original Description
Location Debtor Secured Party Number File Date of Collateral
- -------- ------ ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
ANNEX IX
--------
EXISTING INVESTMENTS
--------------------
<PAGE>
Exhibit 10.18
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT, dated as of May 16, 1997 (as amended, modified or
supplemented from time to time, this "Agreement"), made by each of the
undersigned pledgors (each, a "Pledgor" and, together with any other entity that
becomes a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor
of BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit
of the Secured Creditors (as defined below). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall be used herein as therein defined.
W I T N E S S E T H :
-------------------
WHEREAS, Therma-Wave, Inc. (the "Borrower"), the financial
institutions from time to time party thereto (the "Banks"), and Bankers Trust
Company, as Agent (together with any successor agent, the "Agent", and together
with the Pledgee and the Banks, the "Bank Creditors"), have entered into a
Credit Agreement, dated as of May 16, 1997 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), providing for the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower, all as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or more
(i) interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and/or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate
of a Bank (each such Bank or affiliate, even if the respective Bank subsequently
ceases to be a Bank under the Credit Agreement for any reason, together with
such Bank's or affiliate's successors and assigns, collectively, the "Other
Creditors," and together with Bank Creditors, the "Secured Creditors");
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that each Pledgor shall have executed and
delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
<PAGE>
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
liabilities (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) of such
Pledgor, now existing or hereafter incurred under, arising out of or
in connection with any Credit Document to which such Pledgor is a
party and the due performance and compliance by such Pledgor with the
terms of each such Credit Document (all such obligations and
liabilities under this clause (i), except to the extent consisting of
obligations or indebtedness with respect to Interest Rate Protection
Agreements or Other Hedging Agreements, being herein collectively
called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities of such
Pledgor, now existing or hereafter incurred under, arising out of or
in connections with any Interest Rate Protection Agreement or Other
Hedging Agreement including, in the case of the Pledgors other than
the Borrower, all obligations of such Pledgor under the Subsidiary
Guaranty in respect of Interest Rate Protection Agreements or Other
Hedging Agreements (all such obligations and liabilities under this
clause (ii) being herein collectively called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral;
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred
to in clauses (i), (ii) and (iii) above, after an Event of Default
(such term, as used in this Agreement, shall mean any Event of Default
under, and as defined in, the Credit Agreement, or any payment default
by the Borrower under any Interest Rate Protection Agreement or Other
Hedging Agreement and shall in any event include, without limitation,
any payment default (after the expiration of any applicable grace
period) on any of the Obligations (as hereinafter defined)) shall have
occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing
or realizing on the Collateral, or of any exercise by the Pledgee of
its rights hereunder, together with reasonable attorneys' fees and
court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations".
-2-
<PAGE>
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean (x) with respect to corporations incorporated under
the laws of the United States or any State or territory thereof (each, a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each, a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time directly owned by any Pledgor of any Foreign Corporation, provided that,
except as provided in the last sentence of this Section 2, such Pledgor shall
not be required to pledge hereunder more than 65% of the total combined voting
power of all classes of capital stock of any Foreign Corporation entitled to
vote; (ii) the term "Notes" shall mean (x) all Intercompany Notes at any time
issued to each Pledgor and (y) all other promissory notes from time to time
issued to, or held by, each Pledgor; provided, that, except as provided in the
last sentence of this Section 2, no Pledgor shall be required to pledge
hereunder any promissory notes (including Intercompany Notes) issued to such
Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation and
(iii) the term "Securities" shall mean all of the Stock and Notes; provided
that, notwithstanding the foregoing, the term "Securities" shall not include any
Notes listed in Annex D hereto. Each Pledgor represents and warrants that on
the date hereof (i) each Subsidiary of such Pledgor, and the direct ownership
thereof, is listed in Annex A hereto; (ii) the Stock held by such Pledgor
consists of the number and type of shares of the stock of the corporations as
described in Annex B hereto; (iii) such Stock constitutes that percentage of the
issued and outstanding capital stock of the issuing corporation as is set forth
in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory
notes described in Annex C hereto where such Pledgor is listed as the Lender;
and (v) on the date hereof, such Pledgor owns no other Securities. In the
circumstances and to the extent provided in Section 7.13 of the Credit
Agreement, the 65% limitation set forth in clause (i)(y) and the limitation in
the proviso of clause (ii) in each case of this Section 2 and in Section 3.2
hereof shall no longer be applicable and such Pledgor shall duly pledge and
deliver to the Pledgee such of the Securities not theretofore required to be
pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1 Pledge. To secure the Obligations and for the purposes set forth
in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a security
interest in all of the Collateral owned by such Pledgor; (ii) pledges and
deposits as security with the Pledgee the Securities owned by such Pledgor on
the date hereof, and delivers to the Pledgee certificates or instruments
therefor, duly endorsed in blank in the case of Notes and accompanied by undated
stock powers duly executed in blank by such Pledgor in the case of Stock, or
such other instruments of transfer as are acceptable to the Pledgee; and (iii)
assigns, transfers, hypothecates, mortgages, charges and sets over to the
Pledgee all of such Pledgor's right, title and interest in and to such
Securities (and in and to all certificates or instruments evidencing such
Securities), to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement.
3.2 Subsequently Acquired Securities. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
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therefor or instruments thereof, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank in the case of Stock,
or such other instruments of transfer as are acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by any
Authorized Officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder. Subject to the
last sentence of Section 2 hereof, no Pledgor shall be required at any time to
pledge hereunder (x) any Stock which is more than 65% of the total combined
voting power of all classes of capital stock of any Foreign Corporation entitled
to vote or (y) any promissory notes (including Intercompany Notes) issued to
such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation.
3.3 Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee in writing thereof, and, if after such
notification, the Pledgee so requests, such Pledgor shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York UCC, if applicable). Each Pledgor further agrees to take such actions
as the Pledgee deems reasonably necessary or desirable to effect the foregoing
and to permit the Pledgee to exercise any of its rights and remedies hereunder,
and agrees to provide an opinion of counsel reasonably satisfactory to the
Pledgee with respect to any such pledge of uncertificated Securities promptly
upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock," all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes," all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities," which together with all dividends and interest
thereon, as the case may be, and all proceeds thereof, including any securities
and moneys received and at the time held by the Pledgee hereunder, is
hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; provided, however, that
the failure to give such notice shall not affect the validity of such
appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an
Event of Default shall have occurred and be continuing and (ii) written notice
thereof shall have been given by the Pledgee to the relevant Pledgor (provided,
that if an Event of Default specified in Section 9.05 of the Credit Agreement
shall occur, no such notice shall be required), each Pledgor shall be entitled
to exercise any and all voting and other consensual rights pertaining to the
Pledged Securities and to give all consents, waivers or ratifications in respect
thereof; provided, that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement, any other Credit Document or any
Interest
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Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured
Debt Agreements"), or which would have the effect of impairing the position or
interests of the Pledgee or any other Secured Creditor, except to the extent
such violation, inconsistency or impairment shall be waived in accordance with
the terms of Section 20 hereof. All such rights of such Pledgor to vote and to
give consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the respective Pledgor; provided, that all cash dividends payable in respect
of the Pledged Stock which are determined by the Pledgee to represent in whole
or in part an extraordinary, liquidating or other distribution in return of
capital shall be paid, to the extent so determined to represent an
extraordinary, liquidating or other distribution in return of capital, to the
Pledgee and retained by it as part of the Collateral. Subject to the last
sentence of Section 3.2 hereof, the Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or
property (other than cash) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(ii) all other or additional stock or other securities or
property (including cash) paid or distributed in respect of the
Pledged Stock by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other or additional stock or other securities
or property (including cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate reorganization.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Pledgee shall be
entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into
the Pledgee's name or the name of its nominee or nominees (the Pledgee
agrees to promptly notify the relevant Pledgor after such transfer;
provided, however, that the failure to give such notice shall not
affect the validity of such transfer);
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(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon
any Pledged Note (including, without limitation, to make any demand
for payment thereon);
(iv) subject to the giving of written notice to the relevant
Pledgor in accordance with clause (ii) of Section 5 hereof (to the
extent required by such Section 5), to vote all or any part of the
Pledged Stock (whether or not transferred into the name of the
Pledgee) and give all consents, waivers and ratifications in respect
of the Collateral and otherwise act with respect thereto as though it
were the outright owner thereof (each Pledgor hereby irrevocably
constituting and appointing the Pledgee the proxy and attorney-in-fact
of such Pledgor, with full power of substitution to do so); and
(v) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by each Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine; provided, that at least 10 days' written notice of the time
and place of any such sale shall be given to such Pledgor. Each
Pledgor hereby waives and releases to the fullest extent permitted by
law any right or equity of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of
marshalling the Collateral and any other security for the Obligations
or otherwise. At any such sale, unless prohibited by applicable law,
the Pledgee on behalf of the Secured Creditors may bid for and
purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Pledgee nor any other
Secured Creditor shall be liable for failure to collect or realize
upon any or all of the Collateral or for any delay in so doing nor
shall any of them be under any obligation to take any action
whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Secured Debt Agreement or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Secured Creditor of any one or more of the rights, powers or remedies provided
for in this Agreement or in any other Secured Debt Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any other Secured Creditor of
all such other rights, powers or remedies, and no failure or delay on the part
of the Pledgee or any other Secured Creditor to exercise any such right, power
or remedy shall operate as a waiver thereof. The Secured Creditors agree that
this Agreement may be enforced only by the action of the Agent or the Pledgee,
in each case acting upon the instructions of the Required Banks (or, after the
date on which all Credit Document Obligations have been paid in full, the
holders of at least the majority of the outstanding Other Obligations) and that
no other
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Secured Creditor shall have any right individually to seek to enforce or to
enforce this Agreement or to realize upon the security to be granted hereby, it
being understood and agreed that such rights and remedies may be exercised by
the Agent or the Pledgee or the holders of at least a majority of the
outstanding Other Obligations, as the case may be, for the benefit of the
Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain jointly
and severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor from and against any and all claims, demands, losses, judgments and
liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee and
each other Secured Creditor for all costs and expenses, including reasonable
attorneys' fees, growing out of or resulting from this Agreement or the exercise
by the Pledgee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for
those arising from the Pledgee's or such other Secured Creditor's gross
negligence or willful misconduct. In no event shall the Pledgee be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgors under this Section 11 are
unenforceable for any reason, each Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with
the Pledgee in executing and, at such Pledgor's own expense, file and refile
under the applicable UCC or appropriate local equivalent, such financing
statements, continuation statements and other documents in such offices as the
Pledgee may deem reasonably necessary or appropriate and wherever required or
permitted by law in order to perfect and preserve the Pledgee's security
interest in the Collateral and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where
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permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 11 of the Credit Agreement.
14. TRANSFER BY PLEDGORS. Except for sales or dispositions of
Collateral permitted pursuant to the Credit Agreement, no Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except in
accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each
Pledgor represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement and liens permitted under
clauses (a) and (e) of Section 8.03 of the Credit Agreement; (ii) it has full
power, authority and legal right to pledge all the Securities pledged by it
pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); (iv) no consent of any other
party (including, without limitation, any stockholder or creditor of such
Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by such
Pledgor in connection with the execution, delivery or performance of this
Agreement, or in connection with the exercise of its rights and remedies
pursuant to this Agreement, except as may be required in connection with the
disposition of the Securities by laws affecting the offering and sale of
securities generally; (v) the execution, delivery and performance of this
Agreement by such Pledgor does not violate any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of the certificate
of incorporation or by-laws of such Pledgor or of any securities issued by such
Pledgor or any of its Subsidiaries, or of any mortgage, indenture, deed of
trust, loan agreement, credit agreement or any other material agreement or
material instrument to which such Pledgor or any of its Subsidiaries is a party
or which purports to be binding upon such Pledgor or any of its Subsidiaries or
upon any of their respective assets and will not result in the creation or
imposition of any lien or encumbrance on any of the assets of such Pledgor or
any of its Subsidiaries except as contemplated by this Agreement; (vi) all the
shares of Stock of Subsidiaries
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of the Borrower have been duly and validly issued, are fully paid and
nonassessable; (vii) each of the Pledged Notes constituting Intercompany Notes,
when executed by the obligor thereof, will be the legal, valid and binding
obligation of such obligor, enforceable in accordance with its terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law); and (viii) the pledge and
assignment of the Securities pursuant to this Agreement, together with the
delivery of the Securities pursuant to this Agreement (which delivery has been
made), creates a valid and perfected first security interest in such Securities
and the proceeds thereof, subject to no prior lien or encumbrance or to any
agreement purporting to grant to any third party a lien or encumbrance on the
property or assets of such Pledgor which would include the Securities other than
liens permitted under clauses (a) and (e) of Section 8.03 of the Credit
Agreement. Each Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Securities and the proceeds
thereof against the claims and demands of all persons whomsoever; and such
Pledgor covenants and agrees that it will have like title to and right to pledge
any other property at any time hereafter pledged to the Pledgee as Collateral
hereunder and will likewise defend the right thereto and security interest
therein of the Pledgee and the other Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Pledgor shall have notice
or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, such Pledgor
as soon as practicable and at its expense will use its reasonable efforts to
cause such registration to be effected (and be kept effective) and will use its
reasonable efforts to cause such qualification and compliance to be effected
(and be kept effective) as may be so requested and as would permit or facilitate
the sale and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any similar
statute then in effect), appropriate qualifications under applicable blue sky or
other state securities laws and
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appropriate compliance with any other government requirements; provided, that
the Pledgee shall furnish to such Pledgor such information regarding the Pledgee
as such Pledgor may request in writing and as shall be required in connection
with any such registration, qualification or compliance. Such Pledgor will
cause the Pledgee to be kept reasonably advised in writing as to the progress of
each such registration, qualification or compliance and as to the completion
thereof, will furnish to the Pledgee such number of prospectuses, offering
circulars or other documents incident thereto as the Pledgee from time to time
may reasonably request, and will indemnify the Pledgee, each other Secured
Creditor and all others participating in the distribution of the Pledged Stock
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to such Pledgor by the Pledgee or
such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration; provided, that
at least 10 days' notice of the time and place of any such sale shall be given
to such Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price which the Pledgee, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will promptly execute and deliver to such Pledgor a proper instrument
or instruments acknowledging the satisfaction and termination of this Agreement,
and will duly release from the security interest created hereby and assign,
transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Pledgee and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, "Termination
Date" shall mean the date upon which the Total Revolving Loan Commitment and all
Interest Rate
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Protection Agreements or Other Hedging Agreements have been terminated, no Note
(as defined in the Credit Agreement) or Letter of Credit is outstanding (other
than Letters of Credit, together with all Fees that have accrued and will accrue
thereon through the stated termination date of such Letters of Credit, which
have been supported in a manner satisfactory to the Letter of Credit Issuer in
its sole and absolute discretion) and all other Obligations (other than
indemnities described in Section 11 hereof and in Section 12.13 of the Credit
Agreement which are not then due and payable) have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement), the Pledgee, at the request and expense of such Pledgor will duly
release from the security interest created hereby and assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not theretofore been
released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee
a certificate signed by an Authorized Officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b).
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Telecopier No.: (212) 250-7218
(c) if to any Bank (other than the Pledgee), at such address as
such Bank shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to each Pledgor and the
Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
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20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of either (x) the Required Banks (or all the
Banks if required by Section 12.12 of the Credit Agreement) at all times prior
to the time on which all Credit Document Obligations have been paid in full or
(y) the holders of at least a majority of the outstanding Other Obligations at
all times after the time on which all Credit Document Obligations have been paid
in full); provided, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class (as defined below) of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors (as defined below) of
such Class. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders of
the Credit Document Obligations or (ii) the Other Creditors as holders of the
Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (i) with respect to the Credit
Document Obligations, the Required Banks and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
21. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns; provided that no
Pledgor may transfer or assign any or all of its rights and obligations
hereunder without the prior written consent of the Pledgee. THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. The headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
22. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.13 and/or 8.14 of the
Credit Agreement shall automatically become a Pledgor hereunder by executing a
counterpart hereof and delivering the same to the Pledgee.
* * *
-12-
<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address: THERMA-WAVE, INC.,
1250 Reliance Way as a Pledgor
Fremont, California 94539
Attention: President
Telephone: (501) 490-3663
Facsimile: (501) 490-0843 By:
---------------------------
Name: Allan Rosencwaig
Title: President and CEO
BANKERS TRUST COMPANY,
as Pledgee, Collateral Agent
By:
-----------------------------
Name: May Kay Coyle
Title: Managing Director
-13-
<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
----------------
LIST OF SUBSIDIARIES
--------------------
<TABLE>
<CAPTION>
<S> <C>
Therma-Wave, Ltd. 98%
Therma-Wave, (Japan) K.K. 100%
Therma-Wave Foreign Sales Corp. 100%
Therma-Wave Domestic International Sales Corp. 100%
</TABLE>
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
----------------
LIST OF STOCK
-------------
Therma-Wave, Ltd.
98 shares of capital stock
Therma-Wave, (Japan) K.K.
30 shares of capital stock
<PAGE>
ANNEX C
to
PLEDGE AGREEMENT
----------------
LIST OF NOTES
-------------
Time Vesting Note from Allan Rosencwaig to Borrower in the principal amount
of $151,171.88.
Time Vesting Note from Anthony W. Lin to Borrower in the principal amount
of $28,722.60.
Time Vesting Note from W. Lee Smith to Borrower in the principal amount of
$22,675.73.
Time Vesting Note from Jon L. Opsal to Borrower in the principal amount of
$28,722.60.
Time Vesting Note from David Willenborg to Borrower in the principal amount
of $22,675.73.
<PAGE>
ANNEX D
to
PLEDGE AGREEMENT
----------------
LIST OF EXCLUDED NOTES
----------------------
None
<PAGE>
Exhibit 10.19
================================================================================
SECURITY AGREEMENT
among
THERMA-WAVE, INC.,
CERTAIN SUBSIDIARIES
OF THERMA-WAVE, INC.
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of May 16, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I SECURITY INTERESTS................................................. 2
1.1. Grant of Security Interests........................................ 2
1.2. Power of Attorney.................................................. 2
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS................. 3
2.1. Necessary Filings.................................................. 3
2.2. No Liens........................................................... 3
2.3. Other Financing Statements......................................... 3
2.4. Chief Executive Office; Records.................................... 4
2.5. Location of Inventory and Equipment................................ 4
2.6. Recourse........................................................... 5
2.7. Trade Names; Change of Name........................................ 5
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS...................... 5
3.1. Additional Representations and Warranties.......................... 5
3.2. Maintenance of Records............................................. 6
3.3. Direction to Account Debtors; Contracting Parties; etc............. 6
3.4. Modification of Terms; etc......................................... 6
3.5. Collection......................................................... 7
3.6. Instruments........................................................ 7
3.7. Further Actions.................................................... 7
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS........................... 7
4.1. Additional Representations and Warranties.......................... 7
4.2. Licenses and Assignments........................................... 8
4.3. Infringements...................................................... 8
4.4. Preservation of Marks.............................................. 8
4.5. Maintenance of Registration........................................ 9
4.6. Future Registered Marks............................................ 9
4.7. Remedies........................................................... 9
ARTICLE V SPECIAL PROVISIONS CONCERNING
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PATENTS, COPYRIGHTS AND TRADE SECRETS......................... 10
5.1. Additional Representations and Warranties......................... 10
5.2. Licenses and Assignments.......................................... 11
5.3. Infringements..................................................... 11
5.4. Maintenance of Patents............................................ 11
5.5. Prosecution of Patent Application................................. 11
5.6. Other Patents and Copyrights...................................... 11
5.7. Remedies.......................................................... 12
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL............................. 12
6.1. Protection of Collateral Agent's Security......................... 12
6.2. Warehouse Receipts Non-Negotiable................................. 13
6.3. Further Actions................................................... 13
6.4. Financing Statements.............................................. 13
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT..................... 14
7.1. Remedies; Obtaining the Collateral Upon Default................... 14
7.2. Remedies; Disposition of the Collateral........................... 15
7.3. Waiver of Claims.................................................. 16
7.4. Application of Proceeds........................................... 17
7.5. Remedies Cumulative............................................... 18
7.6. Discontinuance of Proceedings..................................... 18
ARTICLE VIII INDEMNITY....................................................... 19
8.1. Indemnity......................................................... 19
8.2. Indemnity Obligations Secured by Collateral; Survival............. 20
ARTICLE IX DEFINITIONS...................................................... 20
ARTICLE X MISCELLANEOUS..................................................... 25
10.1. Notices......................................................... 25
10.2. Waiver; Amendment............................................... 25
10.3. Obligations Absolute............................................ 26
10.4. Successors and Assigns.......................................... 26
10.5. Headings Descriptive............................................ 26
10.6. Governing Law................................................... 26
10.7. Assignor's Duties............................................... 26
10.8. Termination; Release............................................ 26
10.9. Counterparts.................................................... 27
10.10. The Collateral Agent............................................ 27
10.11. Additional Assignors............................................ 28
</TABLE>
ANNEX A Schedule of Chief Executive Offices and other Record Locations
(ii)
<PAGE>
Page
----
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Trade and Fictitious Names
ANNEX D List of Marks
ANNEX E List of Patents and Applications
ANNEX F List of Copyrights and Applications
ANNEX G Grant of Security Interest in United States Trademarks and Patents
ANNEX H Grant of Security Interest in United States Copyrights
(iii)
<PAGE>
SECURITY AGREEMENT
------------------
SECURITY AGREEMENT, dated as of May 16, 1997, among each of the
undersigned assignors (each, an "Assignor" and, together with any other entity
that becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors")
and Bankers Trust Company, as Collateral Agent (the "Collateral Agent"), for the
benefit of the Secured Creditors (as defined below). Except as otherwise
defined herein, terms used herein and defined in the Credit Agreement (as
defined below) shall be used herein as therein defined.
W I T N E S S E T H :
-------------------
WHEREAS, Therma-Wave, Inc. (the "Borrower"), the financial
institutions from time to time party thereto (the "Banks"), and Bankers Trust
Company, as Agent (the "Agent," and together with the Collateral Agent and the
Banks, the "Bank Creditors"), have entered into a Credit Agreement, dated as of
May 16, 1997 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the making of Loans to the Borrower and the
issuance of, and participation in, Letters of Credit for the account of the
Borrower, all as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or more
(i) interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and/or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate
of a Bank (each such Bank or affiliate, even if the respective Bank subsequently
ceases to be a Bank under the Credit Agreement for any reason, together with
such Bank's or affiliate's successors and assigns, collectively, the "Other
Creditors", and together with the Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other
than the Borrower) has jointly and severally guaranteed to the Secured Creditors
the payment when due of all obligations and liabilities of the Borrower under or
with respect to the Credit Documents and the Interest Rate Protection Agreements
or Other Hedging Agreements;
<PAGE>
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that the Assignors shall have executed and
delivered to the Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt
and complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority in, all of the
right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired: (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising thereunder (other than Contracts which by their terms cannot be pledged
(although the right to receive payments of money thereunder shall not be
excluded from the security interest created hereunder)), (iii) all Inventory,
(iv) all Equipment, (v) all Marks, together with the registrations and right to
all renewals thereof, and the goodwill of the business of such Assignor
symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all computer
programs of such Assignor and all intellectual property rights therein (other
than such programs and rights which by their terms cannot be pledged) and all
other proprietary information of such Assignor, including, but not limited to,
trade secrets, (viii) all other Goods, General Intangibles, Chattel Paper,
Documents and Instruments, (ix) the Cash Collateral Account and all monies,
securities and instruments deposited or required to be deposited in such Cash
Collateral Account, and (x) all Proceeds and products of any and all of the
foregoing (all of the above, collectively, the "Collateral").
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such
-2-
<PAGE>
Assignor or otherwise) to act, require, demand, receive, compound and give
acquittance for any and all monies and claims for monies due or to become due to
such Assignor under or arising out of the Collateral, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
take any action or institute any proceedings which the Collateral Agent may deem
to be reasonably necessary or advisable to protect the interests of the Secured
Creditors, which appointment as attorney is coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve and perfect the security interest
granted by such Assignor to the Collateral Agent hereby in respect of the
Collateral have been accomplished (or will have been accomplished on the
Business Day immediately following the Effective Date) and the security interest
granted to the Collateral Agent pursuant to this Agreement in and to the
Collateral creates a perfected security interest therein prior to the rights of
all other Persons therein and subject to no other Liens (other than Permitted
Liens) and is entitled to all the rights, priorities and benefits afforded by
the Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests, in each case to the extent that
the Collateral consists of the type of property in which a security interest may
be perfected by filing a financing statement under the Uniform Commercial Code
as enacted in any relevant jurisdiction or in the United States Patent and
Trademark Office or United States Copyright Office or, to the extent provided in
Section 6.3(b) hereof, in any foreign equivalent office of the United States
Patent and Trademark or United States Copyright Office.
2.2. No Liens. Such Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any Person (other than Permitted Liens),
and such Assignor shall defend the Collateral to the extent of its rights
therein against all claims and demands of all Persons at any time claiming the
same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as the Total Revolving Loan Commitment has not
been terminated or any Note remains unpaid or any
-3-
<PAGE>
of the Obligations remain unpaid or any Interest Rate Protection Agreement or
Other Hedging Agreement or Letter of Credit remains in effect (other than
Letters of Credit, together with all Fees that have accrued and will accrue
thereon through the stated termination date of such Letters of Credit, which
have been supported in a manner satisfactory to the Letter of Credit issuer in
its sole and absolute discretion) or any Obligations are owed with respect
thereto, such Assignor will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except (a) financing statements filed or to be filed in respect of
and covering the security interests granted hereby by such Assignor or as
permitted by the Credit Agreement and (b) financing statements with respect to
Permitted Liens.
2.4. Chief Executive Office; Records. The chief executive office of
such Assignor is located at the address or addresses indicated on Annex A hereto
for such Assignor. Such Assignor will not move its chief executive office
except to such new location as such Assignor may establish in accordance with
the last sentence of this Section 2.4. The originals of all documents
evidencing all Receivables and Contract Rights of such Assignor and the only
original books of account and records of such Assignor relating thereto are, and
will continue to be, kept at such chief executive office, at one or more of the
locations set forth on Annex A hereto or at such new locations as such Assignor
may establish in accordance with the last sentence of this Section 2.4. All
Receivables and Contract Rights of such Assignor are, and will continue to be,
maintained at, and controlled and directed (including, without limitation, for
general accounting purposes) from, the office locations described above or such
new location established in accordance with the last sentence of this Section
2.4. No Assignor shall establish new locations for such offices until it shall
have given to the Collateral Agent notice of its intention to do so unless (i)
such Assignor shall give to the Collateral Agent written notice of any such
relocation of its chief executive office within 10 days following such
relocation, clearly describing such new location and providing such other
information in connection therewith as the Collateral Agent may reasonably
request and (ii) with respect to such new location, it shall take all action,
reasonably satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor (other than (i) immaterial
portions of Inventory (x) sold on consignment or held on display for
demonstration purposes or (y) transferred to another location in connection with
a sale of such Inventory in the ordinary course of business, so long as such
sale occurs within 60 days from the date of such transfer and (ii) various spare
parts held for maintenance or repair of Equipment). Each Assignor agrees that
all Inventory and Equipment now held or subsequently acquired by it shall be
kept at (or shall be in transport to) any one of the locations shown on Annex B
hereto, or such new location as such Assignor may establish in accordance with
the last sentence of this Section 2.5 (other than (i) immaterial portions of
Inventory (x) sold on consignment or held on display
-4-
<PAGE>
for demonstration purposes or (y) may be transferred to another location in
connection with a sale of such Inventory in the ordinary course of business, so
long as such sale occurs within 60 days from the date of such transfer and (ii)
various spare parts held for maintenance or repair of Equipment). Any Assignor
may establish a new location for Inventory and Equipment only if (i) it shall
have given to the Collateral Agent written notice within 10 days following any
such relocation clearly describing such new location and providing such other
information in connection therewith as the Collateral Agent may request and (ii)
with respect to such new location, it shall have taken all action reasonably
satisfactory to the Collateral Agent to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
2.6. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other
Credit Documents, in the Interest Rate Protection Agreements or Other Hedging
Agreements and otherwise in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. No Assignor has or operates in any
jurisdiction under, or in the preceding 12 months has had or has operated in any
jurisdiction under, any trade names, fictitious names or other names except its
legal name and such other trade or fictitious names as are listed on Annex C
hereto. No Assignor shall change its legal name or assume or operate in any
jurisdiction under any trade, fictitious or other name except those names listed
on Annex C hereto and new names established in accordance with the last sentence
of this Section 2.7. No Assignor shall assume or operate in any jurisdiction
under any new trade, fictitious or other name unless (i) it shall have given to
the Collateral Agent written notice within 10 days following any assumption of,
or operation under, such new name clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request and (ii) with respect to such new name, it shall have taken all action
requested by the Collateral Agent, to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are what they purport to be, and that all
papers and documents (if any) relating thereto will be
<PAGE>
the only original writings evidencing and embodying such obligation of the
account debtor named therein (other than copies created for general accounting
purposes).
3.2. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense accurate records of its Receivables and Contracts,
records of all payments received, all credits granted thereon, all merchandise
returned and all other dealings therewith, and such Assignor will make the same
available on such Assignor's premises to the Collateral Agent for inspection, at
such Assignor's own cost and expense, at any and all reasonable times upon prior
notice to an Authorized Officer of such Assignor. Upon the occurrence and during
the continuance of an Event of Default and at the request of the Collateral
Agent, such Assignor shall, at its own cost and expense, deliver all tangible
evidence of its Receivables and Contract Rights (including, without limitation,
all documents evidencing the Receivables and all Contracts) and such books and
records to the Collateral Agent or to its representatives (copies of which
evidence and books and records may be retained by such Assignor). Upon the
occurrence and during the continuance of an Event of Default and if the
Collateral Agent so directs, such Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents (if any) of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon
the occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as such Assignor.
Without notice to or assent by any Assignor, the Collateral Agent may apply any
or all amounts then in, or thereafter deposited in, the Cash Collateral Account
which application shall be effected in the manner provided in Section 7.4 of
this Agreement. The costs and expenses (including reasonable attorneys' fees) of
collection, whether incurred by the relevant Assignor or the Collateral Agent,
shall be borne by the relevant Assignor. The Collateral Agent shall deliver a
copy of each notice referred to in the preceding clause (y) to the relevant
Assignor; provided, that the failure by the Collateral Agent to so notify such
Assignor shall not affect the effectiveness of such notice or the other rights
of the Collateral Agent created by this Section 3.3.
3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify in
any material respect any term thereof or make any material adjustment with
respect thereto, or extend or renew the same, or compromise or settle any
material dispute, claim, suit or legal
-6-
<PAGE>
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Collateral Agent, except as
permitted by Section 3.5 hereof or in the Credit Agreement. Each Assignor will
duly fulfill all obligations on its part to be fulfilled under or in connection
with the Receivables and Contracts and will do nothing to impair the rights of
the Collateral Agent in the Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract, except that,
prior to the occurrence of an Event of Default, any Assignor may allow in the
ordinary course of business as adjustments to amounts owing under its
Receivables and Contracts (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services or for other reasons which such Assignor finds
appropriate in accordance with reasonable business judgment. The reasonable
costs and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor.
3.6. Instruments. If any Assignor owns or acquires any Instrument
constituting Collateral, such Assignor will within 10 Business Days notify the
Collateral Agent thereof, and upon request by the Collateral Agent will promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use the
-7-
<PAGE>
registered Marks listed in Annex D hereto for such Assignor and that said listed
Marks constitute all the marks and applications for marks registered in the
United States Patent and Trademark Office or the equivalent thereof in any
foreign country that such Assignor presently owns or uses in connection with its
business. Each Assignor represents and warrants that it owns, is licensed to use
or otherwise has the right to use all Marks that it uses. Each Assignor further
warrants that it has no knowledge of any third party claim that any aspect of
such Assignor's present or contemplated business operations infringes or will
infringe any trademark, service mark or trade name. Each Assignor represents and
warrants that it is the true and lawful owner of or otherwise has the right to
use all trademark registrations and applications listed in Annex D hereto and
that said registrations are valid, subsisting, have not been cancelled and that
such Assignor is not aware of any third-party claim that any of said
registrations is invalid or unenforceable, or is not aware that there is any
reason that any of said registrations is invalid or unenforceable, or is not
aware that there is any reason that any of said applications will not pass to
registration. Each Assignor represents and warrants that upon the recordation of
a Grant of Security Interest in United States Trademarks and Patents in the form
of Annex G hereto in the United States Patent and Trademark Office, together
with filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate to perfect the security
interest granted to the Collateral Agent in the United States Marks covered by
this Agreement under federal law will have been accomplished. Each Assignor
agrees to execute such a Grant of Security Interest in United States Trademark
and Patents covering all right, title and interest in each United States Mark,
and the associated goodwill, of such Assignor, and to record the same. Each
Assignor hereby grants to the Collateral Agent an absolute power of attorney to
sign, upon the occurrence and during the continuance of an Event of Default, any
document which may be required by the United States Patent and Trademark Office
or the equivalent thereof in any foreign country in order to effect an absolute
assignment of the Assignor's right, title and interest in each Mark, and record
the same.
4.2. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any right under any Mark absent prior written approval of the
Collateral Agent.
4.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or diluting or otherwise
violating in any material respect any of such Assignor's rights in and to any
Mark, or with respect to any party claiming that such Assignor's use of any Mark
violates in any material respect any property right of that party. Each Assignor
further agrees, unless otherwise agreed by the Collateral Agent, to prosecute
any Person infringing any Mark in accordance with commercially reasonable
business practices.
4.4. Preservation of Marks. Each Assignor agrees to use its Marks in
interstate commerce (or the equivalent thereof in any foreign jurisdiction)
during the time
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in which this Agreement is in effect, sufficiently to preserve such Marks as
trademarks or service marks under the laws of the United States or under the
laws of the applicable foreign country, as the case may be; provided, that, to
the extent permitted by the Credit Agreement, no Assignor shall be obligated to
preserve any Mark in the event such Assignor determines, in its reasonable
business judgment, that the preservation of such Mark is no longer desirable in
the conduct of its business.
4.5. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (SS) 1051 et seq. (or the equivalent thereof in any foreign
jurisdiction) to maintain trademark registrations, including but not limited to
affidavits of use and applications for renewals of registration in the United
States Patent and Trademark Office (or the equivalent thereof in any foreign
jurisdiction) for all of its registered Marks pursuant to 15 U.S.C. (SS)
1058(a), 1059 and 1065 (or the equivalent thereof in any foreign jurisdiction),
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Collateral Agent; provided, that no Assignor shall
be obligated to maintain registration of any Mark in the event that such
Assignor determines, in its reasonable business judgment, that such maintenance
of such Mark is no longer necessary or desirable in the conduct of its business.
Each Assignor agrees to notify the Collateral Agent three (3) months prior to
the dates on which the affidavits of use or the applications for renewal
registration are due with respect to any registered Mark that the affidavits of
use or the renewal is being processed or being abandoned, as the case may be.
4.6. Future Registered Marks. If any registration for a Mark issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office (or the equivalent
thereof in any foreign jurisdiction), within 30 days of receipt of such
certificate, such Assignor shall deliver to the Collateral Agent a copy of such
certificate, and a grant of security in such Mark, to the Collateral Agent and
at the expense of such Assignor, confirming the grant of security in such Mark
to the Collateral Agent hereunder, the form of such security to be substantially
the same as the form hereof or in such other form as may be reasonably
satisfactory to the Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such rights,
title and interest shall immediately vest, in the Collateral Agent for the
benefit of the Secured Creditors, and the Collateral Agent shall be entitled to
exercise the power of attorney referred to in Section 4.1 hereof to execute,
cause to be acknowledged and notarized and record said absolute assignment with
the applicable agency; (ii) take and use or sell the Marks and the goodwill of
such Assignor's business symbolized by the Marks
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and the right to carry on the business and use the assets of such Assignor in
connection with which the Marks have been used; and (iii) direct such Assignor
to refrain, in which event such Assignor shall refrain, from using the Marks in
any manner whatsoever, directly or indirectly, and, if requested by the
Collateral Agent, change such Assignor's corporate name to eliminate therefrom
any use of any Mark and execute such other and further documents that the
Collateral Agent may request to further confirm this and to transfer ownership
of the Marks and registrations and any pending trademark application in the
United States Patent and Trademark Office (or the equivalent thereof in any
foreign jurisdiction) to the Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use (i) all material United States and foreign trade secrets and
proprietary information necessary to operate the business of the Assignor (the
"Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such
Assignor and that said Patents constitute all the patents and applications for
patents that such Assignor now owns or uses and (iii) the Copyrights listed in
Annex F hereto for such Assignor and that said Copyrights constitutes all
registrations of copyrights and applications for copyright registrations that
such Assignor now owns or uses. Except as set forth on Annex X to the Credit
Agreement, each Assignor further warrants that it has no knowledge of any third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any patent or any copyright or such
Assignor has misappropriated any trade secret or proprietary information, except
those claims which in the aggregate could not be reasonably expected to have a
Material Adverse Effect. Each Assignor represents and warrants that upon the
recordation of a Grant of Security Interest in United States Trademarks and
Patents in the form of Annex G hereto in the United States Patent and Trademark
Office and the recordation of a Grant of Security Interest in United States
Copyrights in the form of Annex H hereto in the United States Copyright Office,
together with filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate to perfect the security
interest granted to the Collateral Agent in the United States Patents and United
States Copyrights covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute such a Grant of Security Interest
in United States Trademarks and Patents covering all right, title and interest
in each United States Patent of such Assignor and to record the same, and to
execute such a Grant of Security Interest in United States Copyrights covering
all right, title and interest in each United States Copyright of such Assignor
and to record the same. Each Assignor hereby grants to the Collateral Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of any Event of Default, any document which may be required by the
United States Patent and Trademark Office (or the equivalent thereof in any
foreign
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jurisdiction) or the United States Copyright Office (or the equivalent thereof
in any foreign jurisdiction) in order to effect an absolute assignment of all
right, title and interest in each Patent and Copyright, and to record the same.
5.2. Licenses and Assignments. Except as otherwise permitted by the
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any right under any Patent or Copyright absent prior written approval
of the Collateral Agent.
5.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe any of such
Assignor's rights in and to in any Patent or Copyright or to any claim that such
Assignor's practice of any Patent or use of any Copyright violates any property
right of a third party, or with respect to any misappropriation of any Trade
Secret Right or any claim that such Assignor's practice of any Trade Secret
Right violates any property right of a third party. Each Assignor further
agrees, absent direction of the Collateral Agent to the contrary, diligently to
prosecute any Person infringing any Patent or Copyright or any Person
misappropriating any Trade Secret Right in accordance with commercially
reasonable business practices.
5.4. Maintenance of Patents. At its own expense, each Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S)
41 (or the equivalent thereof in any foreign jurisdiction) to maintain in force
rights under each Patent, absent prior written consent of the Collateral Agent;
provided, that, to the extent permitted by the Credit Agreement, no Assignor
shall be obligated to maintain any Patent in the event such Assignor determines,
in its reasonable business judgment, that the maintenance of such Patent is no
longer necessary or desirable in the conduct of its business.
5.5. Prosecution of Patent Application. At its own expense, each
Assignor shall diligently prosecute all applications for Patents listed in Annex
E hereto for such Assignor and shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies, absent written consent
of the Collateral Agent; provided, that, to the extent permitted by the Credit
Agreement, no Assignor shall be obligated to prosecute any application in the
event such Assignor determines, in its reasonable business judgment, that the
prosecuting of such application is no longer necessary or desirable in the
conduct of its business.
5.6. Other Patents and Copyrights. Within 30 days of the acquisition
or issuance of a Patent, registration of a Copyright, or acquisition of a
registered Copyright, or of filing of an application for a Patent or
registration of Copyright, the relevant Assignor shall deliver to the Collateral
Agent a copy of said Copyright or certificate or registration of, or application
therefor, said Patents, as the case may be, with an assignment for security as
to such Patent or Copyright, as the case may be, to the Collateral Agent and at
the expense of such Assignor, confirming the assignment for security, the form
of such
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assignment for security to be substantially the same as the form hereof or in
such other form as may be reasonably satisfactory to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof to
execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct such Assignor to refrain, in which
event such Assignor shall refrain, from practicing the Patents and using the
Copyrights directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to confirm
this and to transfer ownership of the Patents and Copyrights to the Collateral
Agent for the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor will
do nothing to impair the rights of the Collateral Agent in the Collateral except
to the extent such impairment shall be waived in accordance with the terms of
Section 10.2 hereof. Each Assignor will at all times keep its Inventory and
Equipment insured in favor of the Collateral Agent, at such Assignor's own
expense to the extent and in the manner provided in the Credit Agreement; all
policies or certificates with respect to such insurance (and any other insurance
maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's
reasonable satisfaction for the benefit of the Collateral Agent (including,
without limitation, by naming the Collateral Agent as additional insured and
loss payee) and (ii) shall state that such insurance policies shall not be
cancelled or revised without 30 days' prior written notice thereof by the
insurer to the Collateral Agent; and certified copies of such policies or
certificates shall be deposited with the Collateral Agent. If any Assignor shall
fail to insure its Inventory and Equipment in accordance with the preceding
sentence, or if any Assignor shall fail to so endorse and deposit all policies
or certificates with respect thereto, the Collateral Agent shall have the right
(but shall be under no obligation) to procure such insurance and such Assignor
agrees to promptly reimburse the Collateral Agent for all costs and expenses of
procuring such insurance. Except as otherwise permitted to be retained by the
relevant Assignor pursuant to the Credit Agreement, the Collateral Agent shall,
at the time such proceeds of such insurance are distributed to the Secured
Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each
Assignor assumes all liability and responsibility in connection with the
Collateral acquired by it and the liability of such Assignor to pay the
Obligations shall in no way be affected or diminished by reason of the
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fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law) or, if any warehouse receipt or any receipt in the
nature of a warehouse receipt is "negotiable" (as such term is used in Section
7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law) then the respective Assignor shall promptly take
all action as may be required under the relevant jurisdiction to grant a
perfected security interest in such Collateral to the Collateral Agent for the
benefit of the Secured Creditors.
6.3. Further Actions. (a) Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
(b) Each Assignor hereby agrees that it will from time to time, at its
own expense and at the request of the Collateral Agent or the Required Banks,
take all actions (including making all appropriate filings) as may be necessary
or in the reasonable opinion of the Collateral Agent desirable to perfect (and
maintain the perfection of) any security interest in any material foreign Mark,
Patent and/or Copyright, and in connection therewith shall deliver one or more
opinions of foreign counsel confirming the validity and perfection of such
foreign Marks, Patents and/or Copyrights.
6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time reasonably request or as are necessary or desirable in the opinion of the
Collateral Agent to establish and maintain a valid, enforceable, first priority
perfected security interest in the Collateral as provided herein and the other
rights and security contemplated hereby all in accordance with the Uniform
Commercial Code as enacted in any and all relevant jurisdictions or any other
relevant law. Each Assignor will pay any applicable filing fees, recordation
taxes and related expenses relating to its Collateral. Each Assignor hereby
authorizes the Collateral Agent to file any such financing statements without
the signature of such Assignor where permitted by law.
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ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent;
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the Collateral
or any part thereof in accordance with Section 7.2 hereof, or direct the
relevant Assignor to sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof, and, in each case, take possession of the
proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral Agent,
in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or places
so designated by the Collateral Agent and there delivered to the
Collateral Agent;
(y) store and keep any Collateral so delivered to the Collateral
Agent at such place or places pending further action by the Collateral
Agent as provided in Section 7.2 hereof; and
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(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect
the same and to preserve and maintain them in good condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent
shall in its sole judgment determine (taking into account such provisions
as may be necessary to protect and preserve such Marks, Patents or
Copyrights);
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Agent or the Collateral Agent, in each case acting upon the instructions
of the Required Banks (or, after the date on which all Credit Document
Obligations have been paid in full, the holders of at least the majority of the
outstanding Other Obligations) and that no other Secured Creditor shall have any
right individually to seek to enforce or to enforce this Agreement or to realize
upon the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Agent or the Collateral Agent or the
holders of at least a majority of the outstanding Interest Rate Obligations, as
the case maybe, for the benefit of the Secured Creditors upon the terms of this
Agreement.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option,
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be subject to reserve), after publication of notice of such auction not less
than 10 days prior thereto in two newspapers in general circulation in the City
of New York. To the extent permitted by any such requirement of law, the
Collateral Agent may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this Section without
accountability to the relevant Assignor. If, under mandatory requirements of
applicable law, the Collateral Agent shall be required to make disposition of
the Collateral within a period of time which does not permit the giving of
notice to the relevant Assignor as hereinabove specified, the Collateral Agent
need give such Assignor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of applicable law.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and each Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
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7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or the
Additional Security Documents require proceeds of collateral under such Security
Documents to be applied in accordance with the provisions of this Agreement, the
Pledgee or Mortgagee under such other Security Document) upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in Section
7.4(c) hereof with each Secured Creditor receiving an amount equal to its
outstanding Obligations or, if the proceeds are insufficient to pay in full
all such Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 10.8 hereof, to the
relevant Assignor or, to the extent directed by such Assignor or a court of
competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or amount, that
amount (expressed as a percentage) equal to a fraction the numerator of which is
the then unpaid amount of such Secured Creditor's Obligations and the
denominator of which is the then outstanding amount of all Obligations.
(c) All payments required to be made to the Bank Creditors hereunder
shall be made to the Agent under the Credit Agreement for the account of the
Bank Creditors and all payments required to be made to the Other Creditors
hereunder shall be made directly to the respective Other Creditor.
(d) For purposes of applying payments received in accordance with this
Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Agent
under the Credit Agreement and (ii) the Other Creditors for a determination
(which the Agent, each Other Creditor and the Secured Creditors agree (or shall
agree) to provide upon request of the Collateral Agent) of the outstanding
Obligations owed to the Bank Creditors or the Other Creditors, as the case may
be. Unless it has actual knowledge (including by way of written notice from a
Bank Creditor or an Other Creditor) to the contrary, the Agent under the Credit
Agreement, in furnishing information pursuant to the preceding sentence, and the
Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no
Credit Document Obligations other than principal, interest and regularly
accruing fees are owing
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to any Bank Creditor and (y) no Interest Rate Protection Agreement or Other
Hedging Agreement, or Other Obligations in respect thereof, are in existence.
(e) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the sums referred to in
clause (a) of this Section 7.4 with respect to the relevant Assignor.
7.5. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements, the other
Credit Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
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ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any Interest Rate Protection
Agreement or Other Hedging Agreement, any other Credit Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), the violation of the laws of any
country, state or other governmental body or unit, any tort (including, without
limitation, claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage), or contract claim; provided that no Indemnitee
shall be indemnified pursuant to this Section 8.1(a) for losses, damages or
liabilities to the extent caused by the gross negligence or willful misconduct
of such Indemnitee. Each Assignor agrees that upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, suit or judgment, the relevant Assignor shall
assume full responsibility for the defense thereof. Each Indemnitee agrees to
use its best efforts to promptly notify the relevant Assignor of any such
assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
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<PAGE>
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Credit Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and the payment of all other
Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the recitals to this
Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Banks" shall have the meaning provided in the recitals to this
Agreement.
"Borrower" shall have the meaning provided in the recitals to this
Agreement.
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<PAGE>
"Cash Collateral Account" shall mean a cash collateral account
maintained with, and in the sole dominion and control of, the Collateral Agent
for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreements or Other Hedging Agreements).
"Copyrights" shall mean any United States or foreign copyright owned
by any Assignor, including any registrations of any Copyrights, in the United
States Copyright Office or the equivalent thereof in any foreign country, as
well as any application for a United States or foreign copyright registration
now or hereafter made with the United States Copyright Office or the equivalent
thereof in any foreign country by any Assignor, other than those countries
outside the United States where the grant of a security interest would
invalidate such Copyrights.
"Credit Agreement" shall have the meaning provided in the recitals to
this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be
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<PAGE>
limited to, all machinery, equipment, furnishings, movable trade fixtures and
vehicles now or hereafter owned by any Assignor and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreements or Other Hedging Agreements"
shall have the meaning provided in the recitals to this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through work-
in-process to finished goods -- and all products and proceeds of whatever sort
and wherever located and any portion thereof which may be returned, rejected,
reclaimed or repossessed by the Collateral Agent from any Assignor's customers,
and shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any United
States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration of any trademarks
and service marks in the United States Patent and Trademark Office, or the
equivalent thereof in any foreign country, other than those countries outside
the United States, where the grant of a security interest would
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<PAGE>
invalidate such trademarks, service marks and trade names, and any trade dress
including logos and/or designs used by any Assignor in the United States or any
foreign country.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document to which such Assignor is a party and the
due performance and compliance by each Assignor with the terms of each such
Credit Document (all such obligations and liabilities under this clause (i),
except to the extent consisting of obligations or indebtedness with respect to
Interest Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations"); (ii) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of each Assignor now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging
Agreement including, in the case of the Assignors other than the Borrower, all
obligations of such Assignor under the Subsidiary Guaranty in respect of
Interest Rate Protection Agreements or Other Hedging Agreements (all such
obligations and liabilities under this clause (ii) being herein collectively
called the "Other Obligations"); (iii) any and all sums advanced by the
Collateral Agent in order to preserve the Collateral or preserve its security
interest in the Collateral; (iv) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or liabilities of
each Assignor referred to in clauses (i) and (ii), after an Event of Default
shall have occurred and be continuing, the reasonable expenses of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Collateral Agent of its
rights hereunder, together with reasonable attorneys' fees and court costs; and
(v) all amounts paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement under Section 8.1 of this Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which any
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a United States or foreign patent now or
hereafter made by any Assignor, except those patents or patent applications in
those countries outside the United States where the granting of a security
interest in such patents is not permissible under the laws of that country.
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<PAGE>
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, (d) all powers of attorney
for the execution of any evidence of indebtedness or security or other writing
in connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Requisite Creditors" shall have the meaning provided in Section 10.2
of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8 of
this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
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<PAGE>
ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218;
(c) if to any Bank Creditor (other than the Collateral Agent), at
such address as such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby and the
Collateral Agent (with the consent of (x) either the Required Banks (or, to the
extent required by Section 12.12 of the Credit Agreement, all of the Banks) at
all times prior to the time on which all Credit Document Obligations have been
paid in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full); provided, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors of such Class of Secured
Creditors. For the purpose of this Agreement the term "Class" shall mean each
class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of
the Credit Document Obligations or (y) the Other
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<PAGE>
Creditors as the holders of the Other Obligations. For the purpose of this
Agreement, the term "Requisite Creditors" of any Class shall mean each of (x)
with respect to the Credit Document Obligations, the Required Banks and (y) with
respect to the Other Obligations, the holders of at least a majority of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any
amendment to or modification of any Credit Document or any Interest Rate
Protection Agreement or Other Hedging Agreement or any security for any of the
Obligations; whether or not any Assignor shall have notice or knowledge of any
of the foregoing.
10.4. Successors and Assigns. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and its successors and assigns; provided, that no Assignor
may transfer or assign any or all of its rights or obligations hereunder without
the prior written consent of the Collateral Agent. All agreements, statements,
representations and warranties made by each Assignor herein or in any
certificate or other instrument delivered by such Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of this Agreement, the
other Credit Documents and the Interest Rate Protection Agreements or Other
Hedging Agreements regardless of any investigation made by the Secured Creditors
or on their behalf.
10.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
10.7. Assignor's Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of each Assignor under or with
respect to any Collateral.
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<PAGE>
10.8. Termination; Release. (a) After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Revolving Loan Commitment and all Interest Rate Protection Agreements or Other
Hedging Agreements have been terminated, no Note or Letter of Credit is
outstanding (other than Letters of Credit, together with all Fees that have
accrued and will accrue thereon through the stated termination date of such
Letters of Credit, which have been supported in a manner satisfactory to the
Letter of Credit Issuer in its sole and absolute discretion) and all other
Obligations (other than any indemnities described in Section 8.1 hereof and in
Section 12.13 of the Credit Agreement which are not then due and payable) have
been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement), the Collateral Agent, at the request and expense of such Assignor,
will duly release from the security interest created hereby and assign, transfer
and deliver to such Assignor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in the possession of the Collateral Agent and has not
theretofore been released pursuant to this Agreement.
(c) At any time that the respective Assignor desires that Collateral
be released as provided in the foregoing Section 10.8(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by an Authorized Officer of
such Assignor stating that the release of the respective Collateral is permitted
pursuant to Section 10.8(a) or (b) hereof.
10.9. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Collateral Agent.
10.10. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and
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<PAGE>
as provided in the Uniform Commercial Code in the State of New York. The
Collateral Agent shall act hereunder on the terms and conditions set forth in
Section 11 of the Credit Agreement.
10.11. Additional Assignors. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.13 and/or 8.14 of the
Credit Agreement shall automatically become an Assignor hereunder by executing a
counterpart hereof and delivering the same to the Collateral Agent.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
first above written.
Address: THERMA-WAVE, INC.,
1250 Reliance Way as an Assignor
Fremont, California 94539
Telephone: (510) 490-3663
Facsimile: (510) 490-0843 By
------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Assignee, Collateral Agent
By
------------------------
Name:
Title:
<PAGE>
ANNEX A
to
SECURITY
AGREEMENT
------------
SCHEDULE OF CHIEF EXECUTIVE OFFICES
-----------------------------------
AND OTHER RECORD LOCATIONS
--------------------------
<PAGE>
ANNEX B
to
SECURITY
AGREEMENT
---------
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
---------------------------------------------
<PAGE>
ANNEX C
to
SECURITY
AGREEMENT
---------
TRADE AND FICTITIOUS NAMES
--------------------------
<PAGE>
ANNEX D
to
SECURITY
AGREEMENT
---------
LIST OF MARKS
-------------
<PAGE>
ANNEX E
to
SECURITY
AGREEMENT
---------
LIST OF PATENTS AND APPLICATIONS
--------------------------------
<PAGE>
ANNEX F
to
SECURITY
AGREEMENT
---------
LIST OF COPYRIGHTS AND APPLICATIONS
-----------------------------------
<PAGE>
ANNEX G
-------
GRANT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
---------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which
are hereby acknowledged, [Name of Grantor], a _______________ corporation ("the
Grantor") with principal offices at_______________________________, hereby
grants to Bankers Trust Company, as Collateral Agent, with principal offices at
One Bankers Trust Plaza, New York, New York 10006 (the "Grantee"), a security
interest in (i) all of the Grantor's right, title and interest in and to the
United States trademarks, trademark registrations and trademark applications
(the "Marks") set forth on Schedule A attached hereto, (ii) all of the Grantor's
rights, title and interest in and to the United States patents (the "Patents")
set forth on Schedule B attached hereto, in each case together with (iii) all
Proceeds (as such term is defined in the Security Agreement referred to below)
and products of the Marks and Patents, (iv) the goodwill of the businesses with
which the Marks are associated and (v) all causes of action arising prior to or
after the date hereof for infringement of any of the Marks and Patents or unfair
competition regarding the same.
THIS AGREEMENT is made to secure the satisfactory performance and
payment of all the Obligations of the Grantor, as such term is defined in the
Security Agreement among Grantor, the other assignors from time to time party
thereto and the Grantee, dated as of May 16, 1997 (as amended from time to time,
the "Security Agreement"). Upon the occurrence of the Termination Date (as
defined in the Security
<PAGE>
ANNEX G
Page 2
Agreement), the Grantee shall, upon such satisfaction, execute, acknowledge, and
deliver to the Grantor an instrument in writing releasing the security interest
in the Marks and Patents acquired under this Agreement.
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the ___ day of ____________.
[NAME OF GRANTOR],
as Grantor
By_____________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Collateral Agent and Grantee
By_____________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of _______, _____, before me personally came
_________________ who, being by me duly sworn, did state as follows: that [s]he
is _______________ of [Name of Grantor], that [s]he is authorized to execute the
foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
_________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of ______, _____, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company, that [s]he is authorized
to execute the foregoing Agreement on behalf of said corporation and that [s]he
did so by authority of the Board of Directors of said corporation.
____________________________
Notary Public
<PAGE>
SCHEDULE A
----------
MARK REG. NO. REG. DATE
- ---- -------- ---------
<PAGE>
SCHEDULE B
----------
PATENT PATENT NO. ISSUE DATE
- ------ ---------- ----------
<PAGE>
ANNEX H
-------
GRANT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Grantor], a _______________ corporation (the
"Grantor"), having its chief executive office at
_____________________________________________, ____________________________, is
the owner of all right, title and interest in and to the United States
copyrights and associated United States copyright registrations and applications
for registration set forth in Schedule A attached hereto;
WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its
principal offices at One Bankers Trust Plaza, New York, New York 10006 (the
"Grantee"), desires to acquire a security interest in said copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Grantor is willing to grant to the Grantee a security
interest in the copyrights and copyright registrations and applications therefor
described above;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and subject to the terms and conditions of the
Security Agreement, dated as of May 16, 1997, made by the Grantor, the other
assignors from time to time party thereto and the Grantee (as amended from time
to time, the "Security Agreement"), the Grantor hereby grants to the Grantee a
security interest in the copyrights and copyright registrations and applications
therefor set forth in Schedule A attached hereto.
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
<PAGE>
Executed at New York, New York, the ___ day of _____ _____.
[NAME OF GRANTOR],
as Grantor
By__________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Collateral Agent and Grantee
By__________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of _____ ______, before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Grantor], that [s]he is authorized to execute
the foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
_________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of ______, _______, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company, that [s]he is authorized
to execute the foregoing Agreement on behalf of said corporation and that [s]he
did so by authority of the Board of Directors of said corporation.
____________________________
Notary Public
-2-
<PAGE>
SCHEDULE A
----------
U.S. COPYRIGHTS
---------------
REGISTRATION PUBLICATION
NUMBERS DATE COPYRIGHT TITLE
- ------------ ----------- ---------------
<PAGE>
<PAGE>
Exhibit 10.20
EXHIBIT A
---------
THERMA-WAVE, INC.
-----------------
1997 STOCK PURCHASE AND OPTION PLAN
-----------------------------------
1. Purpose of Plan. This 1997 Stock Purchase and Option Plan (the
---------------
"Plan") of Therma-Wave, Inc. (the "Company") is designed to provide incentives
---- -------
to such present and future employees, directors, consultants or advisers of the
Company or its subsidiaries ("Participants"), as may be selected in the sole
------------
discretion of the Company's board of directors, through the grant of Options by
the Company to Participants or through the sale of Common Stock to Participants.
Only those Participants who are employees of the Company and its Subsidiaries
shall be eligible to receive incentive stock options.
2. Definitions. Certain terms used in this Plan have the meanings
-----------
set forth below:
"Board" means the Company's board of directors.
-----
"Code" means the Internal Revenue Code of 1986, as it may be amended
----
from time to time.
"Class A Common" means the Company's Class A Common Stock, par value
--------------
$.01 per share.
"Class B Common" means the Company's Class B Common Stock, par value
--------------
$.01 per share.
"Class L Common" means the Company's Class L Common Stock, par value
--------------
$.01 per share.
"Common Stock" means the Class A Common, the Class B Common and the
------------
Class L Common.
"Fair Market Value" of a share of Common Stock means the market value
-----------------
as determined in good faith by the Board; provided that this definition shall
not apply to any other agreement under which Common Stock is issued or under any
Option grant if "Fair Market Value" is otherwise defined in such agreement or
Option grant.
"Option" means any option enabling the holder thereof to purchase any
------
class of Common Stock from the Company granted by the Board pursuant to the
provisions of this Plan. Options to be granted under this Plan may be incentive
stock options within the meaning of Section 422 of the Code ("Incentive Stock
Options") or in such other form, consistent with this Plan, as the Board may
determine.
<PAGE>
"Option Shares" means any shares of Common Stock issued hereunder upon
-------------
exercise of Options.
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
3. Grant of Options. The Board shall have the right and power to
----------------
grant to any Participant Options at any time prior to the termination of this
Plan in such quantity, at such price, on such terms and subject to such
conditions that are consistent with this Plan and established by the Board.
Options granted under this Plan shall be subject to such terms and conditions
and evidenced by agreements as shall be determined from time to time by the
Board.
4. Sale of Common Stock. The Board shall have the power and
--------------------
authority to sell to any Participant any class or classes of Common Stock at any
time prior to the termination of this Plan in such quantity, at such price, on
such terms and subject to such conditions that are consistent with this Plan and
established by the Board. Common Stock sold under this Plan shall be subject to
such terms and evidenced by agreements as shall be determined from time to time
by the Board.
5. Administration of the Plan. The Board shall have the power and
--------------------------
authority to prescribe, amend and rescind rules and procedures governing the
administration of this Plan, including, but not limited to the full power and
authority (i) to interpret the terms of this Plan, the terms of any Options
granted under this Plan, and the rules and procedures established by the Board
governing any such Options and (ii) to determine the rights of any person under
this Plan, or the meaning of requirements imposed by the terms of this Plan or
any rule or procedure established by the Board. Each action of the Board which
shall be binding on all persons.
6. Limitation on the Aggregate Number of Shares. The number of
--------------------------------------------
shares of Common Stock issued under this Plan (including the number of shares of
Common Stock with respect to which Options may be granted under this Plan (and
which may be issued upon the exercise or payment thereof)) shall not exceed, in
the aggregate, 3,000,000 shares of Class A Common and 3,000,000 shares of Class
B Common (as such numbers are equitably adjusted pursuant to paragraph 11
hereof). If any Options expire unexercised or unpaid or are canceled, terminated
or forfeited in any manner without the issuance of Common Stock or payment
thereunder, the shares with respect to which such Options were granted shall
again be available under this Plan. Similarly, if any shares of Common Stock
issued hereunder upon exercise of Options are repurchased hereunder, such shares
shall again be available under this Plan for reissuance as Options. Shares of
Common Stock to be issued upon exercise of the Options or shares of Common Stock
to be sold directly hereunder may be either authorized and unissued shares,
treasury shares, or a combination thereof, as the Board shall determine.
7. Incentive Stock Options. All Incentive Stock Options (i) shall
-----------------------
have an exercise price per share of Common Stock of not less than 100% of the
Fair Market Value of such share on the date of grant, (ii) shall not be
exercisable more than ten years after the date of grant, (iii)
-2-
<PAGE>
shall not be transferable other than by will or under the laws of descent and
distribution and, during the lifetime of the Participant to whom such Incentive
Stock Options were granted, may be exercised only by such Participant (or his
guardian or legal representative), and (iv) shall be exercisable only during the
Participant's employment by the Company or a Subsidiary, provided, that the
Board may, in its discretion, provide at the time that an Incentive Stock Option
is granted that such Incentive Stock Option may be exercised for a period ending
no later than either (x) the termination of this Plan in the event of the
Participant's death while an employee of the Company or a Subsidiary, or (y) the
date which is three months after termination of the Participant's employment for
any other reason. The Board's discretion to extend the period during which an
Incentive Stock Option is exercisable shall only apply if and to the extent that
(i) the Participant was entitled to exercise such Option on the date of
termination, and (ii) such Option would not have expired had the Participant
continued to be employed by the Company or a Subsidiary. To the extent that the
aggregate Fair Market Value of stock with respect to which Incentive Stock
Options are exercisable for the first time by any individual during any calendar
year exceeds $100,000, such Options shall be treated as Options which are not
Incentive Stock Options.
8. Listing, Registration and Compliance with laws and Regulations.
--------------------------------------------------------------
Each Option shall be subject to the requirement that if at any time the Board
shall determine, in its discretion, that the listing, registration or
qualification of the shares subject to the Option upon any securities exchange
or under any state or federal securities or other law or regulation, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to or in connection with the granting of such Option or
the issue or purchase of shares thereunder, no such Option may be exercised or
paid in Common Stock in whole or in part unless such listing, registration,
qualification, consent or approval (a "Required Listing") shall have been
----------------
effected or obtained, and the holder of the Option will supply the Company with
such certificates, representations and information as the Company shall request
which are reasonably necessary or desirable in order for the Company to obtain
such Required Listing, and shall otherwise cooperate with the Company in
obtaining such Required Listing. In the case of officers and other persons
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the
Board may at any time impose any limitations upon the exercise of an Option
which, in the Board's discretion, are necessary or desirable in order to comply
with Section 16(b) and the rules and regulations thereunder. If the Company, as
part of an offering of securities or otherwise, finds it desirable because of
federal or state regulatory requirements to reduce the period during which any
Options may be exercised, the Board may, in its discretion and without the
consent of the holders of any such Options, so reduce such period on not less
than 15 days' written notice to the holders thereof.
9. Cash Payments Upon Exercise. Options which are not Incentive
---------------------------
Stock Options may, in the Board's discretion, provide that the holder thereof,
as soon as practicable after the exercise of the Options will receive, in lieu
of any issuance of Common Stock, a cash payment in such amount as the Board may
determine, but not more than the excess of the Fair Market Value of a share of
Common Stock (on the date the holder recognizes taxable income) over the
Option's exercise price multiplied by the number of shares as to which the
Option is exercised.
-3-
<PAGE>
10. Organic Change. Except as otherwise provided in this Plan, any
--------------
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets or other transaction which
is effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
"Organic Change." Except as otherwise provided in this Plan, after the
--------------
consummation of any Organic Change, each Participant holding Options shall
thereafter have the right to acquire and receive upon exercise thereof, rather
than the Option Shares immediately theretofore acquirable and receivable upon
exercise of such Participant's Options, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of Option Shares immediately theretofore acquirable and receivable upon exercise
of such Participant's Options had such Organic Change not taken place. Except
as otherwise provided in this Plan, in any such case, the Company shall make
appropriate provision with respect to such Participant's rights and interests to
insure that the provisions hereof (including this Section 10) shall thereafter
be applicable to the Options (including, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the value for the Common Stock
reflected by the terms of such Organic Change and a corresponding immediate
adjustment in the number of Option Shares acquirable and receivable upon
exercise of the Options, if the value so reflected is less than the Fair Market
Value of the Common Stock in effect immediately prior to such Organic Change).
11. Adjustment for Change in Common Stock. In the event of a
-------------------------------------
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation or other change in the Common Stock, the Board
shall make appropriate changes in the number and type of shares authorized by
this Plan, the number and type of shares covered by outstanding Options and the
prices specified therein.
12. Taxes. The Company shall be entitled, if necessary or
-----
desirable, to withhold (or secure payment from the Plan participant in lieu of
withholding) the amount of any withholding or other tax due from the Company
with respect to any amount payable and/or shares issuable under this Plan, and
the Company may defer such payment or issuance unless indemnified to its
satisfaction.
13. Termination of Options. Unless otherwise expressly provided in
----------------------
any grant of Options pursuant to this Plan, upon a Sale of the Company (as
defined below) or upon termination of the Participant's employment for any
reason, the Board may (i) terminate such Participant's Options without payment
of any kind; (ii) terminate such Participant's Options for a cash payment in
such amount as the Board may determine, but not more than the excess of the Fair
Market Value of a share of Common Stock (on the date of such Sale of the Company
or such termination) over the Option's exercise price multiplied by the number
of Options to be terminated; or (iii) immediately vest any unvested Options held
by such Participant, causing such Options to become immediately exercisable.
Notwithstanding anything to the contrary contained in this paragraph, paragraph
14 shall not apply to Incentive Stock Options.
-4-
<PAGE>
For purposes of this paragraph, "Sale of the Company" means any
-------------------
transaction involving the Company and a third party or affiliated group of third
parties pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's Board (whether by merger, consolidation or sale or
transfer of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
For purposes of this paragraph, "Person" means an individual, a
------
partnership, a joint venture, a corporation, a limited liability company, a
trust, an unincorporated organization and a government or any department or
agency thereof.
14. Termination and Amendment. The Board at any time may suspend or
-------------------------
terminate this Plan and make such additions or amendments as it deems advisable
under this Plan, except that they may not, without further approval by the
Company's stockholders, (a) increase the maximum number of shares as to which
Options may be granted under this Plan, except pursuant to paragraph 11 above or
(b) extend the term of this Plan; provided that, subject to paragraph 8 hereof,
the Board may not change any of the terms of a written agreement with respect to
an Option between the Company and the holder of such Option without the approval
of the holder of such Option. No Options shall be granted or shares of Common
Stock issued hereunder after May 16, 2007; provided that, if the term of this
Plan is otherwise extended, no Incentive Stock Options shall be granted
hereunder after May 16, 2007.
* * * * *
-5-
<PAGE>
Exhibit 10.21
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT (this "Agreement") dated as of May __,
1997 is made by and among Therma-Wave, Inc., a Delaware corporation (the
"Company"), the Persons listed on Schedule A attached hereto or certain
designees thereof that execute a counterpart to this Agreement (the "Bain
Group"), the Persons listed on Schedule B attached hereto (the "Sutter Group"),
the Persons listed on Schedule C attached hereto (the "Existing Stockholders"),
the Persons listed on Schedule D attached hereto or other employees of the
Company that execute a counterpart to this Agreement (the "Management
Stockholders") and Antares International Partners, Inc. ("Antares"). The Bain
Group, the Sutter Group, the Existing Stockholders, the Management Stockholders
and Antares are collectively referred to herein as the "Stockholders," and each
as a "Stockholder". Unless otherwise provided in this Agreement, capitalized
terms used herein shall have the meanings set forth in paragraph 9 hereof.
The parties to this Agreement hereby agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time the holders of a majority
of the Bain Registrable Securities may request registration under the Securities
Act of all or part of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations") or, if available, on Form S-2
or S-3 or any similar short-form Registration ("Short-Form Registrations"). In
addition, (i) at any time after the underwritten initial public offering of the
Company's Common Stock (the "IPO"), the holders of a majority of the Existing
Stockholder Registrable Securities may request a Long-Form Registration or, if
available, a Short-Form Registration and (ii) at any time after the later of (A)
the fifth anniversary of the date hereof and (B) 180 days after the IPO, the
holders of a majority of the Management Registrable Securities may request a
Long-Form Registration or, if available, a Short-Form Registration (a
"Management Demand Registration"). Each request for a Demand Registration shall
specify the approximate number of Registrable Securities requested to be
registered and the anticipated per share price range for such offering. Within
ten days after receipt of any such request, the Company will give written notice
of such requested registration to all other holders of Registrable Securities
and, subject to paragraph 1(d) below, will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the Company's
notice. All registrations requested pursuant to this paragraph 1(a) are
referred to herein as "Demand Registrations."
(b) Long-Form Registrations. The holders of a majority of the Bain
Registrable Securities will be entitled to request three (3) Long-Form
Registrations in which the Company will pay all Registration Expenses, the
holders of a majority of the Existing Stockholder Registrable Securities will be
entitled to request one (1) Long-Form Registration or Short-Form Registration in
which the Company will pay all Registration Expenses, and the holders of a
majority of the Management Registrable Securities will be entitled to request
one (1) Long-Form Registration or Short-Form Registration in which the Company
will pay all Registration Expenses. A registration
<PAGE>
will not count as one of the permitted Long-Form Registrations until it has
become effective, and the last Long-Form Registration (or Short-Form
Registration) will not count as one of the Long-Form Registrations (or Short-
Form Registrations) permitted to be requested by the holders of Bain Registrable
Securities, Existing Stockholder Registrable Securities or Management
Registrable Securities (as the case may be) unless the holders of Registrable
Securities initially requesting such registration have been able to register and
sell at least 90% of the Registrable Securities initially requested to be
registered by such holders; provided that in any event the Company will pay all
Registration Expenses in connection with any registration initiated as a Long-
Form Registration whether or not it has become effective. All Long-Form
Registrations may be underwritten regis trations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
the Bain Registrable Securities will be entitled to request six (6) Short-Form
Registrations in which the Company will pay all Registration Expenses. Demand
Registrations will be Short-Form Registrations whenever the Company is permitted
to use any applicable short form. After the Company has become subject to the
reporting requirements of the Securities Exchange Act, the Company will use its
best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) Priority on Demand Registrations. The Company will not include in
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the Bain
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering, the Company will include in such registration (i) first, the
Registrable Securities requested to be included in such Demand Registration, pro
rata among the holders thereof on the basis of the number of shares Registrable
Securities owned by each such holder, and (ii) second, other securities
requested to be included in such Demand Registration, pro rata among the holders
of such securities; provided that if the Demand Registration is a Management
Demand Registration, the Company will include in such registration (A) first,
the Aggregate Permitted Amount of Management Registrable Securities requested to
be included in such Demand Registration by the holders of Management Registrable
Securities (or if less, the amount of Management Registrable Securities actually
requested to be included in such Demand Registration by the holders of
Management Registrable Securities (the "Requested Amount")), pro rata among the
holders thereof on the basis of each such holder's Permitted Amount of
Management Registrable Securities (and, with respect to each such holder, in an
amount not to exceed such holder's Permitted Amount of Management Registrable
Securities), (B) second, the amount of Registrable Securities (other than
Management Registrable Securities) requested to be included in such Demand
Registration equal to the total amount of Registrable Securities (other than
Management Registrable Securities) multiplied by a fraction, the numerator of
which equals the Aggregate Permitted Amount of Management Registrable Securities
(or, if less, the Requested Amount) and the denominator of which equals the
aggregate amount of Management Registrable Securities, pro rata among the
holders thereof on the basis of the number of shares of Registrable Securities
(other than
-2-
<PAGE>
Management Registrable Securities) owned by each such holder, (C) third, the
remaining Registrable Securities requested to be included in such Demand
Registration, pro rata among the holders thereof on the basis of the number of
shares Registrable Securities owned by each such holder, and (D) fourth, other
securities requested to be included in such Demand Registration, pro rata among
the holders of such securities.
(e) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. The Company may postpone for
up to six months (from the date of the request) the filing or the effectiveness
of a registration statement for a Demand Registration if the Company believes
that such Demand Registration would reasonably be expected to have an adverse
effect on any proposal or plan by the Company or any of its Subsidiaries to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction;
provided, however, that in such event, the holders of Registrable Securities
initially requesting such Demand Registration will be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration will not
count as one of the permitted Demand Registrations hereunder and the Company
will pay all Registration Expenses in connection with such registration.
(f) Selection of Underwriters. The holders of a majority of the Bain
Registrable Securities included in any Demand Registration will have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval which will not be unreasonably withheld. If
no Bain Registrable Securities are included in a Demand Registration, the
Company will have the right to select the investment banker(s) and manager(s) to
administer the offering.
(g) Other Registration Rights. Except as provided in this Agreement,
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Bain Registrable Securities.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its equity securities under the Securities Act (other than (i) in connection
with the IPO, unless any holders of Registrable Securities are permitted to
participate in the IPO, (ii) pursuant to a Demand Registration or (iii) pursuant
to a registration on Form S-4 or S-8 or any successor or similar forms) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), whether or not for sale for its own
account, the Company will give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 15 days
after the receipt of the Company's notice.
-3-
<PAGE>
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of Registrable
Securities owned by each such holder, and (iii) third, other securities
requested to be included in such registration pro-rata among the holders of such
securities.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (other than the parties hereto) who have been granted contractual
demand registration rights, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without adversely affecting the marketability of the offering, the Company will
include in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, pro rata among the holders
of such securities on the basis of the number of shares owned by each such
holder, (ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders thereof on the basis of the number of
shares of Registrable Securities owned by each such holder, and (iii) third,
other securities requested to be included in such registration pro-rata among
the holders of such securities.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such securities,
until a period of at least six months has elapsed from the effective date of
such previous registration.
3. Holdback Agreements.
(a) To the extent not inconsistent with applicable law, each holder of
Registrable Securities agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Company, or
any securities, options or rights convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten public offering of
the Company's common stock (including Demand and Piggyback Registrations)
(except as part of such
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<PAGE>
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) The Company agrees not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten public
offering of the Company's common stock (including Demand and Piggyback
Registrations) (except as part of such underwritten registration or pursuant to
registrations on Form S-4 or S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Securities and Exchange Commission a registration statement with respect to such
Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Bain Registrable Securities covered by such registration statement and to
counsel selected by the holders of a majority of the Existing Stockholder
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to review of
such counsel);
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of either (i) not less than six months (subject
to extension pursuant to paragraph 7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such
-5-
<PAGE>
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
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<PAGE>
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) obtain a comfort letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request (provided that such Registrable Securities constitute at
least 10% of the securities covered by such registration statement); and
(m) provide a legal opinion of the Company's outside counsel, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne as provided in this Agreement, except
that the Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities
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<PAGE>
exchange on which similar securities issued by the Company are then listed or on
the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse (i) the holders of the Bain Registrable
Securities covered by such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the Bain
Registrable Securities included in such registration and (ii) the holders of
Existing Stockholder Registrable Securities covered by such registration for the
reasonable fees and disbursements of one counsel chosen by the holders of a
majority of the Existing Stockholder Registrable Securities included in such
registration, in the case of this clause (ii) in an amount not to exceed
$10,000.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the full
extent permitted by law, each holder of Registrable Securities, its officers,
directors, agents, and employees and each Person who controls such holder
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities, joint or several, together with reasonable costs and expenses
(including reasonable attorney's fees), to which such holder or any such
director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged untrue
statement of material fact contained (A) in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (B) in any application or other document or communication (in this
paragraph 6 collectively called an "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify any securities covered by
such registration statement under the "blue sky" or securities laws thereof, or
(ii) any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such holder and each such director, officer and
controlling Person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission, made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written information
prepared and furnished to the Company by such holder expressly for use therein
or by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished
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<PAGE>
such holder with a sufficient number of copies of the same. In connection with
an underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the full extent permitted by law, will indemnify and hold
harmless the other holders of Registrable Securities, the Company, its
directors, officers, agents and employees and each other Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities, joint or several, together with reasonable costs and
expenses (including reasonable attorney's fees), to which such holder, the
Company or any such director or officer or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or in
any application or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
made in such registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information prepared and furnished
to the Company by such holder expressly for use therein, and such holder will
reimburse the Company and each such director, officer and controlling Person for
any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the obligation to indemnify will be
individual to each holder and will be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnifying party shall not, except with the approval of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not
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<PAGE>
include as an unconditional term thereof the giving by the claimant or plaintiff
to each indemnified party of a release from all liability in respect to such
claim or litigation without any payment or consideration provided by such
indemnified party.
(e) If the indemnification provided for in this Paragraph 6 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect to any losses, claims, damages or liabilities
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect not
only the relative benefits received by the Company on the one hand and the
sellers of Registrable Securities and any other sellers participating in the
registration statement on the other from the sale of Registrable Securities
pursuant to the registered offering of securities as to which indemnity is
sought but also the relative fault of the indemnified party and the indemnifying
party as well as any other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other in connection with the
registration statement or in connection with the statement or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the sellers of Registrable Securities and any other sellers
participating in the registration statement on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) to the Company bear to the total net proceeds from the
offering (before deducting expenses) to the sellers of Registrable Securities
and any other sellers participating in the registration statement. The relative
fault of the Company on the one hand and of the sellers of Registrable
Securities and any other sellers participating in the registration statement on
the other shall be determined by reference to, among other things, whether the
untrue or alleged omission to state a material fact relates to information
supplied by the Company or by the sellers of Registrable Securities or other
sellers participating in the registration statement and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the sellers of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Paragraph 6
were determined by pro rata allocation (even if the sellers of Registrable
Securities were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Paragraph 6, no seller of Registrable Securities shall be
required to contribute any amount in excess of the net proceeds received by such
Seller from the sale of Registrable Securities covered by the registration
statement filed pursuant hereto. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
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<PAGE>
(f) The indemnification and contribution by any such party provided
for under this Agreement shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or contract and will remain in full force and effect regardless of any
investigation made or omitted by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and will
survive the transfer of securities.
7. Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, except that no
Existing Stockholder shall be required to indemnify any underwriter beyond its
indemnification and contribution obligations hereunder.
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such paragraph 4(e). In
the event the Company shall give any such notice, the applicable time period
mentioned in paragraph 4(b) during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this paragraph to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph 4(e).
8. Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to sell Registrable
Securities pursuant to Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.
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<PAGE>
9. Definitions.
"Aggregate Permitted Amount" means the sum of the Permitted Amounts
for each holder of Management Registrable Securities.
"Bain Registrable Securities" means (i) any shares of Common Stock
issued to the Bain Group pursuant to the Recapitalization Agreement or held by
the Bain Group as of the date hereof, (ii) any shares of Common Stock otherwise
acquired by the Bain Group, and (iii) any shares of Common Stock issued or
issuable directly or indirectly with respect to the securities referred to in
clauses (i) or (ii) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, including a recapitalization or exchange; provided,
however, that in the event that pursuant to such recapitalization or exchange
equity securities are issued which do not participate in the residual equity of
the Company ("Non-Participating Securities"), such Non-Participating Securities
will not be Registrable Securities.
"Class A Common" means the Class A Common Stock, par value $.01 per
share, of the Company.
"Class L Common" means the Class L Common Stock, par value $.01 per
share, of the Company.
"Common Stock" means the Class A Common and the Class L Common.
"Existing Stockholder Registrable Securities" means (i) any shares of
Common Stock issued to any Existing Stockholder pursuant to the Recapitalization
Agreement or held by an Existing Stockholder on the date hereof, (ii) any shares
of Common Stock issued or issuable upon conversion of the Preferred Stock, (iii)
any shares of Common Stock otherwise acquired by any Existing Stockholder and
(iv) any shares of Common Stock issued or issuable directly or indirectly with
respect to the securities referred to in clauses (i), (ii) or (iii) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, including a
recapitalization or exchange; provided, however, that in the event that pursuant
to such recapitalization or exchange Non-Participating Securities are issued,
such Non-Participating Securities will not be Registrable Securities.
"Fair Market Value" of each share of Common Stock means the average of
the closing prices of the sales of the Common Stock on all securities exchanges
on which Common Stock may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day Common
Stock is not so listed, the average of the representative bid and asked prices
quoted in the NASDAQ System as of 3:00 P.M., Chicago time, or, if on any day
Common Stock is not quoted in the NASDAQ System, the average of the highest and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case as of the effective date of the applicable
registration hereunder.
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"Management Registrable Securities" means (i) any shares of Common
Stock issued to any Management Stockholder pursuant to the Recapitalization
Agreement or held by any Management Stockholder as of the date hereof, (ii) any
shares of Common Stock issued or issuable upon the exercise of any stock options
issued to any Management Stockholder, (iii) any shares of Common Stock otherwise
acquired by any Management Stockholder and (iv) any shares of Common Stock
issued or issuable directly or indirectly with respect to the securities
referred to in clauses (i), (ii) or (iii) above by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, including a recapitalization or
exchange; provided, however, that in the event that pursuant to such
recapitalization or exchange Non-Participating Securities are issued, such Non-
Participating Securities will not be Registrable Securities.
"Permitted Amount" means, with respect to a holder of Management
Registrable Securities, an amount of Management Registrable Securities with a
Fair Market Value on the effective date of a Management Demand Registration (the
"Determination Date") which, when added to the proceeds of any prior sale,
transfer or other disposition of such holder's Management Registrable
Securities, equals the aggregate amount of all federal, state, and local taxes
required to be paid by such holder (or on such holder's behalf) as a direct
result of the payment to such holder of a Deferred Bonus (as defined in the
agreement with respect to such Deferred Bonus between the Company and such
holder) minus the Fair Market Value on the Determination Date of the amount of
Management Registrable Securities permitted to be sold by such holder under Rule
144 (or any similar provision then if effect) under the Securities Act within
the one-year period following the date on which the "Permitted Amount" is being
determined; provided that the "Permitted Amount" shall be increased by an amount
of Management Registrable Securities with a Fair Market Value on the
Determination Date equal to the amount of any underwriter's discounts or
commissions, if any, payable by such holder in connection with the sale of such
holder's Permitted Amount (without giving effect to this proviso) of Management
Registrable Securities.
"Person" means an individual, a partnership, a joint venture, an
association, a joint stock company, a corporation, a trust, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Preferred Stock" means the Company's Series A Convertible Preferred
Stock, par value $.01 per share.
"Recapitalization Agreement" means that certain Recapitalization
Agreement dated as of the date hereof, among the Company, the Bain Group and the
Existing Stockholders.
"Registrable Securities" means collectively Bain Registrable
Securities, Sutter Registrable Securities, Existing Stockholder Registrable
Securities and Management Registrable Securities. As to any particular shares
constituting Registrable Securities, such shares will cease to be Registrable
Securities when they have been (x) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
or (y) sold to the public through a broker, dealer or market maker pursuant to
Rule 144 (or by similar provision then in force) under the Securities Act.
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Sutter Registrable Securities" means (i) any shares of Common Stock
issued to the Sutter Group pursuant to the Recapitalization Agreement or held by
the Sutter Group as of the date hereof, (ii) any shares of Common Stock
otherwise acquired by the Sutter Group, and (iii) any shares of Common Stock
issued or issuable directly or indirectly with respect to the securities
referred to in clauses (i) or (ii) above by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange;
provided, however, that in the event that pursuant to such recapitalization or
exchange equity securities are issued which do not participate in the residual
equity of the Company ("Non-Participating Securities"), such Non-Participating
Securities will not be Registrable Securities.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Recapitalization Agreement.
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Secu rities in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto shall have the right to injunctive relief,
in addition to all of its other rights and remedies at law or in equity, to
enforce the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, the holders of a majority of the Bain
Registrable Securities and the holders of a majority of the Existing Stockholder
Registrable Securities; provided, however, that in the event that such
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<PAGE>
amendment or waiver would treat a holder or group of holders of Registrable
Securities materially and adversely differently from any other holders of
Registrable Securities, then such amendment or waiver will require the consent
of such holder or the holders of a majority of the Registrable Securities of
such group materially adversely treated.
(e) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the holders of Registrable Securities (or any portion thereof) as
such shall be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities (or of such portion thereof).
(f) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. All issues concerning this Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the law of any jurisdiction other than the State of New York.
(j) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service. Such notices, demands and other communications will
be sent to the Stockholders at the addresses indicated on the schedules hereto
and to any subsequent holder of Registrable Securities at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party, and to the Company at the address indicated below:
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Chief Executive Officer
Therma-Wave, Inc.
1250 Reliance Way
Fremont, California 94539
Telecopier No. (510) 490-0843
with a copy (not to constitute notice to the Company) to:
Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
Telecopier: (617) 572-3274
and to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60606
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
Telecopier: (312) 861-2200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration
Agreement on the day and year first above written.
THERMA-WAVE, INC.
By: _______________________________________
Its: _______________________________________
BAIN CAPITAL FUND V, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: _______________________________________
Its: _______________________________________
BAIN CAPITAL FUND V-B, L.P.
By: Bain Capital Partners V, L.P.
Its: General Partner
By: Bain Capital Investors V, Inc.
Its: General Partner
By: _______________________________________
Its: _______________________________________
BCIP ASSOCIATES
By: _______________________________
A General Partner
(Signature Page to Registration Agreement)
<PAGE>
BCIP TRUST ASSOCIATES, L.P.
By: _______________________________
A General Partner
RANDOLPH STREET PARTNERS
By: _______________________________
A General Partner
SUTTER HILL VENTURES, a California limited
partnership
By: _______________________________________
Its: _______________________________________
SUTTER HILL ASSOCIATES, L.P.
By: _______________________________________
Its: _______________________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO DAVID L. ANDERSON
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO LEONARD BAKER, JR.
By: _______________________________
Its: _______________________________
(Signature Page to Registration Agreement)
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO WILLIAM H. YOUNGER, JR.
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO TENCH COXE
By: _______________________________
Its: _______________________________
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO SHERRYL W. HOSSACK
By: _______________________________
Its: _______________________________
TORAY INDUSTRIES, INC.
By: _______________________________
Its: _______________________________
TORAY INDUSTRIES (AMERICA), INC.
By: _______________________________
Its: _______________________________
(Signature Page to Registration Agreement)
<PAGE>
SHIMADZU CORPORATION
By: _______________________________
Its: _______________________________
_____________________________________________
Allan Rosencwaig
_____________________________________________
Anthony W. Lin
_____________________________________________
W. Lee Smith
_____________________________________________
David Willenborg
_____________________________________________
Jon Opsal
(Signature Page to Registration Agreement)
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO PAUL M. WYTHES
By: _______________________________
Its: _______________________________
ANTARES INTERNATIONAL PARTNERS, INC.
By: _______________________________
Its: _______________________________
(Signature Page to Registration Agreement)
<PAGE>
Schedule A
----------
The Bain Group
--------------
Bain Capital Fund V, L.P.
Bain Capital Fund V-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
Randolph Street Partners
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Adam Kirsch
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Jeffrey C. Hammes
Stephen L. Ritchie
<PAGE>
Schedule B
----------
The Sutter Group
----------------
Sutter Hill Ventures, a California limited partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attention: G. Leonard Baker
Sutter Hill Associates, L.P.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attention: G. Leonard Baker
Wells Fargo Bank, Trustee
SHV M/P/T FBO Paul M. Wythes
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO Leonard Baker, Jr.
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
Wells Fargo Bank, Trustee
<PAGE>
SHV M/P/T FBO Sherryl W. Hossack
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Attention: Chris Petersen
<PAGE>
Schedule C
----------
Existing Stockholders
---------------------
Toray Industries, Inc.
2-2-1 Nihonbashi-Muromachi
Chuo-ku, Tokyo 103 Japan
Attention: Satoru Masuzaki
Shimadzu Corporation
1, Nishinokyo-Kuwabaracho
Nakagyo-ku, Kyoto 604, Japan
Attention: Soju Onose
Toray Industries (America), Inc.
600 Third Avenue, 5th Floor
New York, NY 10016
Attention: Mr. Uchida
<PAGE>
Schedule D
----------
Management Stockholders
-----------------------
Allan Rosencwaig
Anthony W. Lin
W. Lee Smith
David Willenborg
Jon Opsal
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR ENDED FISCAL YEAR ENDED
----------------------------------------- -----------------
1993 1994 1995 1996 1997 1997
-------- ------- ------ ------- ------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Interest expense........ $ 1,320 $ 1,543 $1,998 $ 1,722 $ 1,621 $12,369
Amortization of debt
issue costs............ -- -- -- -- -- 1,571
Estimated interest
portion of rent
expense................ 166 172 200 296 508 508
-------- ------- ------ ------- ------- -------
Fixed charges........... $ 1,486 $ 1,715 $2,198 $ 2,018 $ 2,129 $14,448
======== ======= ====== ======= ======= =======
Income (loss) before
provision for income
taxes.................. $(12,623) $(6,419) $7,487 $11,965 $22,108 $ 8,789
Fixed charges........... 1,486 1,715 2,198 2,018 2,129 14,448
-------- ------- ------ ------- ------- -------
Earnings................ $(11,137) $(4,704) $9,685 $13,983 $24,237 $23,237
======== ======= ====== ======= ======= =======
Ratio of earnings to
fixed charges.......... -- -- 4.4x 6.9x 11.4x 1.6x
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 8, 1997, except for Note 8, as to which the
date is May 16, 1997, included in the Prospectus of Therma-Wave, Inc. that is
made part of the Registration Statement (Form S-4) and Prospectus of Therma-
Wave, Inc. for the offer to exchange its Series B senior notes due 2004 for
any and all of its outstanding senior notes due 2004.
Ernst & Young LLP
San Jose, California
June 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> APR-06-1997
<CASH> 16,741
<SECURITIES> 0
<RECEIVABLES> 23,153
<ALLOWANCES> 1,621
<INVENTORY> 17,427
<CURRENT-ASSETS> 61,639
<PP&E> 11,771
<DEPRECIATION> 5,928
<TOTAL-ASSETS> 68,620
<CURRENT-LIABILITIES> 22,919
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 20,100
<TOTAL-LIABILITY-AND-EQUITY> 68,620
<SALES> 109,493
<TOTAL-REVENUES> 109,493
<CGS> 49,795
<TOTAL-COSTS> 49,795
<OTHER-EXPENSES> 36,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,621
<INCOME-PRETAX> 22,108
<INCOME-TAX> 9,007
<INCOME-CONTINUING> 13,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,101
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
